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bifcake
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Profit margins

It is said over and over that hi end audio stores' margins are paper thin. I have found out today that this is complet and total bullshit.

I was at a high end store today and I sneaked a peak at their computer screen while they were doing a component lookup and their cost came up. It was just as I suspected: they get a 100% markup on components (this was an amp, not cables). In fact the markup for this particular component was 110%

So, we are getting raped when we buy new by dealers who are not even all that nice to us.

Furthermore, I suspect that when reviewers buy their stuff at "industry accommodation price", they probably get a 30-50% discount on their gear.

Given that I am a regular contributer to these forums, I believe I am entitled to an industry accommodation price. Where do I collect my badge?

Ergonaut
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Re: Profit margins


Quote:
It is said over and over that hi end audio stores' margins are paper thin. I have found out today that this is complet and total bullshit.

I was at a high end store today and I sneaked a peak at their computer screen while they were doing a component lookup and their cost came up. It was just as I suspected: they get a 100% markup on components (this was an amp, not cables). In fact the markup for this particular component was 110%

So, we are getting raped when we buy new by dealers who are not even all that nice to us.

Furthermore, I suspect that when reviewers buy their stuff at "industry accommodation price", they probably get a 30-50% discount on their gear.

Given that I am a regular contributer to these forums, I believe I am entitled to an industry accommodation price. Where do I collect my badge?


Hi Alex

That is normal in the UK too
Original Equipment Manufacturer (OEM) - 100% markup to its distributor.
Distributor - 100% Markup to its Reseller or Shop
Shop - variable Add-on after market Components - cables etc can be between 100% to 1000%
capital equipment (big Hi-fi) between 10% and 30% usually

--Make it yourself

CECE
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Re: Profit margins

Nah....come on, and those car dealers are only making $100 on the great deal they gave yeah. Actually they lost money, that's why they have dozens of $40,000 products sitting there. they loose money on every sale.
You mean those $45,000 CD only players are over priced, and not really worth the exhorbitant prices that some marketing guy decides is the selling price. Hmmm, let's analyse this, this device will spin a CD, output it's signal, into some other over priced beast......this is high end, ya know, the mfgs are struggling. Cus' they insist on ripping people, they deserve to fade.
decads ago Advent got in trouble, with dealer price fixing, but somehow the prices never changed, but no dealer would discount them. The question remains the same, why does anyone think audio is any different than any other consumer products? There are high markups, BS marketing, and each month a new try at taking more money for an inferior product. Sy Syms, an educated consumer is some of hi ends worse customers. Now let's go listen, cus that's all that matters. I see it's time to listen to a 72V colorado rock piece of wire, cus' ya know, regular WIRE, doesn't sound right. It needs PTFE air gaps, and other assorted marketing designs.
What's the markup on a $100,000 spinning wheel??? hahahahahahahahaha, how do you EVER recoup the loss on such a purchase. Maybe those units are really meant to list for only $5,000. And they made a mistake in teh price list, it sold, so they said, hey, we might be on to something...keep it priced high, gullibles will think it's special...that is an old marketing tool, charge more. Who makes the motor for the TT? Just cause it cost too much, doesn't mean it's high end in SOUND.
Think about this, $100,000 for a spinning platter!!! An AUDI R8...has a $109,000 STICKER, it has so many prcise perfectly finished, exacting components that work in hot, cold, dry, water, anything, and it's a work of art....how can the Continuum be possibly overpriced? hahahahahahah And teh Audi R8 has climate control, has it's own sound system, it's own seats. With teh Continuum, you still need the amp, speakers, seats, place to put teh thing on....oh yeah, what a deal. I know anything MF says is good, is true. He's a former failed DJ. That makes him an audio expert, there never is any mention of his electyronics or electrical background? Rrecording, musican? That would be interesting.
JA recordds, measures, and applys SCINCE and reality to his views, not just personal preferences, I really think StereoPhile needs to hire on more sane reviewers, with realistic points of view on stuff. Pushing 100 year old technolgy to teh extent MF does is really bizzare. And having to use a $100K spinner, to extract the signal, is the sign of lack of something upstairs. Wonder if he thinks 100W incandescent lamps are still a good idea in the era of 23W CFL's and now LED coming into useage. Let's never move forward, rotary phones forever!!!!

tomjtx
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Re: Profit margins

I have seen a number of manufacturer price lists and wholesale can vary somewhat .

I think it is safe to asume at least a 40% to 50% spread :1,000.00 retail is 600.00 or 500.00 wholesale.

In one case I did see only a 33% spread but I think that is rare.

The higher the retail , the more likely the spread is 50 rather than 40%,

Those $30,000.00 speakers likely wholesale for 15,000.00.

If you look carefully and bargain well it is possible to get 20-30% off any high-end gear, you just have to be patient.

It is also helpful to not get hooked on the idea there is only one dac, amp etc. that is acceptable.

Pro audio gear does have less markup but is reasonably priced to begin with.

The Lavry DAC10 can be bought for 850.00 street price, some like it more than the benchmark or belcanto3.

There is good value out there if one keeps a level head and bargains well.

CECE
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Re: Profit margins

Yup.

dbowker
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Re: Profit margins

Guys- why does everyone become a business hating whiner when you start looking at mark-ups? That ain't all profit, I assure you, and not every product gets 100% markup. High-end stores have very high cost of sale. No one just goes in and plunks down piles of money without a lot of listening and time spent, and 9 out of ten customers don't buy at all (ever).

I worked at a high-end store a few years ago and nobody was getting rich I promise you. Maybe a few very successful stores might do better, but I bet their rent and costs are that much higher.

Whine, whine, whine- how come I never hear the same whining about high-end auto show rooms. Can you imagine" Oh those Porche dealers! How come they charge so much- my Honda gets me to work just fine! They must be a bunch of snake oil salesmen!" Hahahah. Once again---if you think it costs too much, just don't buy it!

bobedaone
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Re: Profit margins

Actually, Porsche has the highest per-car profit in the industry. There is no substitute.

As for audio dealers, I can attest to the difficult sales. I often hang around the shop, and there are an awful lot of people who come in and don't buy. (The salesmen don't mind me, though, because they know that whenever I DO have money, it will be in their hands post haste. In fact, I've started a turntable fund, which is essentially a rolling deposit, augmented as finances allow.)

A good dealer is valuable to me, and I do my (small) part to keep them around.

tomjtx
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Re: Profit margins

I wasn't whining.

I don't bemoan the markups, but I do think it's useful to realize the high end markup is not lower than any other product.

That is a bit of marketing fantasy.
That bit of knowledge helps the consumer get a good deal.

Eg. If I want 30,000.00 speakers I know I should aim to pay 20,000 and let the dealer make a nice 5,000 profit.

bifcake
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Re: Profit margins

I believe it was Wes Phillips, if I'm not mistaken, who said that he used to work at a hifi shop and that the markups weren't 100%. Apparently, the hifi market has changed since he worked there.

Aside from the markups, I do want to focus your attention a bit as to what constitutes "industry discount price" which is what reviewers pay for their stuff.

Even if you sign a deal that you can't sell a piece of equipment for 6 months, if you buy it at a 50% discount, you can sell it in 6 months at a profit. I can actually make a decent living just doing that.

Elk
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Re: Profit margins

Keep in mind that the "profit" identified needs to pay for the space, staff, accounting, heat/AC, light, inventory, advertising, etc. The bottom line taxable profit doesn't even begin to approach 100%, or 50% 0r even 25%.

