Need help understanding retail (preferably in Canada)

[3db]

I'm doing my homework before going out to purchase my speakers. I have visited a speaker manufacturer who's suggested a US MSRP of $449/pair. What exactly does that mean?
Does that mean that authorized Audio dealers buy it for that much? Or do they buy for less and sell it for MSRP? Knowing the answer to these to questions will help me alot in getting a good deal. The other thing I need to do is hone my people skills a little. Any input is appreciated.

[RGA]

Manufacturer's Suggested Retail Price --- you rarely have to pay full price --- but Future Shop kind of places don;t always negotiate.

If it's a speaker sold in lots of different places find the place that sells it cheapest - or a place that looks like they'll be better at after service care.

For me I try never to buy from big box chains as smaller outlets will usually match prices...I bought my camera at Black's a Canadian chain -- they matched the price of Future Shop and threw in $80.00 worth of digital photography books and prints etc...plus they'll show you how to work the camera in person after you bought it...FS will try and sell their hoaky warranties for extreme prices. Black's is also Canadian.

You can't expect the dealer to make no money on audio however. Lower priced items have less mark-up than higher priced ones. On a $600.00 TV they may make as little as $40.00.

[3db]

My question is still; DO authorized dealers purchase their stock at MRSP or are they like car dealers in that they buy them at dealer cost. And if so,,What is the actual dealer cost?

Manufacturer's Suggested Retail Price --- you rarely have to pay full price --- but Future Shop kind of places don;t always negotiate.

If it's a speaker sold in lots of different places find the place that sells it cheapest - or a place that looks like they'll be better at after service care.

For me I try never to buy from big box chains as smaller outlets will usually match prices...I bought my camera at Black's a Canadian chain -- they matched the price of Future Shop and threw in $80.00 worth of digital photography books and prints etc...plus they'll show you how to work the camera in person after you bought it...FS will try and sell their hoaky warranties for extreme prices. Black's is also Canadian.

You can't expect the dealer to make no money on audio however. Lower priced items have less mark-up than higher priced ones. On a $600.00 TV they may make as little as $40.00.

[noddin0ff]

My question is still; DO authorized dealers purchase their stock at MRSP or are they like car dealers in that they buy them at dealer cost. And if so,,What is the actual dealer cost?

Um, if they bought at MSRP they wouldn't make any money selling at or below MSRP. They want to make money. I think the answer would be obvious.

Dealer cost isn't necessary a fixed amount. It could depend on quantity, stock, shipping distance, size of order, country of origin, competition in the market, model, how much coffee the dealer had that morning, what store you're talking about, what speaker your talking about, the time of the year, the phase of the moon, whether or not a family relative works at the manufactures sales office...

I suggest working on people skills :-)

noddin0ff

[RGA]

Dealers mark-up items between 20-80% and maybe more. And between that step is the importer or distributor that may have marked up as well. And then ther eis the manufacturers profit/mark-up etc.

On a $500.00 retail item it will depend on the item but the store may have paid $300.00-$400.00. On a $100.00 set of cables at retail the store may have paid $8.00-$10.00.

There are $200.00 Nike Shoes that after materials boxing all labour and shipping cost, advertising administration the works cost Nike $8.00.

I ould think the retail store needs to make at least 15% to cover all their costs. I would think they would need to make about 25% to be happy and to bother staying in business.

But different items yield different costs. They push cables the most because it yields the highest profit margin -- cost next to nothing to make and they charge huge prices for that nothing. A&B sound made $4.00 on motorolla satelite receivers retailing for $200.00. There is no price negotiation. There is a reason that when I bought a $800.00 cd player years ago they gave me free $75.00 Tara Labs cables. The dealer may charge that but he probably paid $5.00 so he can afford to throw in a set on a bigger purchase and seem generous.

Cars are a huge scam but hopefully people know that. They have dealer kickbacks.

If a guy is selling you car for $15k and says the dealer paid $14800 (and many do) it's bogus because no one there would stay in business. Ooops forgot to tell you that at the end of the month or some time down the line thet get $8000.00 from GM or whoever for that car...but they have the invoice

Toyota a while back said there is not a car they make that takes more than 20 hours to put together in labour. The cost of sheet metal and the worst grade leather known to man in their bulk buys -- There isn't a single Toyota that costs the makr more than $7kUS to build and this is a frighteningly high reserved estimate If they are not making at least 100% above their cost they may as well go into the clothing or cologne business...$70.00 for 40ml water/viniger chemical solvents.

