A few years ago I read an interview with an amp manufacturer. He had just introduced an extremely expensive amp. When asked about sales, he stated he expected to sell maybe 3 a year for 3 or 4 years worldwide...
Is it possible for a high end manufacturer to overprice their goods?
Having just read the interesting and hyperbole laden review by RH of the new Rockport Orion speakers in the latest issue of The Absolute Sound, one thing struck me..
is it possible in the high end for a manufacturer to overprice their product ( doesn’t have to be a speaker, but this example comes to mind)? I ask this, as the Orion is priced at $133k! Yes,a price that would probably make 99% of hobbyists squirm. Yet, the speaker now joins a number of competitors that are in the $100k realm.
To that, this particular speaker stands just 50.3” tall and is just 14.3” wide…with one 13” woofer, one 7” midrange and a 1.25” beryllium dome ( which these days is nothing special at all…and could potentially lead to the nasties of beryllium bite).
The question is…given this speakers design and parts, which may or may not be SOTA, is it possible that this is just another overpriced product that will not sell, or is it like others, correctly priced for its target market? Thoughts…
@jl35 That business model is common. Question is whether a product in this hobby can be so high priced, that the result is zero sales? Or,not enough sales to justify the product and its cost to come to market?
I think long standing, big time companies like Rockport are well aware of the sales dynamic, not that they always guess correctly...and for some, it's almost an advertising statement product, not one they actually expect to sell many of...questions of "value" become irrelevant with so many super wealthy potential customers...I like seeing these products, though with no expectation of ever hearing one...
The fact that speakers are priced like that only adds to arguments against the value systems we have allowed to get set up. Someone is buying a $133k speaker while someone else is living in a cardboard box.
A quote from Pope Francis:
"Today consumerism determines what is important. Consuming relationships, consuming friendships, consuming religions, consuming, consuming... . Whatever the cost or consequences. A consumption which does not favor bonding, a consumption which has little to do with human relationships. Social bonds are a mere 'means' for the satisfaction of 'my needs.' The important thing is no longer our neighbor, with his or her familiar face, story and personality.
"The result is a culture which discards everything that is no longer 'useful' or 'satisfying' for the tastes of the consumer. We have turned our society into a huge multicultural showcase tied only to the tastes of certain 'consumers', while so many others only 'eat the crumbs which fall from their masters’ table'. This causes great harm. I would say that at the root of so many contemporary situations is a kind of impoverishment born of a widespread and radical sense of loneliness. ... Loneliness with fear of commitment in a limitless effort to feel recognized."
-- Address to bishops at St. Charles Borromeo Seminary, Philadelphia, Sept. 28, 2015
From what I read Rockport really put a lot of work into the cabinet, and my guess is a lot of the speaker’s cost lies there. That said, it’s a competitive market even at this level and Rockport will find out rather quickly if they overpriced it. Rockport’s been around the block before and I’d be surprised if they overpriced the Orion, but whether customers hear something they deem worth that price relative what else is out there in the same price range — that’s the bigger question. We’ll see.
I see a lot of ultra exotica being offered these days. For instance, road bicycles in the $20,000 range are available. That prices out people like me, but it doesn't mean that really great new bikes aren't available for much less, and these are lighter and better in many ways than anything I could have bought 20 years ago for the same price, even if not adjusted for inflation. You can spend $100K plus on a TV now, or spend $1600 and get something astounding compared to what you could get for $1600 20 years ago. There are those who have the money and want something extra special. The market is providing those goods, it seems to me more now than it ever used to. It's possible to over or under price the exotic stuff. You'll know it's under priced if it sells well but you can't make a profit on it. It's over priced if you can't sell enough to make a profit. Or it can be fine to lose money on it either way if it's viewed as a marketing campaign.
Typically all out assaults at building the very best possible component of a category results in a product with an extreme price. It serves to show what the company is capable of and its value gets assessed mostly by professional reviewers. If favorably reviewed it builds the companies reputation and can cause folks to look at their lower priced models. Trickle down technology and techniques benefited the customers and company. It may not be the profit or volume of the highest price model that is important to the company. A few sales to well healed customers may be well worth it. look at Wilson, they have been selling speakers for over $500K for decades.