Every retail product has a "high" markup and must so that the business remains in existence. You can't expect bargain prices merely because there is a markup built into the retail price.

bifcake
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Re: Profit margins

Sure I can. Everyone's got the same expenses such as rent, salaries, etc. Yet, most items are discounted.

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Re: Profit margins

Over the years, I've been able to pick up a few bits of info here and there, and it agrees with what you say; but there is a wide spread.

There was a manufacturer of a very high end table a few years back that I got to spend some time with. He had transitioned out of making the turntable, even though it had been very well reviewed in the press, because he said the parts cost alone was around 56% of the retail price. When he put any value at all on his time, he actually was losing money on each unit.

On the more fun-to-think-about side, when you consider that 30,000 dollar pair of speakers, think back to the original cost...

30,000 retail.

15,000 cost to the store.

The distributor gets 15,000, and paid 7,500 to the manufacturer.

The manufacturer gets 7,500 bucks, on a "cost to make" of about 3,750.

Looked at in that way, I can see how manufacturers talk about there still being cost issues on something you'd think had a retail price beyond such thoughts. It also explains how there can be such a thriving aftermarket tradition of changing out parts like capacitors and such to "improve" the quality of a product.

I wish I could be a fly on the wall at a cable company and see how there pricing structure worked out.

Other than the Magico Mini, I can't recall any ruckus raised by the price of speakers, but it seems every cable manufacturer is held in suspicious regard by many audiophiles.

Anyway, great topic. Thanks for starting the thread!

bobedaone
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Re: Profit margins

I think we're confusing "profit" with "revenue" here.

Revenue - cost - overhead = profit

Agreed, Elk.

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Re: Profit margins

The only way you can get discounting is with volume. Big volume at that. I don't think any high-end market (audio, automoibile, watches, whatever) has enough consumers to push it into a volume that can create discounting.

Example- look at video game consoles. They pour extraordinary amounts of R&D into into cutting edge chip technology- that themselves are very expensive to produce. But if you can sell a couple million units in the first few months and maintain a steady rate of sales after, you can put out what should be a several thousand dollar piece of hardware for $400. But how is Nagra going to push those crazy expensive $20k+ CD players out the door? Cut a deal with Best Buy and get Joe blow (apologies to any real guys name Joe who are reading this )to buy the thing for even $900? It's sad, but most high-end stuff really could be produced for far less cost and sold for a much more reasonable cost if you actually had a market for it.

All my non-audio friends (which is all but two) really enjoy coming over and hearing my setup, but not one has ever asked "Wow, where can I go buy some of this for me?" And they all love listening to music too. But beyond mid-fi it's just not a priority.

For me it always was, even when I was a college student. I'd somehow manage to scrape whatever cash I could get together and buy any decent used gear I could get a hold of. The beauty today is Audiogon has loads of great stuff that is at truly discounted prices!

Jan Vigne
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Re: Profit margins

I sold audio for many years. The average mark up is 40-50% on most items. Speakers are generally a bit higher profit margins than electronics. Buying in quantity usualy gets a lower price from the manufacture. Buying ten pairs of speakers is cheaper than buying one pair.

Manufacturers will offer discounts that give the dealer more profit if the dealer buys "X" amount of goods at "X" time of year. Some products offer more mark up than others and dealers do take that into consideration when choosing lines. Large chain operations typically have a "house brand" that has much larger mark ups than a nationally advertised line. House brands are stocked for the customer who only buys when they feel they've received a generous discount which the customer places above quality.

A good salesperson is there to make the store profitable and knows when to offer discounts and when to hold their price.

Discontinued and "B" stock items are often offered to dealers at discounts. What is in the price book doesn't always reflect true cost to the shop.

Some manufacturers will pay for the whole or a per centage of advertising which includes or features the manufacturer's products. Those ads you see where such and such a product is promoted by such and such a retailer is a shared expense between the manufacturer and the store.

Perks exist in all retail. I have a Luxman jacket and belt buckle. That came off the Lux profit margin but didn't make me want to sell Luxman receivers. Yamaha used to feed us royally when a new line came out. That didn't make me want to sell Yamaha unless it was the right product for the client.

Industry accommodation prices are typically 50% off retail. Buying from a company such as Sony, the salesperson would do better buying when the store runs a sale. Companies such as Sony, Pioneer, Mitsubishi, etc, offer sales promotion benefits which earns a salesperson points for selling a particular item. The salesperson can then turn those points in to collect merchandise or ocassionally cash. These promotions are seasonal and only offered by a few companies. A salesperson who insists a certain mass market brand is the only choice is either uninformed or working for points.


Quote:
I was at a high end store today and I sneaked a peak at their computer screen while they were doing a component lookup and their cost came up. It was just as I suspected: they get a 100% markup on components (this was an amp, not cables). In fact the markup for this particular component was 110%

What the hell are you doing sneaking a peak at the store's private records? Those are the store's business and not yours! How would you like it if the shop insisted on looking at your credit balances before they demoed any component? Maybe they could take your wallet and check for available funds. I consider what you did to be very unethical.

bifcake
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Re: Profit margins


Quote:


Quote:
I was at a high end store today and I sneaked a peak at their computer screen while they were doing a component lookup and their cost came up. It was just as I suspected: they get a 100% markup on components (this was an amp, not cables). In fact the markup for this particular component was 110%

What the hell are you doing sneaking a peak at the store's private records? Those are the store's business and not yours! How would you like it if the shop insisted on looking at your credit balances before they demoed any component? Maybe they could take your wallet and check for available funds. I consider what you did to be very unethical.

Don't get high and mighty with me. If you want to grandstand, then I suggest you pick a different forum.

As far as the margins are concerned, it's highway robbery. Audiogon prices are where the retail prices should be. Even car dealers, as sleazy as they are, don't get 100% markup. This is one of the things that I think JGH meant when he said the hifi industry was dying. It morphed from a bunch of people trying to recreate the sound of live music to a bunch of people trying to separate you from your money.

quadlover
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Re: Profit margins

this is the first thread that has really got under my skin. let me preface by saying i am not in any way an audio dealer or in the audio industry. to alexo my question is what do you do for a living, how much do you make, and what is the margin structure for that business? you're right it is none of my business. so it is in any business. period. what is a good deal...my friends who sell high end audio, cars, and homes say a good deal is a state of mind. you should not expect to pay the same price for a meal on cloth tablecloths, real china plates and crystal stemware that you pay on a picnic table. by the same token you would not hire a ambulance chasing attorney to close a multi-million dollar real estate deal. real estate, furninshings, cost of display product, sales staff, proper staff and traing costs money. these items affect the margin beyond just what the item costs. plus do not forget shipping which keeps surcharging businesses more and more. are you the type of low life that spends time in an audio store to compare model a vs. model b for a couple of hours and then goes out and buys one of them on audiogon and then expects that store to help you when you have problems? god i hope not. when i make a purchase i go where i feel i am comfortable, where i am treated with respect, and i am given a fair price and i expect support service. if all of those items are not met i either look for another store or expect some kind of compensation for lack of service. so remember the next time you whine that your paying to much...what is your company charging and what does your customer get in return.

bifcake
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Re: Profit margins

Hmmm... a good deal is a state of mind... I guess it is. Hence, there is a sucker born every day.

You know, if a good deal is a state of mind, then that's really an excuse to charge money for nothing. For example, if I sell you snake oil and you're happy with it, even though it's a placebo effect, then I guess you got a good deal. If I sell you a can of "air from Jerusalem", then I guess you got a good deal. It's Emperor's new clothes.

