The Carriage Trade

"The Carriage Trade" used to be how we talked about rich people, people wealthy enough to be able to afford their own carriage back in the "horse and buggy" era.  Carriages are now pretty much restricted to use by tourists and governments when they need to put on a classy public spectacle like a wedding or funeral.  But there are more rich people around than ever.  And there are lots of people who would like to feel at least a little rich at least some of the time.  And catering successfully to the actual rich or even the vicarious rich is a good way to become rich yourself.  So how does it work?

There are lots of things we just don't care about.  So whatever is cheapest is going to be the most successful.  McDonalds followed this business model very successfully for decades.  You got a drive in burger in a hurry and it was very cheap.  They were so successful at this for so long that their competitors gave up on trying to compete on price and speed.  They went to a greater or lesser extent up market.  Burger King, Wendy's, etc. all sold themselves as "a better product that costs more but is worth the additional cost".  Eventually they had some success and McDonalds is now following them up market.

And this "more expensive but worth it" is the next market tier up the ladder from the "cheapest is best" bottom tier.  Here the customer perceives that there are qualitative differences between products in a category and feels that a better product can justify a higher price.  So their may be several tiers of products.  Each higher tier is perceived to have better qualities than the next tier down but as we go up the tiers the price goes up too.

The automobile industry has operated on this multi-tier model for decades.  There are the "economy" models.  They are cheap but get the job done.  Then we move up to the "mid-price" models.  They are nicer looking, better built, and may offer features not found in the economy models.  Then there were the luxury models.  They were the most expensive but also offered the best construction and the most features.  As an example, Ford offered the economy Ford, the mid-price Mercury, and the luxury Lincoln tiers.

I used to drive a mid-price Mercury Grand Marquis.  It was bracketed by the economical Ford Crown Victoria and the luxurious Lincoln Town Car.  The body was the same.  But the trim and features differed as you moved between the models.  (I'm not sure there was any actual difference in construction quality.)  And Ford made a modest profit on each Crown Victoria, more on each Grand Marquis, and the most on each Town Car.  This was balanced from Ford's perspective by the fact that they sold the most Crown Victoria's but the least Town Cars.  Sales of the Grand Marquis ran somewhere in between.

A Lincoln used to be about as luxurious as it got in the car business.  It's market was the well off.  But we now also have the rich, the super rich, and the ultra rich.  So now a Lincoln looks pretty pedestrian.  There are literally dozens of car models that sell for more than a "fully loaded" Lincoln.  A nice Lincoln will set you back maybe $60,000.  But you can buy cars for $600,000, ten times as much.  And some cars cost far more, well into the millions of dollars.

So let's say you have decided to make your fortune by selling super (at least in terms of price) cars or anything else.  How do you go about it?  The first thing to understand is that this game can be played at many levels.  You can aim for the "Lincoln" part of the market.  Or you can aim for higher, say the $600,000 price point.  Or you can aim for the stratosphere, the car that costs a million dollars or more.  It turns out that there are commonalities whichever point you aim for.

But let's start by looking at a failure and one that happened in the most mundane of products, beer.  Anheuser-Busch set out many years ago to make a premium beer called Michelob.  They started distributing it widely in the '60s and you can still find it.  But it never really went anywhere.  This is for a simple reason.  If you are going to sell something at a premium price it has to be distinctive.  Michelob never tasted markedly different than Budweiser.

And it is important to know that it doesn't have to be better.  It just has to be different.  Look at Starbucks, a company playing at roughly the same price point as Budweiser/Michelob.  Consumer Reports panned Starbucks products because they had too much of a bitter taste.   But everybody could instantly tell the difference between a cup of coffee from Starbucks and a cup of coffee from Chock Full o' Nuts, a chain that prided itself on its good coffee.  So when they drank that "premium" Starbucks product they could tell that it was noticeably and obviously different from the "regular" Chock Full o' Nuts product.

And Starbucks is now a mega-company and Anheuser-Busch ended up being sold to a European company called InBev.  In the burger business Wendy's was smart enough to differentiate their product by going with square patties and Wendy's is still around. Car companies change the tail lights and other easily noticed features so that everyone can easily pick out the more prestigious products from the lesser ones.  That's part of what you are getting when you go up market.

