Ironically, the home theater business has never grown more aggressively having been powered by low-cost flat HDTVs and a healthy real estate market that allowed consumers to borrow from their home’s equity to invest in new HDTVs, surround sound, home automation and beyond. With the home market settling back down to reality in most parts of the country and margins on thin HDTVs too thin to keep doors open – Tweeter is forced to take action.

Can Tweeter keep the ship from sinking? It’s possible, however it might take a new focus on audio, customer service and custom installation. The company has pledged to spend more of the money they borrowed today on training, which is an excellent idea. If your salesman doesn’t know how HD DVD connects via HDMI to your new 70-inch Sony – then how are they supposed to sell you the new player? But the solution to Tweeter’s problems is far more complex. They need to get back to selling audio much the way I learned the ropes at Bryn Mawr Stereo (a Philadelphia area retailer acquired by Tweeter a few years back). When Costco is happy with making 2 to 3 percent margins selling 60-inch HDTVs, Tweeter needs to show clients why they need something better and certainly more profitable. By better, I am suggesting the idea of teaching tens of thousands of people why they should lust after the likes of Krell, MartinLogan and B&O (all lines we sold in 1990 at Bryn Mawr Stereo) as opposed to simply having their salespeople take orders for low-profit HDTVs. Tweeter needs to invest long term into the world of high end audio, music in surround sound, HD DVD and Blu-ray and PC convergence. For example, a pair of X-HiFi desktop speakers that cost $999 per pair and are designed to work with an Apple iPod or PC, can net a retailer like Tweeter $500 if sold at retail as they normally are. This is more money than they make selling a $4,000 HDTV. Considering that there are a good 70 million iPods on the market – perhaps it would be worth looking at these little jewel-like brands when merchandizing store locations as opposed to trying to keep up with soccer Mom sticking a 52-inch rear projection in their cart at Sam’s Club along with an industrial sized tub of Tide.

Dave Nauber, the executive who ran Mark Levinson and Revel and who now runs the Classé brand of high-end audio-video electronics, is famous for saying “it takes no less than five years to woo a client to invest in high end audio electronics”. Tweeter needs to invest accordingly in both their lines and their salespeople. If they spend the cash to get a client in the door to sell them an HDTV – make sure they get the 20-minute HD DVD and Blu-ray demo in the reference theater. Make sure they start the demo using the Creston touch-panel remote. Show them how the lights are controlled, how the screen retracts. Play them high-resolution music from a server installed with Music Giants and explain to them why it is better than their iPod with real examples they can hear for themselves. Because next year when those tax refund checks start rolling in – tens of thousands of clients might just start investing in building reference level theaters as opposed to leasing a more expensive Mercedes or buying another Rolex or going on that golf vacation. In the end, Tweeter is faced with the challenge – as is the entire specialty audio-video market – of investing in young clients who for years and years will buy more and more expensive gear. Baby Boomers made the high-end audio industry a success in the 1970s into the early 1990s on this principal but have let that market fizzle. With strong interest from brands who need Tweeter’s reach, Tweeter’s willingness to train salespeople and millions upon millions of consumers lusting for increasing amounts of HD content – the market is there for Tweeter to turn it around if they want it badly enough.

Source: Boston Herald