Re: It simply works better...

So, is there any consensus as to what the future holds for VARS, or what they must do to survive? The simple answer is, of course, "make money". But how?

Somebody else mentioned the concept of gold miners running out of mineable veins, and I didn't really agree with that characterization. In a gold rush like '49, the ones that make a real fortune are the guys selling the shovels and other necessary supplies, not most miners. Levi Strauss didn't make his money on gold, but on pants for miners. VARs sell us our shovels, which we use to dig for the gold (or to at least pile the manure into more creatively tasteful arrangements).

But what happens when anybody can have a shovel, just by snapping their fingers?

If I wanted to start up today as a VAR, I think the first thing I'd do is ask somebody to talk me out of it. Having a bricks and mortar store full of inventory today is very expensive, when competitors just have a boiler room somewhere from which they direct drop-shipments from a factory. Or you just buy direct from the factory! Repairs and service? All outsourced these days, for the most part. Product knowledge and added value? Still a selling point, but yes, certainly a lot of people get more of their questiones answered online these days before they go person-to-person, as opposed to a decade ago, when your main sources were magazines and "sales engineers". You used to HAVE to go create a personal relationship with a dealer as well as a local user club, just to get a functioning rig. Today, you can google up some specs or reviews in seconds.

Not all of the free information they get from various internet sources today is complete or accurate, of course, ( and of course, the information here at the COW is generally superior) but people treasure speed, convenience and "free" stuff above all. Margins have got to be pretty tight these days for selling hardware. Means you have to move a LOT of product to make a LITTLE profit, but getting into volume sales is a very expensive game, no matter what the product; you have to risk a large investment just to begin.

I see a parallel to one of my hobbies, RC model airplanes. Finding a good local hobby shop is getting very tough; it's dominated by warehouse internet sales. You used to have a local guy who was also in the local club, stocked all the necessaries in the shop, would let you open up the new kit boxes and peek inside, or fix your engine, advise you on how to set up the radio, help you build a wing even.

He also covered the gamut: gas planes, electric planes, gliders, jets, scale, pattern, helicopters, boats, trains, all the paints and accessory doo-dads too. Plus all the raw materials, balsa wood, glues, etc to build from scratch if you wanted to.

Nowadays, it's mostly three huge, ginourmous warehouse catalog stores that dominate the national hobby business. Even as pure catalog mail-order, they had been killing the local guy's business for well over 2 decades when the internet came along... and that was all she wrote. The net DOES allow a few craftsmen to set up viable little specialty operations in niche markets within the hobby, where they measure sales of one or two things they make in hundreds of units per year, not thousands. Some of these artisan sellers can command a large price, at low volume, for something like a custom-built scale model with retract gears and a real jet engine. If you can wait months for delivery.

But the big-well-stocked local hobby shop is rare as shade in a dessert these days. What's left of them generally carry a very limited inventory, cater to only the widest demographic, no longer have expert staff, and limit their inventory and expenses to the bone, just to keep the lights on.

Doesn't matter how much you love it; I saw four different airplane club members all think to themselves: "Hey, I can make my hobby into my BUSINESS!" by takingove rthe local, failing hobby store. They all found out in sequential order, they no longer had time or money to fly their own planes, every spare minute and dollar was tied up in the under-capitalized shop (home life suffered too). Flying buddies from the club would come in and look over a new model kits on consignment inventory with the shrink-wrap off... then go home and mail order it from the big catalog house to save ten to fifty bucks over the local guy's best price, including 48-hour shipping. At the most they'd buy a gallon of gas and a spare prop for a buck or two. None of the shop owners could make a dime under such conditions.

Does that sound like our video VAR business, anyone? I hope it doesn't go the same way.
But trends seem to point in that direction, sooner or later. As gear gets better yet cheaper and easier to use, the vise will tighten further.

The answers may be in mergers; getting ginourmous, the size of a B&H perhaps, so you can get economies of scale or market dominance... or to become micro-sized artisan enclaves, fine Swiss watchmakers.

Everybody else gets a Bulova or Timex at the Walgreens.

Scary.