Secondly, as a consumer, it is my prerogative to get the best deal I can. If it means squeezing the dealer, then that's what it means. If it means shopping on Audiogon, then that's what it means. If it means threatening a dealer to go to Audiogon to get a discount, then that's what it means. It is the dealer's prerogative to get the most he can, it is the consumer's prerogative to pay the least they can.

Having said that, what I'm bitching about is the sheer and unadulterated greed that's exhibited by the hifi industry by building in such high profit margins into every product, protecting the dealerships by setting up contracts that don't allow for shipping or selling over the internet, creating a setup where dealers don't have to compete on price and most of all, what really pisses me off to no end are consumers who defend this setup.

quadlover
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Re: Profit margins

just remember that your "right" to squeeze the dealer on price is the same as the dealer's right to tell you no deal and refuse you service. do not get me wrong, i do not like to pay extra any more than the next guy but a businessman has to make money to stay in business and i want to be treated with respect so i treat the business people with respect. if i do not get it i go elswhere. i won't buy product "a" from dealer "a" even if it is a lower price if the place is a dump and i'm treated rudely and with no respect. but if dealer "b" sells the product for a little more but is a nicer facility, has more knowledgable staff, more flexible hours, i am willing to pay a little more for a little better service. if the only reason you are buying from a store is its price, then the business should work out of his trunk of his car, and take special orders, cash only no refunds, because all you want is price and that is all you will get. if you want more the product's base cost does not change but the value of the seller to you is increased to the point where value=price of goods offered.

Elk
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Re: Profit margins


Quote:
Audiogon prices are where the retail prices should be.

And, of course, you audition all of your prospective audio purchases on Audiogon, correct?

If you don't take advantage of audio salons' show rooms, listening rooms, expertise, setup services, etc. it is completely proper to demand bargain prices - in fact you are entitled to discounts.

But you can't have it both ways. You can't insist on nicely set up listening rooms, furnished with expensive equipment to feed the speakers you audition, and then expect the store to cut you a big discount when you finally buy something from one of them. They don't have the bottom line profit flexibility to allow this.

Few are making even a decent living running a high end audio store. If there were giant profits to be had their would be high end stores everywhere. Instead they are closing as they can't make enough money to stay open.

Jan Vigne
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Re: Profit margins


Quote:
it is my prerogative to get the best deal I can. If it means squeezing the dealer, then that's what it means. If it means shopping on Audiogon, then that's what it means. If it means threatening a dealer to go to Audiogon to get a discount, then that's what it means. It is the dealer's prerogative to get the most he can, it is the consumer's prerogative to pay the least they can.

Having said that, what I'm bitching about is the sheer and unadulterated greed that's exhibited by the hifi industry by building in such high profit margins into every product, protecting the dealerships by setting up contracts that don't allow for shipping or selling over the internet, creating a setup where dealers don't have to compete on price and most of all, what really pisses me off to no end are consumers who defend this setup.

Now don't you get high and mighty with me, son. And do not suggest where I go and where I stay!

If you believe all dealers are unethical, then don't deal with them. Find what you want on Audiogon without an assistance from a brick and mortar dealer. If dealers treat you as if they don't want your business, possibly they prefer to deal with people with some ethics. Do you sneak a peak at your co-worker's pay checks if you have the chance? Do you negotiate the grocer down on his prices? Beginning any transaction with the idea you have the "right" to grind the store down is a recipe for less than stellar service. I suppose you consider it ethical to use the dealer as an chance to audition what you will threaten to go buy on Audiogon if the dealer doesn't give you a satisfactory deal? And you believe a satisfactory deal is taken from 110% profit margins. What does Audiogon owe you other than a box? You are the sort of customer who puts high end audio dealers out of business. Then, when there are no boutique dealers, you'll bitch there's no place to audition anything before you go find a discount somewhere else.

You really don't get it, Alex. This is a cottage industry, not the car business. If you really feel all dealers rip you off with outrageous profit margins, you should open your own store and get in on the action. You'd be a fool not to. If you believe greed is the way dealers make money, open our own shop and do it the "right" way. Otherwise, shut your yap and shop Audiogon all you want.

Did you mention to the dealer you saw the prices? If not, why not? Wouldn't that have made the deal much simpler? You know what he paid, you know what you want to pay, he knows what he has to sell it for to stay in business. Kind of like buying that Ford pickup.

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Re: Profit margins


Quote:
You are the sort of customer who puts high end audio dealers out of business. Then, when there are no boutique dealers, you'll bitch there's no place to audition anything before you go find a discount somewhere else.

Exactly so. Great post, Jan.

John Atkinson
Editor, Stereophile

bifcake
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Re: Profit margins

For whom is all of hi-fi designed and created? Is it for the 80,000 people who subscribe to Stereophile and perhaps another 30,000 who subscribe to TAS? Even if there's no overlap, that's still only 120,000 people.

Is that the goal? Is the goal is to ensure that the industry caters exclusively to these 120,000 people? If that's the case, then I guess the pricing model is right: milk them for all they got, get as many people paid as you can and come up with various product changes periodically to ensure the 120,000 always have something to spend their money on.

Alas, the high end industry bitches and moans that there's not enough infusion of new blood. Of course there isn't. They go out of their way to ensure that there wouldn't be. The pricing model is one way of keeping people away.

Those defending the high end manufacturers and dealers always use the argument that:

a) this is a boutique industry

b) you're getting value from the dealer in terms of listening environments

c) you're getting post sales support from a dealer

d) The equipment is very expensive to produce

So, allow me to address these arguments point by point.

a) If the industry wants to remain a very limited boutique industry, then they just have to continue doing what they're doing. Obviously, it's a winning formula because it culled enough buyers down to the hard core 120,000

b) If by value, one means "listening room" and the time to audition, then you get the same "value" from any store selling electronics. It's part of cost of business. If one chooses to sell things audio, then one has to provide a listening environment.

c) What kind of post sales support does one get from a dealer? The dealer charges extra for installation, so that's usually where the post sales support comes in. If there's something that's not working that they installed, they will come back and fix it, but that's a different service that they sold you on top of the gear. If you installed things on your own, their "support" will be limited to a few minutes on the phone.

d) Apparently, the equipment is not all that expensive to produce. At least not by the selling price ratio. It may be much more expensive to produce vs. mass market, but it's not an astronomical cost as we would be lead to believe. If a speaker costs $15,000, then the dealer cost is $7,500, the distributer cost is $3700, the manufacturer's cost is $1800.
If instead of taking a 100% cut, everyone decided to take a more reasonable 30% cut (which is still substantial), then, the distributor cost would be $2,400, the dealer cost would be $3,200 and the retail cost would be $4,300. That's a far cry from $15,000 and there's still enough money to be made by all. Plus, you would attract more people into high end because the entry level components would actually compete with mass market on price and hence would attract many more people.

Alas, I believe that everyone's looking for that "kill" where they can sell as few items as they can and make enough money not to want to do more.

So, if I'm one of those consumers who would kill the high end industry, then perhaps the high end industry deserves to die in its current iteration. One would hope that out of its ashes a better model, a more inclusive, a more reasonably priced model would arise.

Jan Vigne
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Re: Profit margins

Everything you say and everything you propose in this post is simply dead wrong. Let's take one example.


Quote:
b) If by value, one means "listening room" and the time to audition, then you get the same "value" from any store selling electronics. It's part of cost of business. If one chooses to sell things audio, then one has to provide a listening environment.

