It’s no secret that video, once the cash cow of retail AV hasn’t worn that
crown in years.

Today AV dealers still sell video, but with little joy, and almost
grudgingly. The reasons why are simple:

Price Erosion: Every year the new models have a lower price than the old
models. Five years ago a name-brand 60-inch flat panel was $8999. Today it’s
$1999. And $2249 in gross profit is maybe, MAYBE $499, but often a lot less.

It’s a heck of a way to run a railroad.

I did the math in 2001 and decided I didn’t want to stay in commission sales
in retail: If prices and margin decline 5% or more per year that means you
need double digit growth in your annual sales volume just to tread water and
make the same income year after year.

Two solutions presented themselves: do exactly that, year after year without
fail, or go find something else to sell. I opted for the latter.

Volume Rebates: I don’t know any independent AV store owners who like VR. My
friend Igor Kivritsky, owner of Vancouver’s HiFi Center said it best: “I’m
giving my supplier an interest-free loan every time I place an order.”

Getting a VR cheque in the mail from your supplier elicits the same sort of
enthusiasm you have for getting a tax refund in April, until you realize
that it was your money all along.

Additionally, the anticipation and pursuit of VR has played no small part in
the price erosion of the last decade: big box and chain stores, slavering
after a big VR cheque priced all of the margin out of existence with
ever-lower sale prices.

The endgame as we all know, was crummy margins. And we did it to ourselves.

I’ve got no really profound point to this blog post, I just had a clever
idea for a headline, so I decided to run with it, and had to work backwards
from there.