It's almost I repeat almost as profitable as the drug industry --- actually nothing can be that outrageous. Especially since many of the drugs will kill you faster than help you...it's so bad now that I've been seeing drugs advertised on tv. Lipitor --- Go see your doctor about getting this drug???? WTF? It used to be that the doctor would prescribe drugs you actually needed --- now you self doctor and ask the doctor to give you drugs you saw on tv? Yikes.

[LMB]

I'm doing my homework before going out to purchase my speakers. I have visited a speaker manufacturer who's suggested a US MSRP of $449/pair. What exactly does that mean?
Does that mean that authorized Audio dealers buy it for that much? Or do they buy for less and sell it for MSRP? Knowing the answer to these to questions will help me alot in getting a good deal. The other thing I need to do is hone my people skills a little. Any input is appreciated.

A MANUFACTURES SUGGESTED RETAIL PRICE (MSRP) IS THE PRICE THE MANUFACTURER IS SUGGESTING THE RETAILER SELLS IF FOR. THEY CAN SELL IT FOR LESS UNLESS THE PRICE IS SET BY THE MANUFACTURER
IN SOME CASES THE RETAILER MAY SELL IT FOR MORE IF IT'S IN DEMAND
(HYBRID LEXUS IS $5000.00 OVER THE MSRP)
KNOW THE PRODUCT YOU WANT LOOK UP SPECIFICATIONS
MOST RETAILERS DON'T KNOW A LOT ABOUT THEIR PRODUCT

[evil__betty]

Generally as a rule of thumb, home audio speakers are marked up 45% There are some cases if a certain brand of speakers are having a promotion, then usually there is a cost drop in the item so the retailer can 'blow it out' at low prices. Example: JBL has a promotion right now that if you buy any of their speakers, you get a free 8" subwoofer. This includes a pair of book shelf speakers that sell for $250 CAN. The sub has a MSRP of $399 CAN. Why are they giving away a free sub that costs more than these speakers, you ask? Well, normally the sub costs the retailer about $130 but because of this promo, it now only costs the retailer $24. That way the retailer can give the sub away without loosing money. Now with digital cameras and computers - there really is no markup. Big screens start at quite a bit, but Future Shop and Best Buy are quite aggressive and that drives the prices down leaving little margin. Cables also are marked up roughly 50% as well.

[risabet]

Dealers mark-up items between 20-80% and maybe more. And between that step is the importer or distributor that may have marked up as well. And then ther eis the manufacturers profit/mark-up etc.

On a $500.00 retail item it will depend on the item but the store may have paid $300.00-$400.00. On a $100.00 set of cables at retail the store may have paid $8.00-$10.00.

There are $200.00 Nike Shoes that after materials boxing all labour and shipping cost, advertising administration the works cost Nike $8.00.

I ould think the retail store needs to make at least 15% to cover all their costs. I would think they would need to make about 25% to be happy and to bother staying in business.

But different items yield different costs. They push cables the most because it yields the highest profit margin -- cost next to nothing to make and they charge huge prices for that nothing. A&B sound made $4.00 on motorolla satelite receivers retailing for $200.00. There is no price negotiation. There is a reason that when I bought a $800.00 cd player years ago they gave me free $75.00 Tara Labs cables. The dealer may charge that but he probably paid $5.00 so he can afford to throw in a set on a bigger purchase and seem generous.

Cars are a huge scam but hopefully people know that. They have dealer kickbacks.

If a guy is selling you car for $15k and says the dealer paid $14800 (and many do) it's bogus because no one there would stay in business. Ooops forgot to tell you that at the end of the month or some time down the line thet get $8000.00 from GM or whoever for that car...but they have the invoice

Toyota a while back said there is not a car they make that takes more than 20 hours to put together in labour. The cost of sheet metal and the worst grade leather known to man in their bulk buys -- There isn't a single Toyota that costs the makr more than $7kUS to build and this is a frighteningly high reserved estimate If they are not making at least 100% above their cost they may as well go into the clothing or cologne business...$70.00 for 40ml water/viniger chemical solvents.

It's almost I repeat almost as profitable as the drug industry --- actually nothing can be that outrageous. Especially since many of the drugs will kill you faster than help you...it's so bad now that I've been seeing drugs advertised on tv. Lipitor --- Go see your doctor about getting this drug???? WTF? It used to be that the doctor would prescribe drugs you actually needed --- now you self doctor and ask the doctor to give you drugs you saw on tv? Yikes.

