Group tests

[Hi-Phibian]

Not to mention the INSANE mark up the retailers put on the kit (Abe you know what I paid for my Yammy brand new). This is what is stunting the growth of AV in SA

The % margins worked on by dealers in SA is totally in line with that of other territories in the world.


Does this make it acceptable ?  I have first-hand knowledge of what RETAILERS pay for a certain well known brand. This price includes any said costs incurred by shipping, insurance exchange rate and retailing a product for more more than twice than what they are paying for it is a bitter pill to swallow for the consumer. Thats the problem in SA there are too many factors that retailers can use to blame their inflated prices on.

You said SA retailers put on an insane mark up, pointing out the SA retailers as the exception. If you feel the mark up is indeed insane, it is insane everywhere in the world bar Hong Kong, Singapore and Dubai.

My post explained that the RETAILERS buy from a distributor that incurs the shipping & insurance + duty costs that are higher here then in many markets in the world and these are obviously passed on. Mark up as one with first hand retail experience should know is typically % based across the board on a certain product line. This % is in line with markets abroad.
I have been involved in the AV industry in one way or another since 1989 and would be keen to find this brand that allows me to more then double my money purely from retailing it.

Perhaps we should turn it around. What is an acceptable margin/mark up and what would you expect the seller to offer you for this besides a box? Lets also assumne we would like this fellow to still be in business and employing staff the next time we have a need....

[GearSlave]

Perhaps we should turn it around. What is an acceptable margin/mark up and what would you expect the seller to offer you for this besides a box? Lets also assumne we would like this fellow to still be in business and employing staff the next time we have a need....

You tell me. I paid R1800 for a certain CDP that Abe paid R2400 for at a different retailer within a 6 month period. That's around 30% difference, and the guy I got it from must've made money on it still AND they are a well known retailer. No gray stuff here. I don't attribute this discount to my haggling skills...

Our company being an importer of certain specialist goods and owning exclusive rights to it, I'm well aware of the logistical processes involved. It's always a balancing act showing turnover while maintaining a decent EBIT, but having margins of 40% (which is the norm in the specialist AV industry) is not conducive to growth of the industry. Drop the margins and the volumes will increase while still showing reasonable return. The problem in the AV sector is that every distributor wants to retain a fair amount of exclusivity of their brand by not flooding the market with their goods. So, they maintain high margins while the consumer of such goods has to bear the burden. This is a fact of life and no amount of pussy footing around the issue is going to change that.

[Cleansound]

Does this make it acceptable ?  I have first-hand knowledge of what RETAILERS pay for a certain well known brand. This price includes any said costs

So what,are they not allowed to make a mark up ?
I have the same arguments coming my way in the line of business that I am in.Think for one moment that if the company you work for is a non profitable business,what would your salary look like?
The problem is that PROFIT is a dirty word,and people constantly try and haggle better pricing,I personally don't walk into Pick and Pay fill up a trolley and then ask for a discount.If someone gets a good salary and there employer is profitable then they are happy,why ? because it suits them.
But when it comes to spending that hard earned cash,they feel the whole world owes them a favour.

[skinnyfat]

So what,are they not allowed to make a mark up ?
I have the same arguments coming my way in the line of business that I am in.Think for one moment that if the company you work for is a non profitable business,what would your salary look like?
The problem is that PROFIT is a dirty word,and people constantly try and haggle better pricing,I personally don't walk into Pick and Pay fill up a trolley and then ask for a discount.If someone gets a good salary and there employer is profitable then they are happy,why ? because it suits them.
But when it comes to spending that hard earned cash,they feel the whole world owes them a favour.

So you're comforatable with a 130% mark-up then ?? If a product costs a retailer R6000.00 I want you to explain why we the consumer should accept paying R14000.00 for it ? ? ? ? and please spare me the overheads, expenses etc etc I am familiar with business practices
Clearly you feel the need to defend this stance because you need to justify your pricing structure. Your Pick 'n Pay analogy is a load of trollop too, I worked for Pick 'n Pay and they do not work on a mark up of extortionate proportions (contrary to public perception) so why the need to negotiate - And no I was not a cashier in case thats what you're thinking.

Slow moving items justify a higher price?? BALLS . I wanted to demo a pair of Kef iQ9 speakers and the retailer (a nominated retailer by Balanced Audio) says - sorry we don't keep them in stock but we order them for yuo if you want to buy them but we need 50% deposit ==> Sold at the same extortionate mark up. Unforutnately we Joe soap public accept it (myself included) as the norm, because that is what it is, the norm - Unnaceptable but the norm

[Cleansound]

Quite frankly,whether you worked for P&P or not,my analogy stays.
Can you back up with sufficient proof the 130 % mark up you are referring to.
Your assumption of me having to justify my pricing structure is just that (an assumption)
I am not involved in the audio trade,however a good couple of the guys know me well,I support them and I never haggle price.The bottom line remains,every business will have to make a profit in order to pay the salaries.I am quite happy accepting the norm and my reason for saying this is that any Hi-Fi product locally that is priced closed to the dollar or pound price,gives me an indication that said wholesaler or retailer is within business ethics.

