2017, Chapter 7:
Learning New Tricks
After reading the last chapter, you might be thinking, “Well, if stubborn engineers are so great, why aren’t there more of them? Why aren’t all engineers stubborn engineers?”
Well, here’s the counterpoint. In a nutshell:
because progress would grind to a halt.
Stubborn is fine up to a point, but when you start saying things like, “I know this way works, why take a chance?” you’re in trouble. You’ve just thrown out any chance of positive change. You’ve decided
not to learn something new. And that can be just as dangerous as taking too many chances. Maybe even more so—because when you’re taking a chance, you’re taking a chance. When you’re playing it safe, you have the voice of reason and experience on your side. Sometimes that’s good. Sometimes that’s Blackberry. You don’t want to be a Blackberry.
So let’s make this a bit of a catch-all chapter, talking about some of the new stuff we’ve learned—at the Schiitr, at shows, and through our distributors.
(And yeah, I know, no new products. Not yet. Be patient. We’ll get there.)
Changes at the Schiitr
So, it’s a month since we launched the Schiitr. I’m sure some of you want to know how it’s going, if things are looking good, and what’s coming in the future.
First, even if we didn’t make any changes to the Schiitr, it’s future is assured.
We’re doing more than break-even already. And this is without optimized hours, without a single meet, without a single event, without a single SchiitShow, without a single Tech Night. This is just, well, “open it and hope they come.”
And traffic has been surprisingly robust. On weekends, sometimes there’s over a dozen people in the shop at once. Sounds small? Maybe. But the shop’s small. And sales are happening. We’re covering our expenses and then some.
But it could be better. While Friday and Saturday are hot, Tuesday and Wednesday were dead. Our staff, scheduled for half-day shifts, got bored really quick—especially in the morning. Yes, I know, big shock: people who go to school and work don’t have time during weekdays. Kinda a duh moment. But, as I said, we had to start somewhere.
Which leads us to the obvious conclusion:
Change #1: The Schiitr hours. Make it so people can come by on both weekend days, and abandon the dead days. Easy. So, that’s why, as of this week, the Schiitr is open Thursday-Sunday, 10AM-6PM. I expect that’ll work out better for most people, but we’ll see how it goes. As I’ve mentioned before, this is an experiment. Expect us to break things.
But it isn’t just the hours that have us learning at the Schiitr. We’ve worked our way through some hilariously basic stuff (basic for a retail store, not so basic for stubborn engineers) that include:
- Cards getting declined. We’re using a new point of sale (POS) system that looked like it was gonna live up to its acronym, at least until Tyler raised hell. Apparently they didn’t expect to see charges of the size they were getting from us, so they red-flagged every transaction. This led to some hilariously inept “can you buy this online here on the tablet” kind of sales that our very patient customers tolerated well. Now fixed.
- Not knowing what stock we have. Eddie was nice enough to run back to the factory—on a Saturday—because he randomly decided to drop by—to get a customer a Jotunheim, even though we had a stack of them at the shop. Ah well. The customer was patient, and all was well. Now everyone knows how much stock we have.
- Returns? We have to do returns? Yeah, very basic. But we’d never thought of it. This led to some fumbling between myself and Andrew, when we had to figure out how to apply a credit for a return to a new purchase. Problem solved—we’ve just never had to do it on the new system before. This was as late as last weekend, by the way. Yeah, we’re new to this.
- Questions about dropping off upgrades. Locals are also wondering if they can drop their DAC off for an upgrade. Since the POS system is not hooked into the main queueing system, this means an answer of “yeah, but…” As in “Yeah, but you’ll have to buy it online for now.” We’re working to make sure this is smoother in the future.
Now, of course, we haven’t even done a single event at the Schiitr—no tech night, no Mike Moffat seminar on the virtues of MQA (kidding, of course), no me talking about the best op-amps for audio (yeah, also kidding), nada. We haven’t done anything, mainly because we’re pretty busy getting some things ready for you to enjoy. Plus shows. More on that later.
But, that also led to some discussion between Mike and I. Because we have a number of new product intros to do, and we were wondering which one would be a good foundation for a SchiitShow. We have some important things coming up, including, of course, Vidar, but also some things that are more important from an internal point of view (logistics, etc) and some things that are more important from your point of view (exciting new stuff.)
“We could do it about Vidar,” I said, when Mike and I were discussing the SchiitShow. “But everyone knows about Vidar. It’s not that surprising.”
“And (redacted) isn’t that exciting in the grand scheme of things,” Mike added, mentioning an announcement we will probably make shortly.
“And (also redacted) may be huge, or it may not be all that important,” I said, referring to something that I’ve been working on.
“And Manhattan may be ready, but it might not be,” Mike said.
And so, after going back and forth about various scenarios for the SchiitShow, we came to another obvious conclusion: we’ve been thinking about SchiitShows in entirely the wrong way, given the variety of products we’re going to announce, and given the size of our new venue. An old-style, all-out SchiitShow with food and entertainment probably isn’t the brightest idea. It could break the Schiitr. Yes, we could spill into the restaurant next door, but that would require planning and negotiation. Best to save that for a big announcement.
