[TheChairGuy]

LordCloud,

Take a chill pill, fella'...nowhere here are we slandering Ryan or making note of his ethics.  We're just 'armchair quarterbacks' offering opinions on the subject of Red Dragon Audio.

In the case of PhilNYC and myself, perhaps opposing quarterbacks  

[TheChairGuy]

Phil,

I understand your points...really, I do.

Citing Apple - I'll cite Dell.  Started many years later by a 19 year old in his college dorm room, it has always been a direct sales model.  And, now, the largest seller of PC's in the US and world by quite a margin..  It is some 4x larger than Apple, larger than HP/Compaq, etc.

Amazon is the fastest growing retailer in the history of the world - now doing $10 billion yearly - consumer direct harnessing the power of the internet.

ebay didn't exist 8 years a go and 'hi-speed' connection meant not getting booted from your phone connection to the internet not long ago. IM's, PayPal - all much more recent realities.

The lines of communication between people, worldwide, are just a few clicks away....not thousands of miles.  I don't mean to paint dealers as irrelevant...merely, less relevent to today's marketplace.  I see that trend magnifying in the nearest of futures.

[LordCloud]

LordCloud,

Take a chill pill, fella'...nowhere here are we slandering Ryan or making note of his ethics.  We're just 'armchair quarterbacks' offering opinions on the subject of Red Dragon Audio.

In the case of PhilNYC and myself, perhaps opposing quarterbacks  

"Maybe he thought no one was paying much attention anyhow, so why not jack the price to the moon and see if anyone bites."

"When you look at what Odyssey and Audio by van Alstine offer in product at under $2000.00, and listen to their wares, it's difficult to look seriously at the high cost digital amp crowd right now."

"The discounts for volume on icepower modules aren't close to what I expected when I read the dealer price sheet, so that theory goes down the drain I would think. I am not sure how in the world the icepower amps could possibly sell for that much money considering the cost of the modules to the dealer. 500 bucks in parts plus a chassis couldn't possibly equal 6 grand, unless my college math is failing me."

While these may not be slanderous comments, they can most definately harm a small, brand new business in a fickle market where these types of companys come and go in the blink of an eye.  In a market where some equipment is far simpler, performs at a much lower level yet costs far more, I find it hard to imaine how we can argue over pricing issues. But these are of course, just my opinions.

[CornellAlum]

Don't take it personally.  The same information apply's to most of the icepower folks.  Is any of the information false...

[PhilNYC]

Chairguy,

I think using Dell/Amazon/eBay, like Walmart, is an apples to oranges comparison (no pun intended) vs. Apple or others in a perceived "high end market".  In the case of Dell and Amazon, they deal with commodity products, where price is really the only differentiator.  Amazon has tried to get into more specialized/high-end products, and has never successfully turned a profit in those businesses (and they even continue to struggle to be profitable on their commodity businesses).  Dell does have sales offices around the world to serve their business and government customers...while not "retail", they do see the need to have regional presence.

Once you start moving higher than commodity products, differentiation comes in many different forms...performance, style, etc.  ~80% of my local sales (and even a portion of my non-local sales) begin with a home trial.  Someone like Ryan could try to do that himself, or he can have local dealers handle it for him.  But I don't think he could really pull it off successfully (and with an overall profit) if his gross margins are razor-thin, which is what happens when you compete solely on price.  Walmart can do it because of the sheer volume of low-priced products they sell.  In audio, I don't think you could pull this off unless you were Sony or someone of that scale.  And even Sony doesn't believe that they can abandon presence in brick and mortar retail stores.

Of course, you can argue that Class D amps are really a commodity, but that's an entirely different debate...     In the case of Red Dragon, a big part of their appeal is in the physical appearance of the products, and that's something that is hard to communicate online.

[Red Dragon Audio]

Hi Guys,

Thanks for the excellent questions, inquiries and suggestions regarding RDA.

I'm glad there is some "buzz" about RDA here on the circles.
I don't know if it is the time yet but a "Red Dragon Circle" would be nice to start.  I will ask the borg if this is possible.