I don't remember the listening room on Audiogon or eBay. Please, provide a link to that space.

Your numbers and pricing theory would be relevant to a housing development. Not to a small industry such as high end audio. You value price over all else, otherwise, we wouldn't be having this discussion and you wouldn't have felt the unethical urge to sneak a peak at the dealer's cost sheet. What you did is still unethical. That's the bottom line here. That you now use one number to support your entire belief system is absurd! You trust what you saw for five seconds while I trust what I did for twenty five years. Which would you say has more value?


Quote:
So, if I'm one of those consumers who would kill the high end industry, then perhaps the high end industry deserves to die in its current iteration.

No, the high end industry deserves what it has. Maybe you should consider a portion of this hobby where price is the only consideration. Wishing the industry to die when it does not suit your wants is a foolhardy concept. It is what will kill this industry, not by the dealer's greed but by the greed of the customer. Wanting only what you want to be the reality we all live in is not facing reality. It is throwing a fit because you can't get what you want. I prefer to do business in a fashion that doesn't involve throwing fits and I have found more than a few clients over the years who agree. Unfortunately, there are those who would spoil what the rest of us find useful just to satisfy their own selfish desires. You would appear to be one of those spoilers, Alex.

bifcake
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Re: Profit margins

You seem to be stuck on the 'ethics' of me seeing the dealer price list. That's not what the discussion is all about. However, if what I did is unethical, fine. I have no qualms with it.

Let's move on to the core discussion: regarding what I value, I value sound quality and price over all else. I don't require exotic woods, automotive lacquer, or any other
"added value" intangible. I don't require dealer's help with installation, advice or opinion. I can do my own research and solicit opinions from disinterested parties. All that I require is a place to audition and a good price. To me, everything else is pure fluff.

Re: the high end industry, you're absolutely right. It deserves what it has - 120,000 potential customers in a country of 300 million.

As far as doing business is concerned, I don't remember ever mentioning throwing fits. I am not quite sure how you derived that idea. Furthermore, if overpaying for stuff and defending those who overcharge you rocks your boat, then you are free to overpay and revel in the fact that you made someone else money. Alas, that's not my cup of tea. I don't mind the manufacturers and dealers making money. What I do mind is the 100% markup. I don't care if it's a cottage industry, the 100% markup is just pure greed.

dbowker
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Re: Profit margins

Your point by point critique is one of the most naive and self-serving lists I have ever seen, aside from a good DUP rant, which is a whole other category.

You clearly have no idea about how business works and somehow feel you live in this big rigged system expressly made to crush you well deserved "right" to own high-end audio gear of your choice. Man...I guess you aren't very aware of just how privileged you are to even live in a country that HAS these products AT ALL!

You're bitching that you can't own expensive luxury items as if someone was withholding food from your family! It'd be almost funny if you weren't so serious about it. No one owes you anything- least of all makers and sellers of a niche market. It's niche not so much because of all the reasons you state but because most people don't care that much about it.

You seem to care but also think you are some kind of victim. Well, I doubt it. Maybe you should go talk to your boss about this terrible "problem" and have him/her give you a raise?

bifcake
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Re: Profit margins

This is completely irrelevant in the grand scheme of things. Nobody is taking food from my mouth. Given the forums to which I post, I didn't think it was necessary to qualify my posts.

I am not, nor did I ever say I was a victim. I simply pointed out what I consider to be extreme greed that permeates the high end market. I also communicated my displeasure.

I honestly can't fathom where you're getting all this other stuff from.

quadlover
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Re: Profit margins

first off as a reminder to all fair trade pricing was eliminated years ago so in reality list price doe not mean a darn thing. what matters is what you actually pay. so my question to alexo and all others who think margin is a crime, what kind of mark up structure would you purpose that an audio dealer is entitled to gross to stay in business? notice i said gross not net.

bifcake
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Re: Profit margins

I answered that question in my earlier post. I think that a 30% margin is reasonable given that this is a small, niche market.

Jan Vigne
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Re: Profit margins

I don't believe unethical behavior can be divorced from this conversation. Particularly since you have no qualms regarding your unethical behavior and you are basing your entire argument upon such acts. How do you argue with an adult over what is right and wrong? You either get it or you don't that some things are ethical and some things are not. If you don't understand that then any further discussion is worthless.


Quote:
Everyone's got the same expenses such as rent, salaries, etc. Yet, most items are discounted.

If everything is discounted, then what those products sell for is the real price and the retail has no meaning. They should have been priced at what they can sell for. It is dishonest to price them at higher retails. To sell something at a fair price without a discount seems to be the logical conclusion to this issue. Unfortunately for you, Alex, what you wish the selling price to be is not the issue here.

Do you seriously think it is a vlaue to get $5k off a Chevy Tahoe? You really don't see the lost value of that transaction? Go ask a car dealer which vehicles have the highest four year residuals, then try to understand why discounting everything is a stupid way to do business. Surveys show most people do not prefer to haggle over price. Many companies outside of the high end audio industry have proven this to be true. The product sells at its retail price which is considered fair by the buyer. Once again, Alex, what you wish the selling price to be is not the issue here. If you don't believe the retail is fair, buy something else somewhere else.

You have the right to ask for a discount, it is not your prerogative to do so. Any salesperson should quickly learn they will only get what they ask for. The same is true for a client. You generally will not get a discount unless you ask. However, as a salesperson I am under no obligation to provide you with a discount before or after you ask. My job is to keep the store profitable and my employment secure by doing so. If you don't like that, there are places with plenty of employee turn over where discounts are on the tag and in the Sunday newspapers flyers. How much less do you believe the cost to you would be if the shops didn't advertise? You pick your products and you live by the rules. That, sir, is life.

I always told my cliets that I cannot argue "value" with them. A product is worth what someone is willing to pay. If you have no use for exotic woods, automotive paints and other intangibles, I would suggest you ignore those products which include those extra cost items. You act as if the dealer is forcing you to purchase these items when there are multitudes of options available to suit any budget. No one is forcing you to buy a Wilson speaker. Stereophile has reviewed several options which dispense with automotive lacquers and 0.001" specifications while still offering sound quality similar to the Wilsons.

It is not the dealer's fault the manufacturer chooses to build a product which appeals to a buyer who does value such build and sound quality. In this respect, I find your argument to have no basis in logic.


Quote:
I don't mind the manufacturers and dealers making money.

I see. That is usually followed by, "They just don't have to make it off me." And that typically means you do have a problem with anyone making a profit when your money is supplying that margin.

Just whose profit margin are we discussing; the manufacturer or the dealer? You have wandered around between the two as if they are synonymous. I assure you they are not. There are boat loads of dealers who have gone out of businesss while the manufacturer survives. So, you will have to be more succinct in just who you are railing against before I can make anything close to a worthy comment when I have no idea who you despise the most.

I agree with your assessment of items which do not add to the sonic value of the component. But I have assembled what I consider to be a good sounding system without those accoutrements and window dressings simply by shopping for sound and not for flash. Ask any Wilson dealer, however, and they will tell you the client for a $45k speakers considers them as much a piece of design artwork as they are high end speakers. Compared to a less expensive but well made Rega speaker, this is a point well taken. While I prefer not to spend my money on artwork when I want speakers, I agree that a product should look as if it fits in place in a client's home. When I asked one client where the speakers could be placed, I was told they could not go in front of the Picasso. I got the point. If a dealer wishes to sell a $30k amplifier, that same dealer cannot offer speakers that do not fit the furnishings of the person who can afford that amplifier. You seem to now be railing against the fact you cannot even afford the Picasso original.