And it turns out that the taste of the rich is no better and often worse than that of the rest of us.  There are a bunch of mansions built over a hundred years ago by Millionaires from New York City in the small seaport town of Newport in Rhode Island.  You can tour many of them and I have seen the interior of several.  One or two are quite nice.  But some of them are really tacky.  But they are decorated in a way that calls attention to the fact that they cost a lot of money to build.  They provided a showcase in which the rich could display tangible proof of the extent of their wealth.  So all of the mansions scream "I cost a lot of money" buy many are complete failures at saying "and I have very good taste".

So the most important thing once you get far enough up the scale is to make sure your product says in no uncertain terms "I cost a lot of money".  General Motors used to have a mid-price car line called the Oldsmobile.  (They dropped the nameplate in 2004).  The target market for Oldsmobile cars were people who were willing to pay extra for a well engineered and well constructed car.  And General Motors was able to sell enough cars for a long time to make Oldsmobile a profitable product line.

But at a certain point the accountants took over and the product quality diminished because it was cheaper to put parts from other higher volume product lines into Oldsmobile cars.  Their target market eventually figured this out and went elsewhere.  But my real point here is that relying on quality to the detriment of the "pizzazz" factor works but only up to a certain price point.  But if you move the price above that point the very rich don't value quality enough to pay super-premium prices.  Oldsmobile cars always sold for considerably less than Cadillac cars (the G. M. luxury brand).  If you want to put out a premium product at a premium price you can make that work.  But you can't charge a super-premium price no matter how well made your product is.

Now let's move on to a product with a super-premium price.  How much would you pay for a "top of the line" sound system (something you can play music on)?  For many of us the answer is nothing.  We like out smart phones with their ear buds.  The sound quality is not that good but the convenience is awesome.

Several decades ago most homes and apartments featured a "stereo" sound system.  And the price/quality model was similar to the car model of the same period.  You had the economy system featuring unfamiliar brands that got the job done.  You had the mid-price "component" systems that you could read about in a magazine like "Stereo Review".  Then you had premium brands like Bang and Olufsen or Marantz occupying the luxury niche.  But in the same way that a Lincoln might cost you twice as much as a Mercury, these luxury products cost perhaps twice as much as the mid-price brands.  At that time there really weren't any super-premium product lines.

Times change.  Meet Oswald's Mill Audio, OMA for short.  Jonathon Weiss made a bunch of money in Hollywood and retired while relatively young to rural Pennsylvania.  As a young man he worked in old movie theaters.  There he fell in love with their sound systems, many of which dated back to the '30s.  He got interested in reintegrating key components from these old systems into modern "stereo" sound systems.  He eventually turned this hobby into OMA.

You can spend ten thousand dollars or more to get a custom sound system using premium components installed in your home if you have a mind to.  But an OMA system will cost ten times that or more.  Their top of the line speaker system lists for $300,000.  Other components are priced similarly.  A complete system including installation can easily cost $700,000.  Weiss is doing a lot of things right.  He is selling as many systems as he wants to build, which turns out to be not very many.  So he is doing the important things right.  So what's he doing?

More than anything else he is selling a story.  If you peruse his web site (https://www.oswaldsmillaudio.com/) you will find a lot about OMA's "origin story".  You will find out a lot about key construction components like the slate and wood he uses.  There are nice videos and many elegant still photos of the finished equipment, individual components, and the construction of the equipment.  What is hard to find is prices and detailed specifications.  Why?

He has done the important thing.  His equipment has a very distinctive look.  Anybody can see it is very different from your run of the mill stereo components, even high end components.  But things like signal to noise ratio, dynamic range, and other technical specifications, they can't be found.  And prices, if you dig around you can find a price for some of the less expensive components like phonograph cartridges ($1,000 - $2,000, depending on the make and model).  And many of the cartridges are "mono".  They don't even do stereo.  But I couldn't find pricing for the larger and more expensive components on the web site.  It's apparently one of those "if you have to ask - you can't afford it" things.

So is his equipment worth it?  Yes and no.  First the no.