Can't say anything about the car biz, but I worked in high-end A/V retailing for about 3 years. 80% profit, Ha! The only area where profit is that high is in a certain cartridge manufacturer's lower end products. I know that a $100.00 IC doesn't cost $10.00 but closer to $50.00 or 60.00 before the 30 day discount. Dealers throw in a product like this to build customer loyalty. I regularly tossed in product, some high cost and some low but the customer was always happy I did so. About 70% of my biz was returning customers.

Video is another story all together, there is very little profit in high-end video, some where around 20% if I recall correctly. That leads to really high MSRP's that allow discounting and the dealer to make some green. There were certain video brands where we made 6-10% on a sale and thought we did well.

There are dealer kickbacks in the audio world also, though these tend to be directly to the salesperson and not the dealer. Vendors will offer a salesperson a "spiff" to sell a certain product, sell this unit, get $100 dollars; sell 20 of these, get a free unit for yourself. I sold the "s##t" out of KEF 104.2's and traded the pair I won for a Proton Monitor that another guy won.

We tried hard to keep the profit around 30% on average deals, only on big deals, $10,000 and up, would we go down to 20-25% and then only reluctantly. Try to save some money but don't bust the dealer's b***s. The salesperson usually works on commission as a % of the profit, not the gross, and she needs to eat too. Keep in mind that the profit goes into the power bill, really high when Krell's, Audio Research and PS Audio (pre Gain Cell days), not to mention lights, TT's, CD players, signage and whatnot are on all day, shipping from the factory to the dealer; rarely added in to the retail, and all the various additions that suck up profit, like vacation time and salaries, FICA and quarterlies.

It pays to support your local dealer, I too hate paying retail, but if I spend a dealer's time auditioning components then I feel a need to buy from that dealer, who will likely save you some money as a loyal customer. To audition, audition, audition, and then buy mail order is wrong. It treats the dealer, who if they are good, is passionate about audio and can provide a wealth of info, like a clerk at Costco, who may not know anything about what they sell; they compete only on price. The expertise of the dealer is a valuable commodity and needs to be respected as such. I do buy mail order but only if there is no local dealer and the company has a good return policy. After sales support is another benefit of a good, local dealer.

I have been out of the biz for a while, I'm a school administrator now, and have no ties to the industry, I do frequent the shop I worked at however, but the belief that the profit in High-End is high is generally untrue. The rule is that for every dollar a high-end manufacturer spends designing and manufacturing a product, the value charged to the dealer is between $5.00 and $6.00.

[uncooked]

Speakers at future shop anyways are average marked up 50 - 60 % Thats my little hint from the inside to you all.

[nightflier]

...The rule is that for every dollar a high-end manufacturer spends designing and manufacturing a product, the value charged to the dealer is between $5.00 and $6.00.

That's not quite the whole story. First of all, we have to differentiate between the big chains, the specialty audio-video (typically mom & pop operations), and the branded "bose" stores. The profit margins and the service quality differ widely. I sold for Silo, one of the big A/V chains that got bought out by CC, when I was younger. The most discouraging thing was that the profit margins were extremely low for us "floor sellers," but upper management was doing quite well for itself (maybe that's why they went under).

I also was good friends with the son of an engineer from India who set up his own repair shop. I remember when they first came here from England and his father was working out of his own garage. The day he opened his own shop was a really big deal. He specialized in repair and sales of high-end stereo receivers from England and Germany. He always charged well above his cost sometimes as much as 50%, but who am I to say he did not deserve it? After all, he offered service and support beyond anything anyone else was offering. He would even come over and install it for you at no cost. Of course, I was still able to get my Sony walkman fixed for free, too, so that should figure into his expenses as well.

Another side of the story is that most of the equipment sold as high-end is still made by slave labor over seas. Those beautiful Onyx Rocket speakers that I thought were some of the most impressive speakers I had ever seen for the price, are made in China at a fraction of the cost. But all the people in between, some more greedy than others, are what raises the price to "American" standards. Heck, I'm waiting for some adventurous Chinese or Indian company to set up a direct-mail order web site for speakers, and put all the Canadians out of business.

The point is that we are generalizing about the prices when there are far too many factors. I've heard horror stories about what a Bose speaker costs to make compared to what it sells for, but who's to say that this is typical or unique? Is anyone willing to tell me that Dynaudio and Totem are not using the same middlemen as Polk and Infinity? They all want to sell more units because it makes their shareholders happy.