Quote:
Re: the high end industry, you're absolutely right. It deserves what it has - 120,000 potential customers in a country of 300 million.

I really won't argue numbers that have come out of someone's ass. While the audiophile community is small, you have no basis for your numbers and they are irrelevant to the discussion. If you truly believe the high end audio industry is stagnant due to the lack of discounts or inclusion of exotic woods, IMO, you have missed a large portion of what high end audio is all about. If you truly believe most high end audio shops go out of business because the greedy dealer has made all the money needed to survive and thrive and is now resting on some tropical beach sipping $100 cocktails, then you have not been paying attention at all. If you truly believe the music industry is stagnant due to not enough selections in the artists you like, you are saying the same thing as you are about audio. The industry was not built around you and you alone, Alex. If you want a product that suits your needs without the frills, you may have to work a bit but they are out there. However, if you only want $5k off a Tahoe, you have to buy a Chevy.


Quote:
As far as doing business is concerned, I don't remember ever mentioning throwing fits. I am not quite sure how you derived that idea.

As a salesperson I have been "squeezed" quietly and not so quietly. I find both to have the same basis in how the client thinks and both represent a "fit" to me.


Quote:
Secondly, as a consumer, it is my prerogative to get the best deal I can. If it means squeezing the dealer, then that's what it means. If it means shopping on Audiogon, then that's what it means. If it means threatening a dealer to go to Audiogon to get a discount, then that's what it means.

Threats usually constitute a "fit" to me. As with your opinion of what I consider unethical behavior, I suspect you'll disagree on this or have no qualms about what is ethical or what is a fit and what is not. I imagine you'd also disagree with my thinking that a bargain is seldom a deal and a deal is always a value. I don't believe you can assess the deal you got until you've owned the product and find yourself satisfied with the value. If you don't have any value, the deal stinks no matter how much or how little you paid. If after a one year or ten years you think you bought good value, then the deal was good no matter what you paid.


Quote:
All that I require is a place to audition and a good price. To me, everything else is pure fluff.

To me using a dealer's shop to audtion anything and then threatening to buy from Audiogon where they owe you nothing more than a box is unethical and can only constitute (what would hopefully be) a quiet fit but a fit none the less. The shop has costs to cover and you cannot divorce yourself from the next client when it comes to what the dealer must pay to the landlord, the utilities, the insurance, etc. None of those are considerations of Audiogon. Your few extra pennies to the dealer when you do not require all of his services is similar to not paying the physician for anything more than the bandaid to cover the needle stick. Your few pennies will help the dealer when someone does require more assistance. You will allow the dealer to spend some time with a newbie. You will allow the dealer the opportunity to bring along a new line that represents the value you desire rather than the exotic woods you dislike. You are paying for the dealer to hire a sales staff that is capable of helping others. The alternative is the group of idiots you find at Best Buy.

If you ever ask a question, ever wish to hear that amplifier with that speaker when they are not currently lined up on the wall through the switchbox, then you should realize what your pennies go toward. If you ever wish to hear the CD you brought in - instead of the one the kid at the big box store likes - on more than one speaker, then you should realize what the dealer does to spread his overhead and his profit amongst all clients. Literally, what you take from the dealer by threatening to buy from an anonymous dealer on Audiogon is taking the opportunity for someone else to become interested in high end audio. To think otherwise is to be selfish in the extreme.

You threaten a dealer with buying from Audiogon and then you complain they do not treat you well. You are upset when they get their profit back when you do require assistance. You call then greedy when they offer the product required to make your system perform well. Do you really not see a connection between these things? Why would a dealer wish to do business with someone who has no qualms about unethical behavior?


Quote:
What I do mind is the 100% markup. I don't care if it's a cottage industry, the 100% markup is just pure greed.

OK. How do you arrive at that figure? I have told you I spent over two decades selling audio and I've told you what I see as the reality of a small high end dealership. Dealers do not operate on 100% profit margins. Please, take my word, based on my experience, on this fact. You saw one number and you assume this justifies all your arguments with dealers and manufacturers.

I have only a few questions and then I think this thread will be over for me.

Do you realy believe it is ethical to use a dealer's shop for auditions and then grind a dealer down with threats to shop elsewhere from someone who owes you nothing?

Do you seriously believe audio dealers operate at 100% profit margins?

Did you ever find that room where you can audition products on Audiogon? Can you provide that link?

What will you do when there are no shops where you can audition product?

bifcake
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Re: Profit margins

I am not sure that I can address all of your points in a single post, as that would take tomes.

I will address the last few questions you posed and I will make an observation.

I'll start with my observation: It did not click with me that you were a sales guy. At first, I couldn't understand why you were so up in arms about my original post. Now, that it clicked that you're a sales guy, your point of view makes more sense because you're not arguing from the standpoint of a consumer. Rather, you have taken my original statement and took it personally. I can live with that.

Now, to address your questions:

Quote:

OK. How do you arrive at that figure? I have told you I spent over two decades selling audio and I've told you what I see as the reality of a small high end dealership. Dealers do not operate on 100% profit margins. Please, take my word, based on my experience, on this fact. You saw one number and you assume this justifies all your arguments with dealers and manufacturers.

How did I arrive at the figures? I saw them. You say that I saw one figure and base my entire argument on that. Yes, that is correct. That's what prompted my original post. I saw one figure and I made a point about it. You want me to take your word that this figure is not indicative of the overall profit margin. To me, that sounds like every police chief giving "a few bad apples" speech after police brutality gets exposed. I have a feeling that if I came up with 5 numbers, you would still use the same argument that these numbers are not indicative of the overall margins and then you would chastise me for trying to get the overall numbers to prove my point as being unethical.


Quote:

Do you realy believe it is ethical to use a dealer's shop for auditions and then grind a dealer down with threats to shop elsewhere from someone who owes you nothing?

Ethics has nothing to do with it. I agree with you that th shop owes me nothing, but that's a two way street: I owe them nothing as well. They play their cards close to the vest by hiding their markup from me and I play my cards by leveraging my ability to go elsewhere. No one owes anyone anything.


Quote:

Do you seriously believe audio dealers operate at 100% profit margins?


Yes, I do. Honest to goodness, I do. Although, I do think that sometimes they operate on a 110% margin.


Quote:

Did you ever find that room where you can audition products on Audiogon? Can you provide that link?

When did I ever say that I auditioned equipment on Audiogon? I don't understand the premise of this question.


Quote:

What will you do when there are no shops where you can audition product?

I'll go to shows and other venues to hear the stuff. As long as there is stuff to be sold, there will be venues to audition. If all else fails, I'll finagle an invitation to audition stuff at your house. Else, I'll listen to DUP's circuit blowing, fire starting, global warming setup.

Besides, where do people go when there are no dealers available in their area?

Another thing, I prefer not to haggle over price either. If something is reasonably priced (in my opinion, by my standards, using my determination), then I don't haggle. In fact, I almost never haggle. I just do very thorough research ahead of time and then I ask for a discount. If I'm refused, I walk. I've had dealers run after me in the street, asking me to come back. How honest is that? Talk about fair pricing, eh?

bobedaone
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Re: Profit margins

I remember only one short year ago deciding that I wanted to upgrade my CD player. I knew that what I wanted could not be found at Appliances R Us, so after establishing a list of models, I searched for hi-fi dealers in my area. To my surprise, I found one within walking distance of campus!

