Sound Advice pumps up the volume again

In the 1970s, the Sound Advice logo represented state-of-the-art consumer audio products. By the 1980s and ’90s, it had broadened its range to become an icon for a gadget-savvy future — flat-screen TVs, elaborate car audio systems, laserdisc and CD players.

By 2008, when the economy tanked, it became another sign of bad times: going, going, gone.

But today, that iconic Sound Advice signage is a 21st century Back to the Future story — a powerful trigger for nostalgia and curiosity, a signpost for a place where a salesperson will demo a pair of $80,000 MartinLogan Neolith speakers powered by a $30,000 stack of McIntosh amps and explain how they work, even though you’re just looking to drop $200 on a turntable.

“The wonderful thing about coming to Sound Advice is that you know you’ll have an experience,” says A.J. Stockton, vice president of sales for the company. “You may not even buy anything, but you’ll definitely be talking about it over coffee with friends at work the next day.”

The rebirth of Sound Advice, which was founded in Fort Lauderdale in 1974, is an unlikely comeback story in the cutthroat retail electronics industry. While big-box stores such as Best Buy and Target are waging a war of price-matching and discounts with the online giant Amazon and other Internet vendors, Sound Advice has snuck back into the market doing the same thing it did in the good old days: emphasize customer service and personal relationships instead of cut-rate bargains. The company quietly opened its third South Florida location in November at U.S. 1 and 91st Street in Pinecrest.

“Nature abhors a void,” says Peter Beshouri, CEO of Sound Advice and one of its original founders. “When Sound Advice went away, a void was created. I had sold the company and basically retired and was having too many long wine lunches at Capital Grille. My wife at the time said ‘Best you go back to work or rehab. Why don’t you pick one?’”

Beshouri chose work. After selling the chain’s then-32 stores in 2001 for $150 million in stock to Tweeter Home Entertainment Group, Beshouri reclaimed the Sound Advice brand name, logo and mailing list during Tweeter’s bankruptcy liquidation sale in 2010. He reconnected with some of his best salespeople, many of whom were selling AV equipment out of their vans. They used email and the telephone to alert their loyal customers that they were coming back. A glossy 40-page catalog, more like a magazine than a sales brochure, was mailed to the homes of former clients.

After reopening at two previous locations in Fort Lauderdale (in 2011) and Boca Raton (in 2013), the company opened its Miami showroom at a new 7,500 square-foot space chosen for its high-traffic location and affluent neighborhood with an estimated median household income of over $100,000.

With a growing customer base and the addition of the Miami location, Beshouri is projecting revenues of over $20 million in 2016. In 2015, he says the company earned just over $12 million.

Capitalizing on reputation

The corporate strategy remains the same as it was in 1974: Stress the one-on-one connection with your clients and sell them a service, not a box. The main difference this time is that the company is relying entirely on word-of-mouth and reputation to generate business instead of weekly newspaper and TV ads. The three stores’ 25-person sales force works solely on commission — no salary — a practice that Beshouri says has proven to spawn a fiercely loyal staff. About 90 percent of the company’s nearly 30 full-time and part-time employees worked for Sound Advice’s previous incarnation.

“My salespeople are prepared to service,” he says. “Be truthful, be honest and remember we are not hobbyists. We are selling to people who have other things to do. Their hobbies may be boating or timepieces or cars. We’re trying to enhance their lives. Be ready to go to the customer’s home to take measurements and view the space before you recommend a particular TV set or home audio system. Have the courage to tell a customer who wants all the speakers to be tiny and invisible that it’s not going to sound that good. A lot of the other guys will just say ‘Whatever you want.’ But whatever you want isn’t always the right thing.

“Don’t forget the look of the product; that’s very important. It has to fit and look nice inside the house. We’re not a Ferrari, but we’re not a Bentley. We’re probably like a Porsche. High performance and over-servicing and price points all the way through. But not like a Ferrari, which is tiresome to drive, or a Bentley, which is old and curmudgeonly.”

Shawn Dubravac, chief economist and director of research for the Consumer Electronics Association, says the return of Sound Advice is a reflection of the ballooning U.S. consumer technology industry, projected to reach $224.3 billion (wholesale) in 2016 — a 1.5 percent increase from 2015’s estimate of $220.9 billion. In 2014, wholesale revenue was $218.8 billion.

“A retailer like this one entering the market suggests the market is growing,” Dubravac says. “They don’t carry a lot of inventory because a big part of your financial performance depends on how quickly you can turn around inventory. It’s clear that their strategy is based on the knowledge of the technology. They also cater to a well-defined geographical market, so they’re not competing against retailers in other markets.

“The footprint of these markets is quite small, maybe five or 10 miles. And the knowledge the sales associate brings is key. Most of these guys are audiophiles. They know the product back and forth. You can ask them anything, and they have a passion for it.”

Beshouri already has plans to launch a fourth Sound Advice location before the end of the year, probably in Aventura.

Although you can buy a TV set or a pair of speakers via its website, www.soundadvice.com, the company emphasizes personal interaction and customization above competitive pricing. According to industry experts, customer service and one-on-one relationships are key elements for brick-and-mortar retail at a time when established players such as Walmart and Barnes & Noble are struggling.