As I said technical specifications are hard to find.  There is a good reason for this.  You can buy a "professional grade" turntable from Panasonic.  It's what all the successful DJs and rappers use and they can afford the best.  That turntable does everything it is possible to do in terms of technical sound quality.  There is no "up" to go to from one of these units.  So the technical specifications for OMA's turntables will be at best the same as and more likely less than those of a professional grade turntable that costs far less.  But if you spin some vinyl on an OMA turntable is it going to sound great?  Yes.  It will just sound no better than the same piece of vinyl would sound on a far less expensive turntable.

The same it true of the rest of his components.  He uses vacuum tubes rather than solid state components in his electronics.  Modern solid state components have far better technical specifications than old vacuum tube components.  In fact vacuum tube components introduce distortion into the signal.  But this distortion, when it is great enough to be noticeable, distorts the sound in a way that makes it sound warmer.  And this is especially true of the components OMA uses.

All of their vacuum tubes are old designs, typically from the '30s.  They had poor dynamic range and other technical flaws because that was the best the limited technology of the time could do.  Modern technology, even more recent tube designs, can do a much better job.  But oh boy do OMA components look cool.  And you don't have to be any kind of expert to tell a vacuum tube from a transistor or integrated circuit.

It's the same story with his speakers.  The stars of his show are his horns.  There is a relatively small electromechanical device in the throat of the horn but the horn itself is made of wood.  And they are not perfectly round.  Instead they are made up of a number of flat segments.  This deviation from perfect circularity introduces some "high order" distortion.  But it is a small amount, an amount too small to be detected by the average ear.

And speaker systems are typically divided up into low frequency, midrange, and high frequency bands.  Each is treated separately because a single component can't do a good job with that wide a bandwidth.  OMA rightly uses this "three way split" design.  The horns handle the middle frequency band.  But this band is technically pretty easy to get right.  You don't need a big old wooden horn to do an excellent job.  The high frequency band is even easier to handle.  It is the low frequency band that is the hardest to get right.  Guess what OMA spends no time on?  The components that handle the low frequency band.

By now it sounds like I think OMA is doing a terrible job.  And they are if all you care about is how well the equipment performs.  I'm sure the equipment performs well enough to sound just fine to most people.  And that's what is important.  The OMA web site also throws in a goodly amount of  "tech talk".  There is enough of it and it sounds convincing enough to work on people who don't already have the kind of technical background necessary to know what the real story is.  And the customers OMA is selling to don't have that kind of background.  A regular reader of "Stereo Review" back in the day would know about this sort of thing.  But that kind of expertise is rarely needed in the modern world so few people now have it.

What OMA gets right is making their equipment look special and very expensive.  And that's the part they absolutely need to get right.  If you are building a thirty million dollar house you need to furnish it with stuff that looks like it belongs in a thirty million dollar house.  OMA more than fills the bill.  And they have enough of a presence on the web that anybody can quickly determine that their equipment is very unique and very expensive.  And that's the "must have" in this part of the market.  So OMA gets the unimportant stuff wrong and the important stuff right.

And did I mention that Jonathon Weiss has a legitimate Hollywood background?  He knows how to present himself well.  He knows how to "make sure every dollar of the budget shows up on the screen".  You will fail in your attempt to go upscale if your product is bad in such a way that the average person can tell.  But OMA seems to have avoided that trap.  Their equipment gets generally good (but not great) revues.    But it is also true that your product doesn't actually have to be better than other less expensive competing products.  Here I think is the path OMA has taken.  And you will definitely fail if the average person can't instantly distinguish between your product and other products that cost substantially less.  This is where OMA excels.

And an investment in making sure that people know that your brand is a premium brand (Prada anyone?) is money well spent.  That's why many high end brands spend a lot of time, effort, and money, making sure that consumers that will never be able to afford their products have a general knowledge of the company and its products.  If people don't instantly know it's expensive then it might as well be not expensive.  And in that case you are going to lose the sale to different company that has done a better job of marketing its brand.

This is a classic example of the old saw that goes "those who can do and those who can't teach".  I understand what's going on here but I couldn't pull any of this off personally to save my life.  So I actually appreciate a brand like OMA.  They do what they do well and that's to be admired.  Many efforts to operate in the super-premium market fail.  It's a tempting market because the profit margins are so high if you can pull it off.  But succeeding is way harder to do that it looks.