Before I visited, I had serious doubts that I - a college student - would be treated with respect in a store selling systems that cost more than my degree. I was soon proven wrong by a friendly and helpful sales staff, who were more than happy to arrange things to my liking, answer questions, or leave me to listen.

It didn't take long for me to decide to buy, my ears satisfied and my mind at ease. Since then, I've formed a strong relationship with my dealer. I stop by frequently, usually just to listen to whatever might be playing, or to chat with the guys. I talk about future upgrades, some attainable, some merely pipe dreams. Right now, I'm saving my pennies (actually not far off) for a new P3-24. What comes next? New speakers? Headphone rig? I'm not sure, but I guarantee it's coming from them.

Not once have I felt that I was not being treated fairly, or that my best interests were not considered. In fact, on more than one occasion, I've had components recommended that were lower in price than those I suggested.

Are all dealers like this? Of course not. I know. That's why I'm sure as hell going to give them my business. They've earned it.

Jan, thanks for the dealer's perspective in all this.

Everyone wants to save a buck, myself included. I mean, jeez, I'm a student. That being said, I like to think that some things are more valuable than a few extra dollars in my pocket.

This time of year, I have to sit through enough stomach-churning Wal-Mart commercials. People go to Wal-Mart to save a dollar on a wrench, then are disappointed when the little hardware store downtown has to close. Duh.

Here are some truths:

1. Hi-fi is not a volume item
2. Wholesale cost is not the only operating expense
3. Hi-fi is purchased with discretionary income
4. Dealers invest time and resources to allow you to listen

If you want your dealer to be Best Buy, that's exactly what you'll get. Just don't whine when you can't find the Rega aisle.

quadlover
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Re: Profit margins

this is my last comment on this rant as alex has shown his true colors which will lend itself impossible to logically discuss this item with or about his actions further.
1. he spied on the person he did business with by looking at his confidential papers. regardless of what was on that paper that is wrong ethically.
2. alexo has said twice that ethics has nothing to do with this post. i say it has everything to do with ethics. if you don't trust the dealer don't buy from him... if the dealer is uncomfortable with you as a buyer he has a right a right not to give you a "deal"

end of argument

Jan Vigne
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Re: Profit margins

Yes, end of discussion from me also. Alex has provided more or less the answers I expected. Here's an answer to one of his questions.


Quote:
When did I ever say that I auditioned equipment on Audiogon? I don't understand the premise of this question.


Quote:
b) If by value, one means "listening room" and the time to audition, then you get the same "value" from any store selling electronics. It's part of cost of business. If one chooses to sell things audio, then one has to provide a listening environment.

Only brick and mortar shops can provide demos. Only brick and mortar shops owned by someone who cares about their business and their clients' satisfaction can provide good demos. You do not get demo rooms on Audiogon or eBay. You do not get demo rooms when ordering over the internet. They have virtually no over head. To ask a brick and mortar dealer to compete with that is, once again, unethical and simply not in any way reality based.


Quote:
All that I require is a place to audition and a good price. To me, everything else is pure fluff.

You just don't necessarily require that the audition and the price come from the same retailer. But you see no ethical lapse in that thinking.


Quote:
Now, that it clicked that you're a sales guy, your point of view makes more sense because you're not arguing from the standpoint of a consumer. Rather, you have taken my original statement and took it personally. I can live with that.

I do take it personally. I have been treated as less than human by several clients who had never met me before I said, "Hello." However, you, Alex, have nothing on Mr. Angel who replied to, "Hello", with, "I'm going to make your life a living Hell." I shall remember Mr. Angel for many, many years.

But I have purchased products I wasn't selling at the time and I've certainly been a consumer more than a salesperson. I've dealt with customers such as you, Alex. They were never clients. Always just customers. I never ran after anyone in the parking lot but I know why some salespeople do so. They have invested so much time and energy with a customer they don't want to walk away without a thing. Typically the customer gets a product and the store makes a few dollars. If it were a restaurant, the waiter would spit in your eggs. I won't tell you what I've done.

You are wrong once again, Alex, about ethics. Ethics has everything to do with it. You are right that no one owes the other anything - at the beginning of the sale. However, a dealer works to earn their profit. If they provide so much as a demo room where you can audition product, they deserve ethical treatment from the customer. It's only common courtesy at the very least. If the dealer and the client cannot come to an agreement, that's business. Both walk away to find a deal somewhere else. But to negotiate from the opinion all dealers operate at 100% profit is beyond absurd. To think a dealer can gross 30% profit is laughable. It all goes to show you are either a fool or just plain ignorant. Or both.

Why would I lie to you? What do I have to gain from anything other than telling the truth in this situation? I cannot benefit from telling fictions here. You are so grossly incorrect, Alex, that it is impossible to believe what you post.

Alex, it was clients such as yourself who finally made me believe there was a better way to make a living than working at my hobby. With the coming of Home Theater I've dealt with customers who would stab me in the back for $10 on a $15k system. I got tired of asking people to leave. I've missed a lot of things about that career since I left seven years ago. But I've not once missed dealing with customers like you - except for when I got to spit in their eggs.

Buddha
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Re: Profit margins

When I lived in San Francisco, I had a favorite dealer who made the hobby much better for me than any Best Buy or internet site could have.

The store was called Stereo Plus, and my sales guy was John.

I bought most of my current rig from them.

From the first moment I walked into the store, the whole staff made me feel welcome and even the owner took time to chat. I looked like a check forger's shiftless accomplice, but they were friendly and open.

I had just arrived in town and was getting a feel for who carried what, and told them I was just a tire kicker that first visit or two. They didn

bifcake
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Re: Profit margins

I'm not sure there's anything left to be said on the matter. As a sales guy, it seems to me that you refused to compete on price and got bitter when your customers would insist on price competition. You took that as being treated less than human. Driving a hard bargain has nothing to do with treating a sales person as less than human. It's not personal, it's business. If you can't take the heat, get out of the kitchen, which you obviously did, except that you spat in the eggs on your way out. Talk about treating someone as less than human.

As far as ethics are concerned, I did not actively seek to look at the price list. As the dealer did a component search, I happened to see his cost on the screen. So what? So, I know what it costs him to get the item. Big deal. It is still up to him either to make a deal or not. Dealers use all types of tricks to "size you up". I've had a dealer asking me about my watch, my house, my shoes. All kinds of things to try to gauge my income and my willingness to spend money.

There is nothing wrong with trying to shop wholesale. There's nothing wrong with trying to make the best possible deal.

My take on things is that it's time that manufacturers, dealers and distributors start competing on price as well as service, and support. I understand that nobody wants to compete on price, everyone wants to be paid as much as possible for as little work as possible. However, that's not what I subscribe to.

Jan Vigne
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Re: Profit margins


Quote:
I'm not sure there's anything left to be said on the matter. As a sales guy, it seems to me that you refused to compete on price and got bitter when your customers would insist on price competition. You took that as being treated less than human. Driving a hard bargain has nothing to do with treating a sales person as less than human. It's not personal, it's business. If you can't take the heat, get out of the kitchen, which you obviously did, except that you spat in the eggs on your way out. Talk about treating someone as less than human.

You misunderstood what I said.

Still, tell me why, in your opinion, I would lie about dealer margins. I have no dog in this fight at the moment. Why do you not believe what I've said?

bifcake
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Re: Profit margins


Quote:

Still, tell me why, in your opinion, I would lie about dealer margins. I have no dog in this fight at the moment. Why do you not believe what I've said?

