Price Increases


As of late (within last 12 months), I've noticed substantial
price increases by some well known names (Speaker) in the industry on their entire product lines. With no updates to design I cannot understand why the price hikes. I'm not saying the increases are not necessary from a business standpoint or whatever reason, but it discourages me cause it puts many of these products out reach for so many hobbyist including myself. It does make the used market so attractive. Just venting.
demar

Showing 3 responses by bifwynne

David ... the "directionality" of your figures appears reasonable. To put an even finer point on your comment, let's add variable and fixed costs, such as R&D, QC and "S,G, & A" overhead. I made a similar point in other threads about manufacturing economics.

For example, I surmise that large manufacturing companies like Focal, Revel and Paradigm incur roughly similar amounts of fully loaded speaker production costs on a per unit basis. These companies have large volume operations, do their own R&D and manufacture many speaker components in house, most notably the drivers.

It is no coincidence that the three companies also use beryllium dome tweeters in their high end speaker lines. I understand that these companies manufacture their drivers in house.

I don't know how much it costs Wilson to make its speakers on a full absorption cost basis. I realize that the speaker enclosures are made of some secret formula materials, which may be expensive. But ... I surmise that because Wilson doesn't do the volume that a Focal, Revel or Paradigm does, its per unit full absorption cost to make a Wilson speaker is higher than a Focal, Revel or Paradigm speaker -- and that doesn't even speak to the quantum of gross profit that Wilson has to make if it has less volume.

I have no support for the next point which I heard from a Paradigm dealer, who in turn heard this from a Paradigm regional sales rep. So take this with a grain of salt. The story was that a speaker like the Paradigm Signature 8 would have to retail for $30,000 if manufactured by a smaller company for all of the reasons mentioned above. Is the $30,000 number a hard figure. Probably not. But the take-a-way is that because Paradigm is a large volume company, it would be a challenge for a small manufacturer to match Paradigm's MSRP of $9,000 for the Sig. 8.

As to price increases, the point of this thread, it is no coincidence that the US dollar has decreased in value compared to the Euro and the Canadian dollar. In the case of the Paradigm Sig 8, the MSRP was about $5500/pair when the S8s were first introduced sometime in 2004 or so. At that time, the Canadian dollar was worth about 70 cents US. The current exchange rate is about one-to-one. Just based on f/x considerations alone, the MSRP increased by almost 50-percent!! And that doesn't even speak to inflation or the cost of R&D design improvements.

Happy Holidays,

Bruce
And as I mentioned, so does the impact of f/x to the extent that components are imported and the US dollar weakens as compared to the export country's currency. The f/x rates between the US dollar and the Canadian dollar is just one example.

Also ... I recall reading that production costs in traditionally low cost countries such as China are going up, particularly labor. That is a very good trend if it reflects a real increase in the standard of living in the other countries. Call me provincial, but I happen to believe in the dignity of hard work and a fair return on labor.

I also recall reading somewhere that because production costs in China have increased, Paradigm "re-sourced" back to Canada cabinet manufacture. Previously, that process was outsourced to China.

Happy Holidays,

Bruce
Bigkidz, much of what you just wrote makes a lot of sense. I seem to recall reading an article authored by either Steven Stone or one of his colleagues (Robert Skoff?) that advanced the same points about the relationship of "hard costs" versus MSRP, particularly the points about dealer costs and margins.

Perhaps some A'gon members who are dealers can answer a question about one element of dealer costs, namely inventory. Just guessing about this, but I suspect aside from display and demo units, most dealers do not inventory large stocks of high-end equipment. That is not to say that the cost of display and demos is not significant. Consider -- how many Magico or Wilson speakers can a dealer be expected to have boxed in the back?? OTOH, aside from inventory, I imagine the cost of running a B&M store must be quite considerable, plus there is also the need to make a profit. Otherwise, we're talking about a hobby.

That's why buying preowned top end gear makes a lot of sense for me. I've bought most of my gear preowned for about 60 to 70 percent of MSRP. Having said that ... I won't and don't shop and audition gear in B&M stores. I have mentioned many times before that I won't take up a salesperson's time unless I intend to buy retail.

Cheers,

BIF