[skinnyfat]

Can you back up with sufficient proof the 130 % mark up you are referring to.

I can, i would not make such claims if i could not. I purchased a piece (well a few actually) directly from the local agents (via a friend who works in their shipping dept - he trades forex for them). He told me that he couldn't organise landed cost price but i would have to pay what the retailers pay. much to my surprize i paid R6200.00 for an AVR that retailed then for around R15K. Their AVR which retailed then for R48K had a retailer cost of R20K. and this at a time before exchange rates recovered to sane levels In the interest of not compromising my friend's position i cannot reveal the brand. A few of you here know which ones i'm talking of and please do not reveal the brands (Abe, Martin )

Please don't mistake the tone of my posts as directed at you, they most certainly are not, they are merely trying to illustrate the frustration we all should feel to current AV pricing. And I agree that it does not apply to the ENTIRE AV market, just a large chunk of it

EDIT: FMCG have different principles of pricing and market competetiveness to specialized markets such as AV and so the same analogy assumptions cannot apply

[Hi-Phibian]

Skinnyfat, WRT the buddy in the Biz, you have let that cat out the bag a long long time ago. Most of us who follow some of the threads know what AVR (wrong prefix for yours) you are talking about.
R6000.00 > R15000 I can tell you is not dealer price no matter what your friend tells you. How should I know? Well, I have been around a while in this game  and 4 of the 5 co's I was with were dealers for the "brand that shall not be named". One was in fact their biggest dealer by far for a number of years and if anyone would have gotten premier prices it would have been us in those heydays of early AV.
While I was a dealer I did buy product for myself at times, this was available well below dealer pricing as a special favour (nothing like a salesman on the floor who selss what he loves and owns) and more in line with what you say you paid and quite close in fact to landed cost imo.

WRT not doing the AV market in SA any favours,going around using pricing examples that are based on "hearsay" rather then fact and blaming dealers for a mark-up they do not make is not doing anyone any good either.

WRT the dealer who wanted 50% deposit to order a pair of speakers he did not keep to show, as I said before, you are in the driving seat to get value for money and he was not giving you that, I would find another dealer. (I wonder though, had he had them and had you been able to listen to them there and liked them, would you have bought them there or bought them via your buddy? Just curious..)

I do not know the Natal market very well at all and have no idea of the dealer stock holding in your typical better store but here in Gauteng it is not that hard to find dealers that can show some of the premier product of the lines they represent.

Incidentally, not many dealers, after a little negotiation and some cabling/stands and perhaps an installation of the system manage to maintain anywhere near a full list price margin on the sale.

The AV game is a hard one and most retailers that are in it are there because somehow they love music/AV/movies. Trust me, from a purely investment point of viw, there are better businesses.

Anyone had a Cinnabon yet? Awesome stuff. A chelsea bun made fresh drenched with caramel sauce but smaller then your typical chelsea bun. All prepared in a shop the size of your typical London Pie/Biltong Bar. Price, a mere R16.00 each and the folks stand in line waiting!!!

[skinnyfat]

R6000.00 > R15000 I can tell you is not dealer price no matter what your friend tells you.

He has no reason to lie to me croak !!!


AVR ==> Audio Video Receiver AFAIK thats what mine was perhaps you are referring to Denon's use of the acronym

[skinnyfat]

...and my head is now sore from beating it on this brick wall...

[Hi-Phibian]

He has no reason to lie to me croak !!!

Nope, I doubt he has any reason to lie, he may however just have misunderstood something. The way you explained it, he works in the holding co, not actually in the distribution or retail chain directly involved with that product line so who knows what who told him.
All businesses will consider their margins confidential so I am not going to blurb here what it is but it is not R15k to R6k, if it were I would (still) be running a shop and smiling all the way.

AVR> yup Denon and HK for eg, yours was neither one of those.

[Gliding Dutchman]

Anyone had a Cinnabon yet? Awesome stuff. A chelsea bun made fresh drenched with caramel sauce but smaller then your typical chelsea bun. All prepared in a shop the size of your typical London Pie/Biltong Bar. Price, a mere R16.00 each and the folks stand in line waiting!!!

No, but you had my mouth watering here for a moment amongst this hot debate...

GD

[skinnyfat]

AVR> yup Denon and HK for eg, yours was neither one of those.

