1985 Ad

Discount Store News, Jan 7, 1985

Discounters, catalogers and specialty chains report that consumers' demand for audio units that look fashionable in the home and are easy to operate is driving sales in rack audio systems.

"The general public is not into the audiophile stage like they were five to seven years ago, said John Kednig, merchandiser for Landover, Md.-based cataloger W. Bell & Co. "They want units that are cosmetically appealing, matched and less expensive than components."

Retailers say the market is further strengthened by the influx of female shoppers in consumer electronics departments.

The emphasis on rack audio systems may cut into sales of components, but component units already have a far narrower appeal than all-in-one systems; few full-line discounters even stock component pieces.

However, many of the rack audio systems offer features once associated mostly with the component units like dual cassettes and black matte finishes. For discounters, the high tech look and features in rack systems gives the catagory a quality image, a change from when rack audio systems were considered second rate equipment.

However, specialty chains are promoting rack audio systems even more heavily, concentrating on better-quality feature-packed units. For example of eight models advertised by Federated, only two were priced below $500; one of the models, by Yamaha, ran on ad for almost $1,500.

With the broadening appeal of rack audio systems, retailers who have failed in the past with these units or have never stocked them before have recently built up their assortments, and several chains are planning to expand the category further this year.

In its 1985 catalog, W. Bell incerased the number of pages devoted to rack audio systems from one to two, and doubled the Sku's carried, said Kenig. Last year sales increased over 100% from the previous year, when component audio pieces were sold in racks, but priced separately.

Another cataloger, Erie, Pa.-based Dahlkemper's also increased its offering from four to nine models this year, with the bulk of its units from Soun-design and Panasonic. Three of the units displayed in the 1984-85 merchandise catalog have black finishes.

Buyer A1 Jenkins expects to expand the assortment further this year, although the price range--now at about $200 to over $300--depends upon how member groups fared with the current offerings.

Specialty chains are also turning a profit from rack stereos, with even higher-priced pieces. At Pacific Stereo, the category is up 30% to 35%, and the number of sku's stocked was doubled from six to 12, said Armand Phillipi, executive vp, marketing.

The chain carries Sanyo, Technics and Pioneer models that start at $299 and top at $1,500. Two models, priced at $1,099 and $1,299, come with compact disc players. The $1,500 unit has a dubbing deck.

At Federated, the lowest-priced rack audio system, featured in a preholiday ad, was a Sanyo priced at $392. Other models, by Magnavox, Sansui, Technics, Fisher and Yamaha, were priced up to $1,494, and offered varying features like double cassette decks, cassette decks with auto reverse or music search, 80 watts/channel integrated amplifiers and direct drive turntables.

Luskin's the Maryland-based specialty CE chain, entered the rack audio business for the first time this fall with 12 models ranging in price from $299 to $1,399. The two best-selling units are by Sanyo for $499 and by JVC for $999.

Although the category is getting increased play industry-wide, buyer Mike Hamerling said it is too early to worry that his 35% margins will get squeezed by competitive promotions. Also, four of the models were assembled especially for Luskin's by Morantz, so the competition does not have these same items.

Discounter Heck's is also getting good margins--25% to 30%--from its first-time assortment of rack audio systems, but buyer John Branham said the company gains in another way, too. "It's a new concept and a new image for our company," he said.

Setup Is Refined

The chain now devotes 16 linear feet to rack stereos and stocks five sku's from Soundesign and Emerson. Prices fall between $159 and 299.

Branham said his best-sellers are two models priced below $200. Beginning this month, retail prices should drop 10% to 15%, and Branham expects consumers will trade up to better models with more features rather than opt for the least expensive units.

Murphy's Mart is also counting on consumers' enthusiasm for the rack stereos to stay high through the year. Dmm Frank Remaley said last year's rack stereo business was "excellent." This was a turnaround from 1983 because he traded in that year's poorly received assortment for two models from Soundesign, priced at $249 and $349 and a $399 model from Emerson. His best-moving items was the higher-priced Soundesign with a black face, on sale for $299.

This year, the Pennsylvania-based regional discounter will add up to two more units, at least one at a higher price point. Remaley said he had looked at units from Pioneer which cost $100 to 200$ more than his current models, but didn't have the time to include them in last year's assortment.