Yes. It's definitely possible. A fool and his money are soon parted, and there is no denying corporate greed. Think about it... Product parts may equal three thousand dollars max. Product sells for a hundred and thirty three thousand dollars. That's a net profit of a hundred and thirty thousand dollars. Well over my annual income if they sell just one pair to somebody rich and wanting an elitest speaker.
There will always be consumers who believe the more expensive something is, the better it is, or simply want the bragging rights to having paid the most for something. And so long as there are people with more money than they can spend in 100 lifetimes (Elon and Jeff B. come to mind), there will be a small market for $500,000 speakers etc... Are they worth it? Doesn't matter.
@labguy while I think your math is not quite correct for this particular speaker, as it leaves out a number of factors, including the R&D costs, shipping, advertising, dealer mark up etc., I do think that it is likely that there is a very significant profit in the Orion. Not saying there is anything wrong in that, particularly if the consumer rewards the company with multiple sales. Question in my OP, and I think it bears repeating here, is this…is there a price to value ratio in this hobby that will make the hobbyist say, enough is enough, that’s just not worth it…and therefore..pass on the sale? Clearly, this price has a differing number for each consumer, but I do wonder where it becomes more than thin air for all consumers in this hobby?
So, is the new Orion with its design at that level, or is it not even close?
The manufacturing process of the Rockport enclosures are pretty insane compared to many and if you're not familiar with their design, research it.
Although at this upper end, there are many which are impressive for sure (engineering/manufacturing). Whether or not that equates six figure prices isn't my point, just that these aren't some MDF boxes slapped together. Also I believe they now manufacture their own drivers (not 100% sure though). Not many that do (Dynaudio, Focal etc..), which just adds to the overall R+D costs.
Is it possible for a high end manufacturer to overprice their goods?
If it is true "high end", no, their market buys overpriced jets and yachts so an amp is no BFD.
Now, is it possible for cheesy amps to be priced to high? It gets me sick just thinking about it because the only thing "high end" about those products is often the name.
I would look at this from the other direction. Will consumers over pay for what they perceive to be top quality? This hobby is notorious for consumers who think quality comes with a high price tag. IMO as the price goes up so does diminishing return. There is a spot where double the price is double the quality. Then once you jump the shark you can pay out double for only 5% to 10% bump in quality. Some people have the money and how they spend it is no concern to me. We hear from people all the time chasing down that last 1% they are trying to find.
I've seen dealer price lists from "high end audio" manufacturers.
Particular segments have REALLY high markup, that doesn't seem to faze customers.
Also have been exposed to the wholesale end of other high end consumer products. Nothing shocking comparing "high end audio" to other luxury products.
Consumers with wide wallets will pay.
The only Hi-end audio company is the Wavetouch audio. Everything else are Hi-Fi. They all are simply unlistenable to me. I watched few 2023 Axpona videos and my ears are in serious pain. My ears are much better after I listen WTPC video for few minutes. Alex/Wavetouch
It’s amazing how many people are naive about the costs involved in running a business, let alone designing and building a high quality product. $100K+ speakers aren’t made in a garage over the weekend.
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Here are just a few considerations:
- Manufacturing costs could easily be a minimum of $25K/month - most likely much more for larger operations. This would include: shop space rental, warehouse space rental (for both raw materials & finished products), CNC machine purchase, assorted power tools purchase, specialized handheld tools purchase, specialized electronics equipment, specialized software programs, multiple large work benches, etc.
- Cabinet raw materials
- Driver raw materials (probably modified)
- Wiring and wire harness raw materials
- Exotic paint and/or staining products
- Separate paint shop space rental
- Labor costs for skilled technicians: $50/hour X # of hours, X # of technicians.
- Estimating profit margin needed to keep those skilled technicians on the payroll vs trying to find new qualified workers every few months and training them.
- Monthly utility expenses.
