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When I am at a audio show and looking at a ton of gear I find myself trying to figure out what it cost to make the Item. Of course it's only a guess and I don't have actually numbers. I have worked in manufacturing before and I remember what it cost for us to make a product and then seeing the product on the open market. The company I worked for was owned by my sisters husband so I had inside information on what it cost to make an item. One popular item we made in the 80's and was distributed worldwide was a fashion Item. The parts came from China but the units were assembled in Southern California. The Item cost with parts and labor included was 7.00. The retail price was 69.95. So like you said about a 10 times markup from what it cost to it's retail price.
How about the manufacture’s overhead costs?
Profit mark up?
High end? Usually 60% of MSRP plus shipping.
$ Sub total.
Profit Market? Shoot for maybe 10% If lucky 5%.
Why do you think B&M dealers are going out of business every day?
$ Final sale price. Always MSRP?
#1 on digital and #3 on everything else. With an average of 40% profit at MSRP, and most dealers will discount 10-20% so that drives the used market down to below dealer cost at resale. In my years here on Audiogon, it seems that 50% of MSRP seems to be the place that everyone starts and then negotiates from there. I think a dealer will usually offer 20-25% of MSRP or show more but a portion of the higher trade allowance is reduced price from MSRP.
After all he must then turn around and try to make a profit at resale.
But then in the end, our hobby is not all about investment and monetary returns. So the years of enjoyment we gain from our equipment captures that investment to enjoy music and the depreciation is merely the fee of admission.
excellent discussions guys- I am interested in the cost of making cables/power cords (my caveat of our wonderful hobby).
Being a Transparent fan, I often wonder how this company, arrives at the OPUS level pricing? EnKlein, ElRod + MIT are others as well.
In other words, the true cost of making (1) pair of IC, (1) PC
the network box...?
I read recently where a guy took apart some 20k Transparent cables and try to duplicate them. I don't remember where I read it. So unfortunately I can't provide a link. He wind up buying all the parts and putting it together. He did say some of the parts were a bit different because he could not find all the original parts. Though he said he found many. He says his total parts cost was 800.00. Plus all the time he spent putting it all together. He said at a price saving of nearly 19k he was extactic and he was very pleased with the sound.
"You don't find that with cars, where dealers are making slim margins"
What you said is the perception many people have. I worked as a car broker for 3 years. The dealer actually makes what they call in the Industry trunk money. That is essentially a kick back the dealer gets from the manufacturer. We would broker cars all day long at dealers cost and still make a good profit. Every month the manufacturers put out different incentives for different cars. We would focus are advertising on what cars we could make the most on. I remember when Mercedes was giving us a 4000.00 rebate for every E-series car we would sell. We would offer the car at dealer cost and sell a ton of them. They were paying me 25 percent of gross so I was making 1000.00 a car. It was a very lucrative business till the owner of my company got greedy and started screwing people.
I think the reason is a lot of audio equipment sound practically the same at widely varying price points due to economies of scale (labor and buying power) and the fact that audiophiles are constantly selling to upgrade. So if you're in the market for CD player and have two grand to spend, you can either buy a new one or one a used four grand unit and get practically the same sonic performance -- plus the four grand unit may have a higher resale value when time to upgrade again. When you are talking about six figure equipment, then the difference in performance is smaller still, if any at all.
That's what the used equipment seller is competing against. If the prices accurately reflected performance, the depreciation would be a lot less (see the iPad auctions on eBay where they usually sell for 60 to 75% of retail).
I am in product development. Don;t forget that R&D expenses can sometimes be significant. Initial product samples are all hand made. Co-manufacturers of subsystems or other parts charge for their prototypes If you are developing something new then you have to go through many rounds of prototyping to get the results you want. And then once you have the design you are looking for you have to scale up and figure out how to manufacture it. Sometimes you have to buy new equipment, a new line. Then you have to iron out the manufacturing wrinkles, so the first line runs may have high defect rates. All of this can be very expensive, Engineering time, craft people to hand make samples, materials travel ect. All of these expenses have to be built into the cost. The actual material and labor cost of any piece of gear sometimes not the most significant cost. If the projected market or number of units that they think they can sell is not large then all the development costs are spread over a relatively small number of units. For the most part I don;t think that greed is driving the cost of high end gear. As in most things you get what you pay for. However it seems that charging what the market will bear can be a factor.
"The dealer actually makes in the industry trunk money."
Well I'll be go to Hell, I didn't know that--thanks, Taters.
Yeah, I would not be too impressed with the expensive cables these days, not with the quality of DIY parts out there. Anyone can now use OCC wire for any application. If Transparent et al cannot divulge the type of wire they use, why spend that much?
Yes, I went to order a second power cord to find out that the price was now double for the same cord!!!? There went the "loom" idea for that cable company.
There's a lot of this going on, but it's not everywhere. There is actually expensive gear out there that's worth it. It depends on who makes it and the channels that it goes through.
For example, there are some passionate audiophile engineers out there building their own brilliant stuff one piece at a time. Most of these folks are just getting by or doing okay, but they love what they do. They are not raking it in, even though they're delivering hi-end goods at hi-end prices. For instance, having just one quality chassis built, because you only have one amp to build right now, can be a major cost factor that leads to escalated pricing.
Of course, this does not explain why the big companies with much higher production and reduced costs, charge so much or as much.
Maybe, the big company's product got an "A" rating in that mainstream publication. Of course, advertising in that publication can cost them a bunch, right?
"the main reason audio equipment depreciates so much is"
Any question of this nature about ANYTHING can be answered with Supply vs Demand.
There is more used audio gear than used audio gear buyers.
I would like to take this opportunity to thank all of you audiophiles who continue to buy new and sell your used gear in your never ending search for audio nirvana. Keep on churning baby. Keep on churning. I will be here to buy your hand-me-downs.
Definitely #4, over-priced to begin with. I offer the following example(s) as proof.
Consider the following brands of audio equipment, all of which I have. What is interesting to note is that not only do the manufacturers of these items claim they are directly comparable to equivalent products made by other manufacturers that charge many times (as much as 10X in certain cases) as much, but numerous professional and average Joe audiophile reviews also agree that their value is simply outstanding.
Not in any particular order:
Agree with over-priced to begin it. Companies keep churning out new products. Claiming this new version is the one. And audio reviwers with an eye on advertisment fees for the magazines play along. How many reviews have you read. This is it, hold the presses the wheel has just been re-invented. Make our purchases and before you get them into our homes, before their even set up, they've drop in value at least, 30% sometimes 40+%.
A case in point; Me. I bought Snell Type B's in 1994. I spent a lot of time with them. TONS of time experimenting with them. My ears became trained to their sound. I know them as well as anyone. I've been smitten ever since with them. It's 20 years and hundreds of speakers later. How many people remember or regard them with so much fondness? Hence the pathetic resale value of older gear. BTW; what is the average age of an A-goner? Joe (59)