So, here’s what we’re doing:
Change #2: Multiple Smaller SchiitShows. What makes the most sense is to have a smaller SchiitShow for every product introduction—together with a video product intro streamed from the Schiitr. That way, more people can see Mike and I blathering about…er, I mean, discussing new products. And all the new products can have a proper intro, even if they aren’t as groundbreaking as, well, the original Yggy intro or something. As with everything we’re doing, we’re going to see how this goes and change it up as necessary, but as of now, expect the yearly SchiitShow to become plural. Starting very soon, too.
And, of course, we still haven’t done any Tech Nights, or opened up the Schiitr to local audiophile groups who want to do meets. Nor have we even begun to think about opening additional Schiitrs around the country. Again, let us crawl before we walk, much less run. There are plenty of ideas we’ll be experimenting with over the rest of the year, and I’m excited to see how they work out.
(Or, in other words, expect additional updates—and additional changes—at the Schiitr.)
Blowing Up the Trade Show
The past months has seen me return to trade shows—first CanJam LA, and lately AXPONA. And yeah, I know, I know, I’ve been scarce at shows. A combination of Too Many New Products Syndrome, and I’m Sick At The Wrong Moments Syndrome combined to keep me in the office for much of the last year. Now, I’m back at the shows…and quickly wondering how we are gonna keep up with all the shows we could go to.
I mean, there’s the LA show after Axpona, and Munich, and London CanJam, and the bizarre Newport thing right before RMAF, and RMAF, and the DC thing, and CES (if you are that insane) and probably two or three more before it goes round again…which means you’re looking at (pretty much) a show every month.
And when you’re talking about a show like Axpona, where we have both a speaker room and a headphone space, you’re talking lots and lots of logistics for the gear, plus staff (we had 4 people there, plus me), plus marketing stuff, plus shipping, plus travel, plus hotels, plus food, plus booze (ah, come on, you can’t expect people to go to these things without drinking—what, are you heartless?)
You quickly realize: to hit all these shows, and do them well, is literally a full-time job for one person. Plus the staff you have to send to shows. Which means you may end up eating 2 or more people’s salaries. Just to go to shows. Plus the cost of the booth, travel, etc. Shows cost a ton of money. That’s just the way it is.
So are they worth it? Hmm. I wasn’t so sure on that one…at least until we went to Axpona. Axpona reminded me that:
(a) There are a whole lot of people who still don’t know us
(b) We haven’t spent a lot of time away from the west coast
(c) People are really, really happy to see us, by and large
Bottom line, Axpona introduced us to a new audience—many of whom were thrilled to see us “get out of California.”
Aside: you should have seen Tony asking the waiter at Gibson’s for their vegan menu. I’m surprised he didn’t tell us to leave right there. He did immediately ask if we were from California, though.
Aside aside: It took me asking if their cows were sustainably raised for him to tell us to get the hell out.
Aside aside aside: of course, all of this was in good fun. We were just playing with them a bit. We all had a great dinner (no vegans in the group) and everyone had a good laugh, including the waiter.
This response (happy to see us outside of California) was also apparently reflected in the New York CanJam we attended, though I missed that show. In any case, it was soon clear that yes, we needed to get outside of California more often.
(And, by extension, if we’re going to be doing more SchiitShows at the Schiitr, we probably don’t need to worry about LA-area shows so much. The Schiitr is essentially a Schiit trade show—100% of the time.)
So, yeah. We could go to more shows outside of California—but I’m not convinced that’s the answer.
Or at least not all of it. Here’s why: the show demographics. As reported on Stereophile.com, Axpona was happy to get 12% of attendees in the under-35 age bracket. However, visitors to the Schiit site are 60% under 35. Hell, almost 20% are under 24. While the CanJam show demographics are probably a lot closer, the demographics of the typical audio show don’t mesh with our reality.
Aside: and this is the key thing for me. Every Fulla or Magni we sell helps create new audiophiles. This is the most important thing we can do—provide an affordable way to get started in high-end.
Worse, shows like Munich are geared towards hooking up traditional manufacturers with distributors and their dealer network—something we have no interest in. So even if the demographics were right, the purpose of the show is wrong. So why bother attending.
So, the question was: how do you blow up the trade show model…and make it work for a bizarre company like Schiit?
Mike and I came to the same conclusion, I think, largely by chance. Here it is: create a stripped-down, ready-to-go SchiitKit that a fan can take to smaller shows and local meets…or create meets themselves.
“Oh, engaging the fanbase, how Flight of the Conchords of you,” you might be sneering. Yeah, except for a couple of things. First, we don’t expect a fan to do this out of the goodness of their heart. They’d be well-paid. Second, we already have fans around the country who want to do this. And third, I think the real kicker is in
creating meets themselves. Who says we have to wait for a show or a meet? If there isn’t a local show or meet, we’ll help create one. Yeah, it’ll have Schiit gear there, but feel free to bring other stuff, get together, and compare.
