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How will dealers pay for new stores?

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expoman
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expoman posted on Sat, Aug 17 2013 1:19 AM

Article in Berlinske Business today
The crisis at B & O hits hard at the dealers where sales dive by 12 per cent. Many people have it so hard that B & O may be forced to support them financially in order to ensure necessary modernization.
Should we shut down life's work? Or should we invest one million crowns in a nicer store in the hope that times get better?
The question comes to mind at B & O dealers after an unusually bad year in B & O's 611 remaining stores, which for the vast majority of whom are owned by independent dealers.
The shops that are design face to the public, have already had some difficult years during the crisis, but the B & Os annual report reveals that the stores have recently gotten even worse. While the B & O Group's total turnover 'only' has declined by six percent, sales of the stores plunged 12 percent in the last financial year, and the smaller so-called shop-in-shop concepts, sales all the way down by 20 percent. Figures have been adjusted for stores that have opened or closed in the past 24 months.
"It's hard to do business in Europe, and that is why the decline we are seeing now," says Tue Mantoni, CEO of B & O.
The stores will get nothing out of the B & O sales of audio systems for cars is increasing by 20 percent. The increase in B & O's new sub-brand B & O Play is the contrast a bit out of, but for the most part are sales outside the traditional stores rather than e-stores and chain stores such as Apple, which has been allowed to sell B & O Play product.
At B & O dealers that spread over Europe in the 1980s and 1990s, you try as best selling TV sets as usual, but it has been difficult in the past five years of crisis. Tue Mantoni denies that the declining B & O sales due to the fact that B & O has had the wrong products on the shelves.
However, the decrease in sales related to the fact that the stores are obsolete.
"Our store concept was revolutionary for 10-15 years ago, but today there is not a proper connection between our innovative and beautiful products and the sensation that is by visiting our stores," said CEO Tue Mantoni already two years ago, when he presented his strategy 'Leaner, Faster, Stronger' for great rejoicing for analysts and the stock market.
Expensive to build shops 
Since then, the B & O opened a single moderniset and highly praised store in Copenhagen and one in Shanghai, but Berlingske Business learns from several sources that it is very difficult for B & O to get dealers to build on the B & O's new tough requirements.
It may cost a store owner more than one million. crowns, if he is to live up to the B & O's new requirements for shop fitting, learns the newspaper. B & O boss does not want to comment on whether B & O will be ready to provide store owners a financial helping hand to get them to build the store on.
"It might be the case that we are helping to make some funding models, including with external financial institutions, and we can help to provide a business case, "said Mantoni, who will not promise that B & O can provide shop owners loan or co-finance a remodeling project.
B & O is in the process of closing 125 stores, but the remaining approximately 500 shops, all built on for the new B & O concept if they will continue to negotiate B & O, says the CEO.
A major challenge is that many retailers have not had a real chance to save up the last five years, and although several of the shop owners find the new store concept attractive, it does not mean that banks will lend them money for a million crown investment in an already virtually unprofitable store. It can be almost impossible for B & O to large parts of the dealer network modernized.
Shops recalls museums
"If dealers to finance it all themselves, I think it will be very difficult for B & O to get conversions completed," says Søren Løntoft, equity analyst at Sydbank.
He believes that B & O should consider investing in store refurbishments in trying to live up to the strategy Mantoni even presented two years ago. The strategy included the modernization of the B & O dealer network as one of six key points.
"It is necessary to get something done at stores now. It works almost like stepping into a museum when the consumer goes into a B & O store and it does definitely effect the sales. So if B & Os new product launches is to truly prosper, it is of paramount importance that they are presented in the right environment, "says Søren Løntoft Hansen.
He praises the new store concept, while he sees it as a strength that B & O has recently decided to phase out some TV products the company can no longer afford to stock. It can provide more space in stores to B & O's best-selling products while helping the stores appear more simple and manageable.
In addition to a decline in overall sales of six percent to 2,814 million. crowns, showed B & O's annual bottom line of minus 160 million. € after tax.

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Barry Santini
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Heck, I only buy BnO in stores because that's the only way BnO will let us. Focussing on stores is obsolete thinking. BnO management is still performing like ostriches.

B
kokomo
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kokomo replied on Sat, Aug 17 2013 9:09 AM

Coincidentally in The Business to Business section of the Sunday Times dated 11th August there was a B&O  advertisement headed "Make Our Business Your Business". 125k needed upfront to invest. No mention of exactly what the money was for but can only guess it was for a dealership,   

vikinger
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vikinger replied on Sat, Aug 17 2013 10:11 AM

kokomo:

Coincidentally in The Business to Business section of the Sunday Times dated 11th August there was a B&O  advertisement headed "Make Our Business Your Business". 125k needed upfront to invest. No mention of exactly what the money was for but can only guess it was for a dealership,   

I would guess that this was still on the franchise model; put the money up, hit our specified targets within 2 years and all will be well. Don't hit our targets..... we take the business from you and the £125k is ours, thank you very much. 

I would guess you might have to take a loan from B&O as well as putting up the £125k. You will also have to pay for your shop lease and rates.........

Maybe a current dealer can confirm what the franchise involves (unless, of course, the terms of the franchise forbid such discussion.)

Graham

kokomo
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kokomo replied on Sat, Aug 17 2013 10:23 AM

The email address for responses is a franchising business in the UK.

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