- Liability insurance and Comprehensive insurance.
- R&D costs. How do you value thousands of hours by the lead designer? When creating something new, there is no formula. It hasn’t been made yet.
- Cost of the prototypes. Those that didn’t work out - as well as the ones that came sort of close - but not good enough.
- Attending industry events. Shipping the gear there and back. Hotel rooms, etc.
- Website maintenance
- Inflation: Price of everything going up.
- and many other costs
@steakster While you are correct in alerting folks to the many costs incurred by manufacturers, i also question where the process is when it comes to a speaker ( maybe any speaker/ high end product at this price point) that comes in at a consumer price that equates to a very impressive new car ( or insert any number of other far more sophisticated and complex products here). While the argument that economies of scale come into place, this argument can surely only go so far?
OTOH, all of this is relative to one’s disposable income, and given that, I do question why this speaker ( or others of its ilk) are priced at just north of $130K...and not multiples of this price? Do these manufacturer’s ( or their dealer network) actually know that this price is in fact attainable--while multiples of this price is not?? If so, how??
$375,000 Ferrari Purosangue SUV - sold out for two years. Link here.
$26,500 Chevy Bolt EV- many available immediately. Link here.
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Starbucks Latte $5+.
McDonalds Latte. $2+
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It’s all relative.
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Economies of scale are a huge factor in determining wholesale and retail costs. It goes very far.
ohh my that made me laugh after a rough night !! 😃😃😃😃😃
I think it's about exclusivity and avoiding comparison. If you price something high enough hardly anyone will ever hear it or be able to compare it to other products. Bose is famous for requiring their products to be displayed in separate areas where they can't be compared to anything. If you price a product high enough no dealer will have a demo so it doesn't need to perform because it can't be compared. It needs to look pretty and have a sound that some will prefer.
Get what you can afford...or can stretch for. Visit a handful of dealers or at least get into communication with a few. Explain your situation and how many bucks you can part with. Tell 'em what you listen to, i.e., what you like. Only play Led Zep? Only hip-hop? Only Miles Davis? Only Maria Callas mono recordings? Tell 'em how much space you got for your high-fi set-up, and how many dB's you like to bathe in. To be sure, you don't need to ignore magazine rave reviews. But a good dealer is a wonderful thing.
One definition of 'overpricing' is that in the revenue (quantity x price) drops.
This is the case in an 'efficient' market with full 'price elasticity' (the cheaper you make it the more you sell) with full working supply and demand balance.
None of these 'laws' apply to the nutty 'high end audio' market. It may actually be the opposite. In this case: they may sell MORE at $133k than at $20k (the full manufacturing cost (including overhead, development, material, labor, etc may be $5k for such a speaker) since 'nutty price' is actually a sales attribute that buyers crave and desire in the realm where a negative cost/benefit ratio starts.
It's like asking is there any greed in man. Answer yes!
I have the 22K Aurender W22SE, I can imagine the markup is less than jewelry on high end audio, but I expect Aurender took 10K profit from the 22k. Worth it? Absolutely yes! Greedy? a little. But also good business, it's a fine line between greed and good business, few walk it.
@russ49 -- It has to do with one construal of the OP’s question, as to whether the speakers are overpriced. Clearly, one reaction to the price is moral revulsion; we
read this all the time on Audiogon -- "How dare they ask that much for X?" We all understand that there are no *laws* against pricing things as they wish, so there are a couple other ways to explain why this question gets asked.
(a) Is the price justified by the economic inputs (parts, labor, research, etc.)? Here the answer is hard to gauge, because every company adds in their "margin" and it’s hard to question what kind of margin is "correct."
(b) Is the price justified by the wider social conditions? Here the answer is often "no," either because of what people themselves can afford or what they see around them (hence the cardboard box comment). Many people get angry at this question because it brings up issues of injustice and how dare we talk about that. This is supposed to be a happy occasion!