And yeah, I know this will take planning. But think of this like the Schiitr—another experiment on how to reach people in a relevant way, rather than relying on a trade show model that’s straight outta the 1970s. Maybe it’ll work. Maybe it won’t. Maybe we’ll tweak it until it works.
But the main thing is…sometimes you gotta try new things. This is one of them.
The Deck, and How It’s Stacked
And finally, let’s talk about another thing, something we need to be aware of, and something we can learn from. Even if there aren’t any good answers right now. In this case, I’m talking about how the deck is stacked against US manufacturers…and not in the way that you’re thinking.
It started with a puzzle, back when I was working on Vali 2. If you remember the Vali 2 chapter, I had a problem with the tube heater—it needed a lot of current, and it was a lot lower voltage than the rest of the circuit. Which meant, power-wise and thermal-wise, it was a no-go. At least not without another winding on the transformer (like what we ended up doing)…or not without a switching power supply to step down the voltage at very high efficiency.
I’m not a fan of switchers, but I looked into them anyway. Call this my “due diligence.” I found a couple of parts which would work, and even went to make some circuits.
However, during the course of my investigation, I discovered something really, really weird: for less than the “book price” of the switching IC itself in 1000-piece quantities, I could buy a complete, working PC board based on that same switching IC in 1-piece quantities from China. This complete, working board, in addition to the IC, had (of course) the board, an inductor, and the associated Rs and Cs needed to make the product work.
Let me repeat that:
I could buy a complete, working switching power supply—one piece at a time—at a price lower than the USA book price for the switching IC alone in 1000 piece quantities.
Even back then, I thought this was weird. Sure, maybe the Chinese manufacturer was purchasing the switching ICs 10,000 or 100,000 at a time, and that would make the price lower. But people familiar with manufacturing know that 1000 pcs is a pretty good buy—that’s why the semiconductor manufacturer uses it as a book quote. 10K or 100K would be lower, sure…but what about the rest of the circuit? What about the board itself? What about soldering, testing, packing, shipping?
Yeah. It didn’t add up.
But back then, I didn’t have time to follow it up. So I didn’t find out that USA manufacturers, just like USA consumers of prescription medication, are getting screwed…er, I mean, getting less-than-optimal pricing from their suppliers.
How did we find out? Well, let’s leave the names out of this. So the manufacturer and their distributor can remain comfortably anonymous. For now, anyway. I’m still of a mind to write an article about this for EDN or EE Times, with a nice sensationalistic headline:
How US Manufacturers are Boned From the Start, or something like that.
Here’s what happened. In order to get large numbers of some very expensive parts—parts that we are probably the largest user of in the world—we ended up using alternate distributors when the distributor we were registered to couldn’t supply them in a reasonable amount of time. This worked well until recently, when our demand has grown and supply, seemingly, has shrunk. Mike ended up going straight to the manufacturer, explaining the situation, and asking that we be able to buy direct—not a bizarre request for such costly parts.
Oh no, that wouldn’t work. However, if we went with their preferred distributor, they guaranteed to take care of us. Their preferred distributor was different than the distributor that had been registered to us, since the one who registered us had been in the throes of major financial problems. Note: this should be a hint that something’s wrong.
So we went to their preferred distributor. Mike knew one of the sales execs there from way back, and they had what appeared to be a cordial re-introduction.
Then the pricing for the expensive chips came back—higher than we’d been paying through the unauthorized (but non-USA) distributors!
Mike’s friend came by to let us know in person. Mike and I sat there, stunned. Then Mike said many things that would get me into even more redaction here on this site.
“So you’re telling me it’s cheaper to buy these parts on the gray market, overseas,” Mike finally summarized.
She nodded and, well, didn’t quite agree, but agreed without agreeing.
“And you wonder why we can’t compete,” I added. I related the story of the switching IC versus the complete power supply. And again, she nodded and agreed, without really agreeing, that it was unfair.
“So there’s a bunch of guys in Asia buying these parts from you, marking them up, and then selling them to us…for less than the manufacturer wants to sell to us through the ‘right’ channels?” Mike asked.
She allowed as how sales in the USA were different, there was negotiation, she’d see what she could do. At that point, Mike exploded.
“Screw ‘em,” he said. “We’ll open a Schiit division in Asia and buy direct. We’re not small. This isn’t pocket change. And we’re not idiots.”
Mike’s old friend looked sad, and went a little gray. She said she’d fight for us and see what she can do. But here’s the thing: when the deck is stacked against you from the start, how do they expect you to succeed? How does it work that these kind of smoke-filled-backroom kinda deals are tolerated in this day and age? And why does a USA manufacturer, working with another USA chip supplier, get automatically boned, even if they’re the “big guy” in a small niche of expensive products?
Like I said, there are no fast and easy answers. Nor any fast and easy solutions. For the moment, our supply is secure, through both the alternate distributors and the official distributor, so our products will continue to flow.
But I gotta wonder…what are they paying overseas?
And what would it mean to you, if we could pay those rates?
I may never know. But we’re going to look into this more carefully. And maybe, in a future chapter, I’ll come back with some answers.