“The market for more high-end boutiques is very mixed at this time,” says Stephen Baker, vice president of industry analysis for the NPD Group. “There are lots of successes in the industry right now for high-end installers — companies that can create a great home theater for consumers as 4K and large-screen TV growth has opened up that marketplace. ... There is a huge opportunity to leverage that business alongside the growth of home automation applications like security, video and energy management since the installation required for home theater is [parallel].

“But these success stories are about custom projects and premium customers. Small retailers focused on just selling mainstream TVs and related hardware without a considerable service component will struggle in today’s very competitive marketplace.”

Sound Advice intends to stand out from the pack with its combination of customer service, no-pressure sales tactics, hands-on demonstrations and a curated line of quality products and brands with competitive prices. Popularity isn’t a factor.

“We don’t sell Bose,” Beshouri says. “It’s elegant, it’s beautiful and it sounds like s--t. I’ve had customers say to me, ‘There never seem to be a lot of people in the store.’ Yeah, that’s on purpose! We don’t do what Walmart does. We just need a little piece of the market. The top 2-3 percent is where we live. I don’t mean in terms of income — we have lots of customers who live in trailer parks — but in terms of people who want to do it our way.”

A ROLLER-COASTER HISTORY

In 1974, Beshouri was the 18-year-old manager of a Tech Hi-Fi store in Detroit — the youngest manager in the entire chain of now-defunct stores — when he and three other guys who worked at the shop decided to branch out on their own and relocate to Fort Lauderdale.

Why Florida? “Tech Hi-Fi had a bunch of locations in the Northeast already,” he says. “Some of us had visited Florida a little, and all the prettiest girls were here. My partners were 21. I was 18. That’s what you do when you’re that age. You don’t make smart decisions: You do things that seem to make sense at the time.”

Lured by a group of investors flush with money and eager to start a business, Beshouri and his trio of co-workers quit Tech Hi-Fi and moved South. The first store opened in Fort Lauderdale, where the company was headquartered. Growth came quickly. The company expanded its goods from high-end stereo equipment to include TV sets, car audio and other home entertainment products. By 1976, Beshouri was managing a new Sound Advice store in Tampa. In 1981, he became CEO and president. In 1983, at 29, he added the title of chairman to his job duties.

There were bumps. When two of the original founders, Greg Sturgis and Joe Piccirilli decided they wanted to move on, Beshouri and former Sound Advice CFO Michael Blumberg took the company public in 1986, allowing Sturgis and Piccirilli to sell off their stakes in the company.

During the IPO offering, Beshouri was upfront about the 1984 federal indictment of Thomas D. Powell, one of Sound Advice’s original investors, on drug trafficking. U.S. authorities had cleared the company of any complicity in the charges against Powell, who had provided $100,000 in start-up funds and had been sentenced to 10 years at a minimum-security prison.

By the end of 1988, Sound Advice had 17 stores throughout the state, generating gross sales of $55 million. In 1990, the number grew to $91.5 million.

That’s the same year Circuit City expanded into Florida, which spurred Beshouri to make changes to the original philosophy. As its stock price reached a then-peak $15 a share in April 1991, Sound Advice started selling lower-end TVs and VCRs, Walkmans and headphones, CDs and LPs — even, for a brief, disastrous time in 1994, personal computers.

Although Sound Advice continued to open stores throughout Florida (including a total of five showrooms dedicated exclusively to pricey Bang & Olufsen equipment) plans to expand into other states stalled.

In 2001, surrounded by increasing competition by big retailers such as Brandsmart USA, Sound Advice, which now had 29 stores in Florida, announced it would become a subsidiary of Tweeter Home Entertainment Group, a national electronics retailer with over 300 locations, for a deal valued at $150 million. The original plan was for Beshouri to oversee all of Tweeter’s marketing and sales, but the arrangement didn’t last long.

“Sound Advice was doing great, but Tweeter was struggling,” he says. “They had bought a number of companies — some were discount, some were high-end — and they didn’t have the infrastructure to deal with that. If you’re a $10 million company and you grow to $100 million by acquiring businesses but you have the same team running things, you’re still a $10 million company in a $100 million box.

“They had this concept of best practice, but they didn’t know best practice to save their lives. They only knew their practices. The minute I got there, I could see there were no protocols in place. Their store managers were in their 20s, there were no uniforms, the stores were pigsties, there was no investment being made in the stores.”

Beshouri says he remained on Tweeter’s board for two years and watched the company “implode.”

“What people often do when things get tough is they go back to doing what they did before and do it harder and harder,” he says. “But they don’t realize what they’re doing doesn’t work.

“I’ll never forget seeing a Tweeter catalog that offered free gasoline with the purchase of a TV. That’s when I knew the end was near.”

After Tweeter went into bankruptcy liquidation in 2008, Beshouri bought back Sound Advice’s intellectual property for an undisclosed amount and relaunched the brand, counting on its legacy to lure back former customers. Manufacturers were delighted by the news, since their products require a more elaborate presentation than big chains are capable of doing.

“A lot of people told me I was crazy for doing this again,” Beshouri says. “But I also had a lot of manufacturers in the industry telling me the speaker business has declined because there’s nobody showing the stuff. The little boutiques have disappeared. There’s a tremendous opportunity here. And Amazon doesn’t touch us. The Internet doesn’t touch us other than help the customer get a little more organized about what they want. I use Amazon to buy a shaver. But I’m not going to buy a f-----g TV on Amazon.”

This story was originally published January 31, 2016 at 2:00 PM with the headline "Sound Advice pumps up the volume again."