I feel you have a bone to grind and I don't see you as an impartial observer. You seem to have some sort of an agenda, and so I take your statements with a grain of salt. Besides, I know what I saw.

bobedaone
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Re: Profit margins

I know this isn't my fight, but I feel the need to butt in here.

The way (IMHO) that dealers compete "on price" is to carry the components that they feel represent the best value to their customers. If CD player X sounds better than player Y, but costs less, then that's money in the customer's pocket, so to speak. Also, as Buddha mentioned, money can be saved when the advice is sound because purchases are not as short-sighted. When I trust a dealer, I don't see "Save your money and get that one instead" as a veiled attempt to separate me from more of my dough.

The consumer's insistence that all industries compete primarily on price, while justified from the consumer's point of view, is perhaps misguided. For example, American workers can't compete on price with those in China. We can compete on quality, but Americans demand a living wage.

What greed.

So, American (or European, etc.) consumers drive a price competition among manufacturers that inevitably leads to overseas production. Consumers save money. Great! Unfortunately, the domestic economy is hollowed, and craftsmanship becomes an anachronism.

To expect hi-fi dealers to compete on price to the extent you desire is as unreasonable to me as you feel the prices are.

The tragedy in all this is that your fiscal assertiveness is probably what's keeping you from building a truly rewarding relationship with a dealer - one commensurate with the retail cost.

Sincerely,

bifcake
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Re: Profit margins


Quote:

The way (IMHO) that dealers compete "on price" is to carry the components that they feel represent the best value to their customers. If CD player X sounds better than player Y, but costs less, then that's money in the customer's pocket, so to speak. Also, as Buddha mentioned, money can be saved when the advice is sound because purchases are not as short-sighted. When I trust a dealer, I don't see "Save your money and get that one instead" as a veiled attempt to separate me from more of my dough.

That's not competing on price because no matter what dealer I go to that carries component A will cost the same.

I don't want to go into the overseas manufacturing debate because that's a topic for another day.

Re: building a "rewarding relationship" with a dealer, the price of that relationship is too high. That's sort of like having a trophy wife - very high initial capital investment + maintenance fees. You have to constantly keep spending the money, else she'll leave you. It's the same with a dealer - you have to do periodic upgrades to maintain the relationship.

CECE
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Re: Profit margins

Is Jan V really Mike Vic, dog fighting is a crime, so is food tampering, which you elude to, buy wanting to SPIT in people's food. You sir, sound like a very scaaaaarey dude. There is no beneift in paying too much. The educatted consumer, strives for teh best deals. you seem to want to remain in teh 19th century, with teh internet, info is readily available, for an educated consumer to make his best deal. If a high end dealer can't compete, out teh door i go. Price, it matters. The "personal relationship" ends when teh credit card is processed. You really trying to tell me some dealer gives a crap about your system, once it's sold, out teh door. If teh mfgs want to keep charging too much at teh wholesale end, then f em. they will have no distribution, and go out of business. Fair pricing, for a good product, with good warranty and mfg support. The mfgs need to work with their dealers if they want them to be so important, if the dealer goes out of business, obviously the mfg doesn't care, they will distribute their stuff anyway they find works for em. The ones who want to reamin stoddgy and keep their prices in teh absurd, using the old marketing plan, charge a lot, dopes will think it's better, probably doesn't work as well, with all teh info now available at teh keyboard. When you price yourself out of business, you did it to yourself. Always someone else to take the spot you left. If you as a salesperson couldn't tell me or convince me of the "value" you offered on the product you where trying to sell me, then you where not a good salesperson, now where you. If I know what I want, and already know it's what i need, all i do is go for price and delivery times. an educated consumer, make poor sale people go out of business, goodbye. Tell me why i should buy a $27K CD only player over say teh EMMLABS CD/SACD unit, which one is gonna give me the "value".....big price disparity, yet teh cheaper one looks to offer more "value" it does more, it's current technology, etc etc. Sell me the over priced one, see if you can

Jan Vigne
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Re: Profit margins


Quote:
Still, tell me why, in your opinion, I would lie about dealer margins. I have no dog in this fight at the moment. Why do you not believe what I've said?

--------------------------------------------------------------------------------

I feel you have a bone to grind and I don't see you as an impartial observer. You seem to have some sort of an agenda, and so I take your statements with a grain of salt. Besides, I know what I saw.

ROTFLMAO

I have an agenda?!!! A bone to grind?! What a twisted thought process you have, Alex! You believe I'm protecting an industry that I don't work in??? Alex, at this point I'm a consumer - not just like you - but a consumer. I've told you I have nothing to gain from telling anything less than the truth. But, I was a salesperson. And that makes me untrustworthy in your eyes, eh, Alex? We'll say and do anything to get a few extra dollars out of the customer. This is what it's all about. The salespeople and the dealer are out to screw Alex. And we'll be doing it until the day you die, Alex. And then we'll screw your family on the funeral. We're all in on it and we all share the 100% profits from the hifi to the coffin to the hole in the ground.

Alex, you're too much!!!

You say and do all the things I heard for twenty five years. Twenty five years, Alex! Hundreds of products, hundreds of customers and thousands of clients. The guy who demands the "deal" or he walks is always the same. There's always a chip on your shoulder that you see on everyone else's. Believe me, Alex, no dealer wants to build a relationship with someone devoid of ethics. No dealer is happy to see the person with no qualms about how they behave walking through their door - again. The treatment you receive from a dealer is the treatment you deserve when you rationalize and justify unethical behavior.

You saw one price for a few seconds, Alex. I did this day in and day out for twenty five years. You are a fool to believe your own BS. You are willing to ignore testimony from someone with experience in order to justify your unethical behavior. The salespeople and dealers who have to put up with this everyday do understand somewhat. They realize this is a sickness. Get some help, Alex.

This thread has testimonies to good dealers treating people well. You don't appear to be enjoying that same treatment from the dealers where you shop. Wouldn't it be nice to be greeted with pleasantries rather than seeing the sales staff run from the door when you arrive? Does your system sound any better if you treat a dealer unethically?

(I've asked these questions of customers similar to you, Alex. I know what the answers are. But let me hear your side anyway.)

And, BTW, I don't think you know what you saw.

Jan Vigne
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Re: Profit margins


Quote:
Is Jan V really Mike Vic, dog fighting is a crime, so is food tampering, which you elude to, buy wanting to SPIT in people's food. You sir, sound like a very scaaaaarey dude.

I sold hifi, dup, not eggs. Get a grip. However, if you'd like, I will come over and spit in your eggs.

As long as you don't make me listen to that Godawful thing you call your system.

jamesgarvin
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Re: Profit margins

This post can only come from someone who has never operated a business, and is not familiar with the costs associated from operating a business. First, you assume that the profit margin from that one product is consistent from product to product. I'm not sure why you would make that assumption, unless you need a platform to complain.

Then consider from that margin, the dealer is paying rent, advertising, salaries, health insurance for his or her employees, which are continually rising, various asundry taxes such as payroll taxes, property taxes, unemployment insurance, utilities, such as heat, electricity, water/sewer, telephone, including long distance, social security taxes, medicare taxes, likely some type of retirement contribution for employees, and for other professionals such as accountans, liability and property insurance, possibly disability insurance. Undoubtedly, there are more. Without knowing what the dealer's net income is, a profit margin on one item that the dealer sells is useless information.

Your points:

b) If by value, one means "listening room" and the time to audition, then you get the same "value" from any store selling electronics. It's part of cost of business. If one chooses to sell things audio, then one has to provide a listening environment.

