Sonos Dealers In Dark About Company’s Target Plans
DENVER -- Sonos dealers were in the dark this week about the company’s plans to sell music systems through Target’s online and brick-and-mortar stores, they said at HTSA’s fall meeting. HTSA members we canvassed about the distribution agreement announced this week on the Sonos blog were surprised to learn about the big box deal. Some dealers didn’t begrudge the multi-room streaming company the opportunity for a significant boost in sales, but many weren’t happy about the 5 percent discount Target REDcard customers will enjoy.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Mark Goldman, president of Sound Components in Coral Gables, Fla., was surprised by the 5 percent volume deal awarded to Target on products that already only deliver 30 percent margin. He compared the margin shrinkage to what’s happening with iPads used in control systems. “You don’t make any money on it,” Goldman said. “It’s scary to me to think about my wife going to Target for paper towels and coming home with a Sonos system, too,” he said. David Rogers, CEO of Dallas Sight and Sound, called the move to Target “disappointing. I don’t understand it,” he said, saying he thought it devalued the brand. His marketing director had a different take. “Sonos is a solution product for us,” said Seth Lauritzen. “If we need it we use it, but nine times out of 10 we use another solution.” Sonos fits a niche for getting music to rooms where a wireless signal won’t reach, he said.
At Hi-Fi House in Broomall, Pa., Sonos is used as a “source component for digital music,” said Paul Sandquist, COO. The way Hi-Fi House integrates Sonos products with other systems is “not like you can get at Target,” Sandquist said. He noted that all along Sonos has offered products on its website, often in slightly discounted bundles, but that it hasn’t impacted sales since Hi-Fi House customers aren’t likely to shop on their own for Sonos. He even saw a possible upside to the Target agreement. Availability in a high-visibility store like Target “introduces Sonos to our people,” he said. “Then they'll call us to help integrate it."
Target will not offer installation service through its stores, a company spokeswoman told us. She said the five percent discount was something “Target offers with their REDCard, it’s not a discount Sonos is offering.” Dealers we spoke to weren’t convinced Target would institute the discount without a negotiated deal with Sonos. “Five percent is a killer,” Sandquist said, and he questioned whether the company would offer similar discounts to specialty dealers. “We're one of their largest dealers on the East Coast,” he said. He noted that Control4 tried selling through Home Depot briefly and that program “didn’t work” because Home Depot personnel weren’t trained for installation. Other dealers we spoke to were hoping Sonos would match the deal for specialists, although the Sonos spokeswoman said no plans were in the works for a discount for that channel.
Acknowledging the reality of volume sales versus limited sales opportunities from the custom installation channel, Keith Burrowes, president of Sierra Integrated Systems in Reno, Nev., said he hoped at the least that Sonos would split the product line so custom dealers could retain unique product. “As a group, we have to support the vendors who support us,” Burrowes said. The Sonos spokeswoman told us that only the Play:3, Play:5 and Bridge products would be sold through Target, which would leave the ZP-90 and ZP-120 zone players for specialists. Sonos has become an important product for a new level of customer that emerged after the new housing collapse, Burrowes said. That entry-level customer shops for price-oriented systems that might be an upgrade to a system built around a family room AV receiver, he said.
David Young, president of The Sound Room in Chesterfield, Mo., predicted a large number of returns from Target customers as they come up against certain compatibility issues that The Sound Room has encountered with Sonos products in the field. “They're going to need someone who knows about networking when someone tries to hook one up to a U-Verse or Dish network and it won’t work,” Young said. “That’s what they get.” He said The Sound Room has had a “steep learning curve” with Sonos as installers learn which routers will and won’t work reliably with the system.
Sonos’ customer support team “has long been an integral part of the Sonos experience,” the spokeswoman told us, saying Sonos is building out its support team in accordance with the expected increase in sales. She didn’t specify a number of additional technical support staff. At Target stores, the Play:3 and Play:5 systems will be demonstrated on “one of the few displays in the electronics department,” she said. Customers will be able to select which video they want to watch and choose from 22 songs to play through the system, she said. The controller for the systems is a Sonos app on an HTC Android phone, she said.
Audio Video Systems, Plainview, N.Y., is “well past worrying about what other retailers are doing,” said COO Franklin Karp. Like many custom dealers, when AVS sells a system with Sonos products, Sonos is just part of the package along with in-wall speaker and other components. “Anything that gets people listening to music on something other than headphones is a plus,” he said.