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Old 03-20-2008   #1
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Default Weak Dollar Helps American Audiophile Companies Sell Overseas

You canít watch CNN for more than 10 minutes without seeing a story about how weak the U.S. dollar has become in recent months versus other currencies, specifically the Euro. With a weakening economy, the Fed is pushing to increasingly lower their lending rate which helps American business have access to cheaper capital but also forces down the dollar to even lower depths. Add in political uncertainty because of a Presidential election year and you have the dicey state of our economy this spring.

Amazingly, American audiophile companies are not feeling the same malaise that other companies are suffering from in the current climate. Audiophile companies stereotypically stopped marketing to new customers more than a decade ago. Instead, they chose to fight for an increasing share of the traditional, shrinking Baby Boomer market and casting the rest of their lot with hopes of sales overseas, which are almost always prepaid by the distributor who then also pays the marketing to promote American audiophile brands overseas. Despite the real estate slump and the fact audiophile companies create very little new consumer demand with people under 50 years old, they are booming in 2007 and into 2008 mainly because of the effect of the weak dollar. To an international distributor it's as if everything an obscure AV industry company sells is on sale. Their money keeps getting more and more powerful to buy our goods. Companies like Pass Labs, not an A-List brand but makers of some very nice and very expensive audiophile gear, reportedly had record profits in 2007 despite replacing their entire U.S. sales force. International sales carried them. Audio Research is seeing a spike in international sales with specific emphasis on Canada that is powering their numbers up easily 20 percent higher than recent years.

There is an opposite effect for marketing and importing companies based in the United States who sell products from overseas. For example, Genelec, makers of some of the absolute best powered speakers for home theater and professional use are seeing higher sales despite having to raise prices over the past three years approximately 12 percent. William Eggleston at Genelec says the pressure is on now more than ever to support the dealer with ads and far beyond. The custom installer channel is the growth sector in their business right now as more and more people are building purpose-built home theater systems all across the nation.

The weak dollar is likely to continue to be a trend until the end of 2008 and possibly into mid-2009 when a new administration takes over and sets a new tone for economic growth. Another possibility is that as the money from the Fed keeps getting cheaper and cheaper, the economy might ignite and the Fed will be forced to raise interest rates back up to higher rates to fight inflation. With that effect and people worldwide feeling better about both the United States domestic and foreign policy going forward, it is likely that the dollar will eventually rise compared to other worldwide currencies. In the mean time U.S. based audiophile companies should expect to see growth on overseas sales. With those profits they should be developing and marketing products that speak to the Generation X, and even the Generation Y markets as the Boomers can only power the business for so much longer.

by: Jerry Del Colliano
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