I am very open and honest about my business.  
If you have a burning question call me up and I will be happy to talk with you about anything and everything.
Here are my numbers you are welcome to call (before 8pm MST).

H: 801.356.1476
C: 801.361.7138

Hope to hear from the members soon.

[TheChairGuy]

Phil,

'Scale' in the amplifier market is probably $$$ half a million...we're talking peanuts in this business.  All the more to do consumer direct like so many now do.  Sony and others cannot do so without losing their large dealer base...as a public corporation you are subservient to shareholders.

A small, new, privately held company can maximize and harness all the advantages available...that is, namely, lower overheads and costs.  Removing 33-50% in dealer markeup is essential to that goal.

Maybe you don't pay late, return product or go belly up on your manufacturers...but plenty of dealers do and have.  These are the realities of dealer networks that new suppliers don't know about until much later...then it is too late. These kind of mistakes in the beginning of a new company, in hopes of reaching the elusive 'scale', will and have crippled and killed off many suppliers in the past.

Again, I'm not anti-dealer (we have hundreds of accounts at my company, so I largely cannot be).....but I'm not blind to the new realities of doing business.  Phil, you strike me as terrificly levelheaded and upstanding in the few years here...I may buy an item from you in the future....but I would consider that same item direct from any one of your manufacturers for half that amount - more readily.  

It's rather a utilitarian argument....you generally sell more more when you sell for less.  Pretty simple concept there to grasp.  One read of Sam Walton's autobiography (highly recommended) will set anyone straight on that issue.  

Amplifiers are commodities...all of us have owned several already in our lifetimes.  In fact, I have personally owned many more ampification devices than TV's in my life...supposedly a commodity now at retail.

[PhilNYC]

Amplifiers are commodities.....

I think this position is the crux of our differing points of view.  I don't see amplifiers as commodities, and therefore I believe that a good dealer can add value to the sales process in terms of being knowledgeable about the products, providing demos, etc.  If you believe all amplifiers are the same, then yes, get the price as low as you can, and cut as many people out of the middle as possible (as long as your marketing costs can remain lower than the cost of those middlemen as well as remaining more effective).  The Internet makes that far more possible than before...

[woodsyi]

There is one other fator at work here that you guys have not mentioned and that is what I call the "premium" factor.  You don't see it here on AC very much but there is a market out there in the highend audio that only appreciates expensive gear.  If Ryan can tap into the well heeled folks  who relies on exclusive dealers to get their Mecedes and Lexus of audio, he does not have to sell a bunch.  For some, the exclusivity and priciness will be the buying point.  Of course the product has to be good, too, but the "luxury" brand name generates higher mark up.

[CornellAlum]

That is an extremely valid point.  If the point of the product is to be strictly targeted towards that niche high-end big $$ market, then the product has to be priced accordingly.

However, if I am shopping in that big $$$ market, I am expecting a lot more than a fancy colored hood to justify the 3x in cost I have to pay vs. a Toyota or whatever.  (this is is no way meant to be derogatory)

I also see amplifiers as commodities.  I see every purchase I make as a commidity unless I have developed some sense of a relationship with you, which does, in my opinion, justify the added expenditure in all circumstances.  I don't believe it is possible to develop these said relationships with a manufacturer of amplifiers, though I suppose I could be wrong if I lived close to a manufacturer.  

The crux of the matter is this.  Why does one manufacturer charge 2k for the same innards that another charges 10k for?

[zybar]

Why does one manufacturer charge 2k for the same innards that another charges 10k for?

Because they can!      

George

[Rob Babcock]

I for one am certainly not ragging on Ryan for the price increase.  Yes, I was a bit disappointed since I'm a confirmed audio cheapskate.   And I'd hoped he'd make the direct-sales model work.  But I don't blame him for going the traditional dealer direction.

Still I wonder if one couldn't do both?  Have two lines, one direct sales and a fancier "audio jewelry" type for the boutiques?  I'm just thinking aloud (and that after a few beers! ) so don't jump my shit if it don't make sense.