(c) Is the price creating a distortion in the audio market? Here, people divide up. Some see the pricing as part of a trend which is distorting the hobby into an ultra rich guy thing. That makes regular hobbyists feel priced out. Others look to the opportunity to buy this ultra-gear at used prices or hope that there is trickle-down from the technology (the way the Apollo program lead to all kinds of innovation.)
In short, the OP’s question is a kind of Rorschach test, and this leads to a fun but chaotic, cross-purposes thread.
Do a search one million dollar speakers, there’s a bunch of them! Over priced? Well they are for me, but…
IMHO, once you have established what the law of diminishing returns is on a piece of audio equipment, any money spent above that price becomes questionable.
Of course, I am basing this on common sense. For instance, does a $200,000 audio system sound ten times better than a $20,000 system? For that matter, does a $20,000 system sound 10 times better than a $2000 system?
It's all relative to how much money you have to spend and how good your hearing is.
There are no laws for pricing products. Manufacturers must establish what they think they need to run the business, and then what kind of profit the product might drive. Do these products have some type of exclusive patented technology? Maybe sometimes? Hype? Bet your life on it. There is always a market for products marketed toward super high-end customers who have so much money that the price is irrelevant and those same customers are the least likely to be customers who do a lot of technical research or get too deep into learning the nuances of a hobby such as audio. It might be a hard pill to swallow but in many cases all that matters to this demographic is that they have something extremely rare and expensive, no matter what the thing in question might be, and that they can show it off simply for the fact that it costs an obscene amount of money. Price is not always a great measure of performance or quality, especially when you leave the reasonable bounds of high-end-high-quality to the level of ridiculous-price-no-added-performance.
It's also possible for a manufacturer to under price a product. If someone were to manufacture a power amplifier and sell it for a profit at $1,500 no audiophile putting together an upscale system would buy it, regardless of how it sounds. Too much cognitive dissonance to match that with a $20k plus loudspeaker. If you doubt me, consider how most audiophiles view powered loudspeakers.
A few points on the OP;
There are 5.3 million millionaires and 770 billionaires living in the US. The market for ultra luxury goods is bigger than you think.
We are in the situation now that extremely high prices for products are a feature not a bug. In other words, exclusivity is a selling point. If you have $50 million in Microsoft stock spending 7 figures for a stereo is reasonable in your world. What else are you going to do with your money? Give it to the homeless?
To reinforce a point made above, volume and mass production is critical in the pricing of any complex product. I don't think anyone would argue that a Toyota Venza is magnitudes more costly to design and manufacture than a Rockport Orion yet the Venza sells for less than half the price. If Rockport could sell hundreds of thousands of Orions they would be a lot cheaper.
A $100k speaker or amp is not just an appliance, it is a work of art with a story behind it. It has the advantage of reproducing musical works of art as its purpose. People pay over $100k for paintings all the time. Why not buy a nice stereo?
I've been to a few audio shows and it's thrilling to hear some of these ultra expensive systems even though I will never own one. The sound they achieve gives me a target to shoot for and has allowed me to enjoy this hobby even more. I've been able to put together an affordable system that was state of the art 25 years ago and it holds up to the modern ultra expensive systems surprisingly well. I'm glad the ultra expensive stuff is out there and I hope that it brings joy to its owners.
Obviously, it is possible. Even the most expensive items are made of components that cost relatively little (thank goodness there is little place for precious metals and gemstones in hi-fi!) Does the manufacturer add enough design know-how, or design beauty to justify the exorbitant price? Looked at objectively, not often. Evidently it makes a difference as to whether the price is a big deal to you, or a trivial throwaway. But it makes no difference to the sound, does it?
I guess I'm saying we should only praise or recommend components on their sound, not on their appearance or their price. An unobjectionable principle. What a shame it so rarely seems to apply.
@russ69 Thanks for pushing me!
Well-placed irony. That said, one thing which is true about the wealthy, and non-wealthy to a large degree, is that happiness is largely measure in relative social position, not material riches. People buy eye candy and expensive things in large part to position themselves with others in their stratum. Part of the audio market is serving that need, while also throwing in a lot of nice audio parts and research in the process.