As in the auto sales business: the goal is to make every customer believe the price was a steal, regardless of what they paid over dealer cost. Likewise, if I believe that paying $300 for $500 MIT interconnects was a great deal, then I'll feel good about my purchase. I'll be a repeat customer, and I might even hear a differrence between those cables and the $12 Dayton Audio's I was using before. Unless we are going to follow that product from the drafting table to the sales floor, we're never going to know if it is priced right. Buying a speaker is like buying modern art, no one knows what it's really worth.

This is why I'm always looking for the next giant-killer. I had the opportunity to hear a pair of Dynaudio Contour tower speakers in my home and they were IMHO the best sounding speakers I have ever heard. But I will not anytime soon be able to spend $5K on a set of speakers (I'd rather put that money in a college fund for my first born then buy a pair of speakers). So I'm determined to find a Dynaudio killer out there because darn it they sounded soooo good to my ears..... Then again, maybe it was the wine, the music we selected, the quiet autumn breeze in the air, or just my mood that day....

BTW, I didn't buy those MIT cables either....

[risabet]

That's not quite the whole story. First of all, we have to differentiate between the big chains, the specialty audio-video (typically mom & pop operations), and the branded "bose" stores. The profit margins and the service quality differ widely. I sold for Silo, one of the big A/V chains that got bought out by CC, when I was younger. The most discouraging thing was that the profit margins were extremely low for us "floor sellers," but upper management was doing quite well for itself (maybe that's why they went under).

I also was good friends with the son of an engineer from India who set up his own repair shop. I remember when they first came here from England and his father was working out of his own garage. The day he opened his own shop was a really big deal. He specialized in repair and sales of high-end stereo receivers from England and Germany. He always charged well above his cost sometimes as much as 50%, but who am I to say he did not deserve it? After all, he offered service and support beyond anything anyone else was offering. He would even come over and install it for you at no cost. Of course, I was still able to get my Sony walkman fixed for free, too, so that should figure into his expenses as well.

Another side of the story is that most of the equipment sold as high-end is still made by slave labor over seas. Those beautiful Onyx Rocket speakers that I thought were some of the most impressive speakers I had ever seen for the price, are made in China at a fraction of the cost. But all the people in between, some more greedy than others, are what raises the price to "American" standards. Heck, I'm waiting for some adventurous Chinese or Indian company to set up a direct-mail order web site for speakers, and put all the Canadians out of business.

The point is that we are generalizing about the prices when there are far too many factors. I've heard horror stories about what a Bose speaker costs to make compared to what it sells for, but who's to say that this is typical or unique? Is anyone willing to tell me that Dynaudio and Totem are not using the same middlemen as Polk and Infinity? They all want to sell more units because it makes their shareholders happy.

As in the auto sales business: the goal is to make every customer believe the price was a steal, regardless of what they paid over dealer cost. Likewise, if I believe that paying $300 for $500 MIT interconnects was a great deal, then I'll feel good about my purchase. I'll be a repeat customer, and I might even hear a differrence between those cables and the $12 Dayton Audio's I was using before. Unless we are going to follow that product from the drafting table to the sales floor, we're never going to know if it is priced right. Buying a speaker is like buying modern art, no one knows what it's really worth.

This is why I'm always looking for the next giant-killer. I had the opportunity to hear a pair of Dynaudio Contour tower speakers in my home and they were IMHO the best sounding speakers I have ever heard. But I will not anytime soon be able to spend $5K on a set of speakers (I'd rather put that money in a college fund for my first born then buy a pair of speakers). So I'm determined to find a Dynaudio killer out there because darn it they sounded soooo good to my ears..... Then again, maybe it was the wine, the music we selected, the quiet autumn breeze in the air, or just my mood that day....

BTW, I didn't buy those MIT cables either....

By paragraph:

I worked at a mom and pop, technically, pop only, store that sold mainly high-end with some mid-fi thrown in, we definitely qualified as a "specialty retailer" that said, I can't comment on big box stores but their purchasing power would indicate that they maintain a lower cost structure than the specialty stores. On thwe other hand, what they sell ain't High-End.

50 % profit on parts isn't unusual forrepair shops. Did this include diagnosis which is now running $55.00/hr or so here in SoCal?

Was dealing only with the retail end of things, but I agree that the off shore product is made cheaply. The addition of tariffs, duties, middlemen, and in some countries VAT adds substantially to the cost.

I agree completely, it is only worth what we'll pay for it.

Aren't we all!

Don't like MIT either!



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