Gregn, thanks for your comments. Just to confirm the 10-20% retail is COGS right as oppose to adding R&D and other long term assets. Your numbers make sense to me, I looked at Sony's balance sheet and they have gross margin of 28% or cost of goods sold (COGS) of 70%, but sony goes towards mass-market/volume strategy with elastic type consumers...
Uppermidfi, you are correct that every cost has to cover R&D and all expenses, but I'm also curious of how much does it cost to make the products (Operating expenses). Not to complain, but just to understand more about the industry. Obviously, smaller firms with lower bargaining power and volume leads to higher gross margin in order to survive, but still curious how pricing is established. A good comparison would be looking at boutique cloth industry (Prada, Gucci, etc). expensive prices but COGS is not that different than GAP. The customers here are inelastic so if Gucci decided to lower their price 25%, it doesn't mean there would be 25% increase in sales. Same with audio, if a price of WAVAC is 175000, will it get twice the sales? so I wonder that since the high-end industry knows their main consumer aren't that price sensitive, so they exploit it by charging more....
Uppermidfi, you are correct that every cost has to cover R&D and all expenses, but I'm also curious of how much does it cost to make the products (Operating expenses). Not to complain, but just to understand more about the industry. Obviously, smaller firms with lower bargaining power and volume leads to higher gross margin in order to survive, but still curious how pricing is established. A good comparison would be looking at boutique cloth industry (Prada, Gucci, etc). expensive prices but COGS is not that different than GAP. The customers here are inelastic so if Gucci decided to lower their price 25%, it doesn't mean there would be 25% increase in sales. Same with audio, if a price of WAVAC is 175000, will it get twice the sales? so I wonder that since the high-end industry knows their main consumer aren't that price sensitive, so they exploit it by charging more....