[PhilNYC]

I definitely see where a Premium market exists, and I think given the chassis construction of the Leviathan, Red Dragon has a shot at serving that market.  Wilson Audio has made a huge business out of "premium pricing".  There is a famous case study used in some business schools that talk about a beer company that introduced a beer at $3/six-pack and it failed miserably.  They reworked the packaging to something more "upscale" and started charging $7/six-pack for the exact same beer, and it was a hit.

[woodsyi]

Still I wonder if one couldn't do both?  Have two lines, one direct sales and a fancier "audio jewelry" type for the boutiques?  I'm just thinking aloud (and that after a few beers! ) so don't jump my shit if it don't make sense.

I don't want your shit. I will stick to mine. Thank you.    

I would think you have to have 2 marketing lables to do that.  The premium one has to establish itself on its own "merit".  The secondary one hints at the value of its worth by pointing to its big brother while the big brother pretends not to be aware of the gauche sibling.  You see this in cars and wineries.  Ryan could develope a "Blue Iguana" line later if RDA becomes sucessfull.

[audiophile39]

I'm the new kid on the block and I'm certainly not an expert on the audio business, however my $.02 is that just in terms of marketing, I think a far more effective approach from RD would have been to say that they *underpriced* the initial run of amps in order to gain visibility and acceptance, and that now their prices are being increased to better reflect time and effort and parts going into the product.  Candidly, I'm really disappointed to hear RD say they are increasing prices, at least partly so, to add cache and prestige to the product.  This is rather cynical in my mind, but perfectly acceptable in a capitalistic system.

[TheChairGuy]

I definitely see where a Premium market exists, and I think given the chassis construction of the Leviathan, Red Dragon has a shot at serving that market.  Wilson Audio has made a huge business out of "premium pricing".  There is a famous case study used in some business schools that talk about a beer company that introduced a beer at $3/six-pack and it failed miserably.  They reworked the packaging to something more "upscale" and started charging $7/six-pack for the exact same beer, and it was a hit.

This absolutely happens - no need for me to read any case study on it.

About 11 years ago I was a Rep (consumer products like housewares and small electrics) living in Washington DC.  One of my accounts was a busy hardware store in (relatively upscale/toney) Bethesda, MD.  They sold everything for the home there.  Service was great....so no one terribly concerned themselves that a trip to KMart 8 miles north would probably save you 30%+ on similar items. Besides, there was and is considerable disposable income there.

They were steady account for me - I sold them several lines; among them was no-name small electrics brand Eastern Electric.  My coffee grinder was nearly exactly the same looking as a (black) Krups only in white, but sold for less than half of theirs.

So, they initially priced it at half of the Krups.  It was a dog for a month - barely a sale - while the Krups flew out.  The Department Manager then raised the cost of the EE grinder to the same as the Krups...it sold out in short order at 4x markup  

Those of you living in Washington, DC area...the store is Strosnider's.  And the story is, remarkably, absolutely true.

[PhilNYC]

Candidly, I'm really disappointed to hear RD say they are increasing prices, at least partly so, to add cache and prestige to the product....

I don't think that's what RD is saying.  As mentioned, if you look at the power specs of the Leviathan, it is the same ICEPower unit as the Bel Canto Ref1000 ($4000/pair) and the Jeff Rowland 501 ($6500/pair).  At $5995/pair, the Leviathan is certainly in-line with these amps.  And given the attention to detail of the Leviathan's beautiful chassis (vs. the Bel Canto's rather plain chassis), there is an undestandable premium.  The Jeff Rowland 501 does have that beautifully machined chassis, so I'm also sure that's one of the reasons why they are higher-priced as well.

So you could say that the RD chassis design is aimed at some segment of the market that appreciates a beautiful-looking component, but I don't see them as raising the price simply to add cache/prestige to the product...

[es347]

......They reworked the packaging to something more "upscale" and started charging $7/six-pack for the exact same beer, and it was a hit.[/quote]......

I bought the Perreaux headphone amp back when it was around $300.  It now has an MSRP of $600.  Not sure how that 2x increase has impacted sales but I sure wouldn't have paid that much for it.