Audio shaken by compact disc and higher-end rack systems

Discount Store News, June 11, 1984

Nationwide DSN Report Revolutionary compact disc (CD) and higher-end rack systems have shaken the audio category out of its hibernation.

The innovations' impact will continue to play a major role in driving the market at Ce specialty discount outlets and has already filtered down to the full-line discount level.

Most of the current excitement is being generated by CDs and the numerous low-priced introductions that were expected at this summer's CES. With increased production levels and heated competition for the mass market, manufacturers are expected to bring in products that could yield retail price tags of less than $300.

"They reached the range of affordability very fast. I just hope they don't keep coming down in price like that or they'll end up like the calculator business did," said Kevin Luskin, exec vp of Luskin's, the Baltimore-based 24-unit CE specialist.

Furthermore, the traditional high-end audio components that set the tone and help establish specialty store image will be receving less of an emphasis. Instead, CE retailers are realizing there is only a limited market in audiophiles and must begin to aim their efforts at the masses.

Rack audio systems, eliminating the difficulties of matching components, will be a key product to specialists beginning to broaden their merchandise mix and to full-line discounters' ongoing stepup efforts into higher-priced goods.

But CD, the first important audio innovation in several years other than personal portables, has certainly caught the attention of CE retailers. If prices continue to drop, as they are expected to, CD penetration might parallel the current VCR explosion.

Digital audio disc (DAD) manufacturers have also lowered software pricing, from the $20-$25 are to $14-$19.

The compact disc technology offers audiophile sound reproduction. A laser beam reads digitally coded music, producing perfect sound with no surface distortions. Since a laser is used, there is absolutely no wear on the discs.

Many believe that CD is merely the tip of the iceberg and disital technology is the future wave of most electronic products--in audio and video.

"Within a few years we're going to see digital take over completely. In Japan, companies are currently working on the development of digital audio receivers," said Verle Rader, manager of product planning for Marantz.

On the current market, both specialits and full-line discounters are carrying a full array of CDs, ranging in price from a low of $400 to over $900.

Pacific Stereo stocks six CD units by manufacturers including Sony, Technics and Hitachi, ranging in price from $488 to $900. Luskin's has recently added two to three units with opening price points just over $400, and CMC Stereo featured a Magnavox CD player for $399.

Full-line discount chains like Gemco, Fedco and K mart are all currently testing CD units and many other chains will be seriously shopping to add units as the price points fall in line.

New Moves

Gemco is testing a Pioneer PV 70 priced at $650. Fedco carries four compact disc players by Sony and Technics, ranging in price from $397 to about $700. The low-end model by Technics is being offered with a manufacturer promotion that includes five free discs. K mart has added a Sharp CD player in its Rochester, Mich., prototype along with a small selection of DADs priced at $19.38 each.

In addition to CD proliferation, higher-priced rack systems, many over $1,000, are beginning to take off at specialists and to a lesser degree, full-line merchandisers. Their sudden growth can be attributed to their simple design and operation, and it has certainly bit into all "high end" audio image.

"Everybody wants to be a Porsche, but Toyotas probably outsell them 100 to one," said Marantzhs Rader.

That traditional high-end image, used by many of the specialty chains, might quickly become a remnant of the past. Several chains, notably Pacific Stereo, are in the midst of broadening their appeal.

A vital part of Pacific Stereo's redirected image effort will be a dramatic increase in its commitment to rack audio systems, as well as recent forays into video, according to Armand Phillipi, exec vp, marketing.

"Our image effort will be designed to broaden demographic base from our current 18-35-year-olds to a slightly older, more affluent customer. We'll be attempting a more mass market appeal through a broadened merchandise mix," he said.