Ever step foot into a best buy? If you think that is a "listening environment", perhaps you should shop there and stop wasting the high dealer's time.

"Apparently, the equipment is not all that expensive to produce."

Is this another educated assumption? It sure is easy to argue your point when your points are based on assumptions.

Now that you know, at least in your own mind, what the so called profit margin is for a dealer, do you now intend to enter a high end store strictly for the purpose of using the dealer's premises, time, and capital, to audition your goodies, and then make tracks to your computer, where you will purchase that component used, or from a cut rate store? Or will you go into the dealer and tell the dealer, before you audition anything, that you "know" what their markup is, that you will not pay more than a 30% markup, and if they do not agree to that reduction, then you will not buy anything?

bifcake
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Re: Profit margins


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This post can only come from someone who has never operated a business, and is not familiar with the costs associated from operating a business. First, you assume that the profit margin from that one product is consistent from product to product. I'm not sure why you would make that assumption, unless you need a platform to complain.
Then consider from that margin, the dealer is paying rent, advertising, salaries, health insurance for his or her employees, which are continually rising, various asundry taxes such as payroll taxes, property taxes, unemployment insurance, utilities, such as heat, electricity, water/sewer, telephone, including long distance, social security taxes, medicare taxes, likely some type of retirement contribution for employees, and for other professionals such as accountans, liability and property insurance, possibly disability insurance. Undoubtedly, there are more. Without knowing what the dealer's net income is, a profit margin on one item that the dealer sells is useless information.

Everybody has these costs. The high end dealers aren't alone in this. That's part of doing business. The grocery down the street has the same costs and they don't charge $50 for a piece of fruit to justify their existence.


Quote:

Your points:

b) If by value, one means "listening room" and the time to audition, then you get the same "value" from any store selling electronics. It's part of cost of business. If one chooses to sell things audio, then one has to provide a listening environment.

Ever step foot into a best buy? If you think that is a "listening environment", perhaps you should shop there and stop wasting the high dealer's time.

The products they sell are considerably cheaper, hence, their listening environment is worse. You won't find a $5k or a $10k speaker there. If you're selling stuff that's that expensive, then it's only natural that you would provide an ideal listening environment in order to sell the product. Else, no one will hear the difference and buy the 10k speaker. Again, the dealer does you no favors by setting up listening rooms. It's part of the selling process.


Quote:

"Apparently, the equipment is not all that expensive to produce."

Is this another educated assumption? It sure is easy to argue your point when your points are based on assumptions.

Apparently, it is not that expensive to produce. If you're quadrupling the retail price from the wholesale price (doubling from manufacturer to distributor and doubling again to dealer), then the manufacturers are selling their equipment for 1/4 of the price and they're STILL making money. So, how much can it be to produce? My guess is that it takes 1/8th of the selling price to produce and that includes all the other ancillary costs such as rent, equipment, employees, etc.


Quote:

Now that you know, at least in your own mind, what the so called profit margin is for a dealer, do you now intend to enter a high end store strictly for the purpose of using the dealer's premises, time, and capital, to audition your goodies, and then make tracks to your computer, where you will purchase that component used, or from a cut rate store? Or will you go into the dealer and tell the dealer, before you audition anything, that you "know" what their markup is, that you will not pay more than a 30% markup, and if they do not agree to that reduction, then you will not buy anything?

Possibly either of the two scenarios or I may decide to cut a different deal or no deal at all. However, the scenarios you described are certainly within the realm of possibilities.

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Re: Profit margins

As usual, this is Audio, there is no relation to common buying? Making teh best deal on a house, on a car, on a motorcycle, how come when you step into the TWILIGHT ZONE of audio, all common things about getting teh best price, best service, best warrantys, don't matter, and if ya ask, or deal, you are just no good for teh industry. I think the indsutr4y has done itself in, by building teh snooty, hoity toity attitude in these stores, they are selling just anotehr product, like anything else. But somehow over teh years, "audio" is just so special....mfgs that play up their attitudes, are doomed, business self corrects, over charge, and ya can keep looking at teh stuff in your warehouse. Price it right and it sells. how many high end hoity toity companeis either faded, or needed to be bailed out by larger companies. How many of these high end, are now just Chiense made stuff, similar to any mass fi, mass market tv....done in low cost factories? Parasound? Where are those 427K Zanden thing produced? Or that $100K TT, or even those $2K TT's, speakers, eesssh, most use Chinese sourced drivers now, and still want top dollar, ain't no profit there is there? Audio like any other consumer product, have gotten much better, for less money, the greedy ones do them selves in. Never try to get a good deal, this is AUDIO, pay, the mfgs and dealers know what's best for your wallet.. Actually an hour of their time is not worth what I'd charge per hour. Why should i support their fancy boutiques, their lifelstyle, if another source of the product, is less. It is a free market they do business in,

Jan Vigne
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Re: Profit margins

What do you do for a living, Alex?

Jan Vigne
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Re: Profit margins


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how many high end hoity toity companeis either faded, or needed to be bailed out by larger companies.


Quote:
Actually an hour of their time is not worth what I'd charge per hour. Why should i support their fancy boutiques, their lifelstyle, if another source of the product, is less.

How do you come up with this crap? dup, I think you need to change your diet.

CECE
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Re: Profit margins

Even online going for teh best deal is doing research. Many SACD/CD from a few of those highly vivble sellers, are usually $3-$4 more plus shipping than when I can get from Amazon, with it's free shipping lower price. If Amazon ain't got it, I do buy from one of the high profile on line world's largest...blah blah blah as they claim, i do support that one, cus he has done some cool stuff in teh recording end, with his studio, and own lable, and has some great music, on his own label. But when I order up say 10 discs and teh difference for my wallet is $50 or mroe, dude, that's lunch for my week, it matters. BMG online run sales, discounted plus time no shipping, ya get some disce at well under $10. Sy Syms taught me as a child, from watching those commercials all teh time, an educated consumer is our best customer...a really dumb one goes next door!!!!

Jan Vigne
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Re: Profit margins

So, you bought your system off Amazon. That explains a lot.

Buddha
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Re: Profit margins

This is all very intriguing.

From the sound of it, what the Hi Fi industry lacks is even one example for a successful store that does business the "right way."

You'd think from all the genius business advice that's been floating around this hobby, some audio Einstein would realize that he'd make really big bucks by operating a store with AlexO's 30% margins.

Bada bing....free money!

My question is, why doesn't this business model exist?

You'd think every town would be dirty with 30% margin stores raking in all the Hi Fi dollars.

Is it a vast conspiracy?

Do manufacturers purposely keep their market penetration low in order to preserve a shrinking clientele?

According to Adam Smith, the market should be full of discount retailers providing full service audio 'salons' that cheerfully settle for that 30% margin.

I would venture to guess that this lack of retail behavior is most likely because those margins would not make for a sustained business model.

Considering manufacturers, assuming this mark-up thing we are discussing, why aren't the haters going after the direct sales manufacturers for charging what is obviously an excessive mark-up, as well?

If the retailer sells a piece of gear for 100 bucks, and the distributor sells it to the retailer for 50 bucks, then why shouldn't direct sales be the equivalent of only 25% of retail?

Where's the outrage?

Where's the flood of direct sales, with manufacturers making a killing selling direct to the consumer for 50-75% below "retail?"

Either AlexO and DUP are smarter than the whole industry, or there is more to this than selling groceries.

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