I was not using this acronym based on the prefixes used by manufacturers in their model numbers. I was using AVR as an abbr. for Audio Video Receiver - Which mine was

[jamster]

Croak, to my mind the debate is not whether the margins on specialist audio equipment are defensible on a business level - like you say, all businesses are entitled to make profit - but whether the margins stymie growth in the industry.

To my mind, there's no doubt that margins are on the high side - especially when one takes the rest of the consumer electronics industry into account. It depends on what segment of the industry you are discussing, though. We need to consider the IP that goes into the design an manufacture of a product, especially a low-volume item. High-end manufacturers charge ridiculous prices, yet still go out of business because they can't recoup overhead.

SA Importers seem to do quite nicely - but do they earn their position in the value chain, or is it simply a question of tying up the right agency at the right time? Do retailers need massive space in shopping centres, or would out-of-the-way warehouse or office type premises suffice?

My view is that there are too many dealers and importers servicing too few clients. Effort should be made to consolidate, ratonalise, offer a better value proposition and ultimately grow the market for specialist HiFi.

It won't happen, but it's nice to dream.

[Hi-Phibian]

All fair comment Jamster... The thing that gets my goat is that this "insane" margin bashed about all over this forum is based on a special "staff" deal passed on. Sean, you know as well as I do that there is no product out there that realises a 58% margin by a retailer (unless they perhaps import or make it) but this is what is claimed from "first hand experience" and used to add fuel.

That is what gets my goat here. I am still waiting for someone to suggest a margin and business modus that they would prefer to support but I guess it is easier to cry about problems then speak of solutions....

WRT distributors adding value, sometimes it is getting the right agency at the right time, having the finance to do it well and the marketing know how to make it even bigger.
There are those distributors though who make an effort to train their dealers so that ultimately the clients of that dealer can get the max out of the optimum solution for them and provide back up support to take care of said solution if something falls over.

Remote locations do work for some retailers but these have possibly decided to cater for a niche that will find them. Joe public will want convenience and swing in to whatever retailer is in a centre they also buy their clothes and groceries in.

The value of the dealer imo is in being able to guide a client satisfy his need and put together proven solutions that work and sound (and for video look) good. This synergy between products that make good systems better then the sum of the parts is hard to get from spec sheets, forums, reviews etc.
There are many that do not add value, the number of "expensive" systems I have found where the DTS out was not enabled on the DVD player for eg is scary. Some bought at the corp, some at specialist retailers.

[Timber_MG]

Let's be frank. If I receive value I actually enjoy paying. I spend almost 2x what I might otherwise shopping at a German butcher than elsewhere, but I am treated in a manner that I appreciate and value,the product is in line with what is paid so I am happy. I am also happy going to an american, chinese run e-tailer to buy products, get excellent sales advice, save in the process and getting the product here quicker than the dealer ordering and still come in at almost half-price. That is a reality of globalization in some markets.

If I wanted to buy certain pro-audio parts (accepting that I'd not bother for small unit quantities) I could get a well represented brand for a lot less, but knowing the market and their business model I pay their markup with a smile and demand service when I need it (and thesedays those employing product certification I also know where to relay complaints to in a way that is effective).

R1k (70% of that for emergency shipping) to get a pro-sound 15 recone kit becasue I decided to skip the SA channel is a no-value proposition and I pay a premium that is a little high with a smile. However if I bring in a small pallet worth (say 10) I buy spares, take my own risks and smile knowing that I have made a tidy saving realizing that I have not had staff and rent to pay and this is where I thnk many of the smaller guys start off until they land with stock they cannot get rid of for the first time.

Now in another industry I know of full-on bona-fide retailers get ~40% dealer rates(and it is not terribly high volumes either and very specialized) ...BUT the service is spotless in every regard, the backup is the kind that I would not attribute to some of the kinds I know of in the hifi industry and the advice you receive is of a very high level of competence (and many products are in stock and ready for demo). The product is likely more expensive to support because of specialized shipping, complex integration and extensive training in proper integration of said product along with extensive safety codes and good practice.

If I look at retail hi-fi I see the commodity market which I generally ignore other than to pick off good value items as the need arises or for ad-hoc purchases. Then in the specialist market I see some dealers who really make the effort and also give good advice mixed with some hype (cause an engineering sell would not be in the interrest of their pocket nor market image) but the vast majority I have stepped foot into (sometimes accompanying friends) have not had an understanding of their product other than merely follow marketing brochures under their noses and some reading in the audiophile mags and were completely unbothered at selling an ill-suited product.

My issue is with wide-spread low-end consumer grade service and sales support for specialist pricing in the retail hi-fi sector. This is an over-supplied market (no doubt there jamster) and with time we here in SA will also see the market change no doubt. The difference is in knowledge and communities like this one empower people with choice.

Edit: typing