Seems there is growing trend for various distributors to be doing business with 'in home dealers'. These appear to be audio hobbyist that are selling factory product from their homes, at 20 to 25 percent off list. Certainly not fair to the dealer network, but it seems to move additional product, especially at these soft purchasing times. Your opinion?
Stan and Chad are onto something with their thoughts of entry fees into the wild and wooly world of audio emporiums.
For claritys sake, are we talking GROSS PROFIT margins here, or simple percentages?
There is a pretty big diff as the number rises.
30% simple on $500 cost = $150.00, or a selling price of $650. 30% GPM on the same $500 = $214.00, or a selling price of $714.
Thats over $60 difference. 40 percent GPM is yet a greater disparity.
Another way to see it is GPM percentages are presented in lesser figures while representing the same outcome.
20% simple mark up = 16.67 % GPM 30 % simple mark up = 23.8% GPM. 40 % simple = 28.57% GPM.
Consequently a dealer can level with someone about the markup, yet still remain veiled in actual terms. Saying Im working on a 30% mark up, by can give you 20% off his 30% = $214 profit, while the 20 % discount given reveals itself only as $42 off his or her, list.
GPM figures in other items than sheer profit. Most retail outlets use GPM rather than simple percentages. Best Buy, JC Pennys, etc.
Its important to know what language is being spoken whenever possible. Albeit this point can remain forever undisclosed or unrevealed and thats indeed the dealers prerogative. .. yet a pretty good sales tactic.
Just thought Id share that bit.
No one ever pays more than he or she can justify anyhow. Ever. Regardless the overall value or deal itself. Well perhaps the utmost uninformed and naïve, or wildly desperate.
Around my area it seems all one needs is lots of cash thats burning a hole in ones pockets, or a contractors license. Take a look at some makers website if you think otherwise and call a few of their dealerships. Youll see what I mean here. The contractor dealers are bountiful around my state and elsewhere. No they dont stock inventory usually . They just say they can get what you want if you specify it to them.
No cash outlay, no inventory, no demos, and in some cases no store/office fronts either.
Geeezzz Louise! That way ANYONE could be a dealer! How hard is that?
I wonder how many folks looking for a lets say medium pricey component for the first time, runs into someone dealing out of their home. Goes there to see or hear one like it, and talk to that dealer, never having met them before or knowing anyone who has as well.
In the deal itself for an in the box fresh device has a waiting period for it to be either drop shipped or for you to return to pick it up or for it to be set up by the seller.
Do you think they would hand over 5K or so just then and there?
Would you?
I believe in home dealers will also have that obstacle to overcome, more so than BM dealers. Though its not a biggie if the dealer is on the up & up for then a fair to each down payment should then suffice to enter into the deal.
Only one BM dealership around here which has stood for the longest has another view on obtaining longevity. They diversified. The McIntosh dealer here also has a Disc sales outlet/store in the store itself, and a high end car audio installation outfit on site. They are also the integra dealership here. They dont discount as a rule from MSRP, and Ive found them to be above it now and then by as much as a couple hundred bucks.
Theyve been keeping their doors open now for decades though. I suspect it isnt all by sales of audio gear alone.
That example is why Im inclined to open a high end shop myself, yet it would be diversified indeed. High end audio, car wash, Laundromat,, pool hall restaurant, and lounge . In a single high rise building.
Or just get a contractors license instead. Which ever is easier . Oooh, theres this just rent someones license instead! Thats done all the time as only one is needed and it doesnt have to be the principally interested or named party in these parts.
regardless how the BM dealers go, we will adapt to some other path, or quit buying stuff altogether.
Depending on how the economy goes, freeze dried food, water, giger counters and guns might be of far more value. ;-))
Bearotti, maybe take that $50k and multiply by 4 then find dealers you wish to carry that dont already have a market presence in your area then figure out what sort of inventory or product minimum representation they demand you carry, multiply that by several makers of gear your likely going to need then factor in not making money for atleast 1 yr........add marketing expense, subtract what it will do to your relationship if you have one then divide that by the rooms in your home you will give up to the business and finally subtract thr enjoyment you will loose by turning a hobby into a business. The answer is always 42 correct?
Sns - Good point about sales tax. Shipping on a $3000 phono cartridge is maybe $200. Shipping from out of state is probably more like $10. The above is an extreme example but one that applies to a lesser degree with most other purchases.
I get very little above 10% discount at B&M. I once tried to negotiate a +10% with the store manager at a local B&M, got totally berated in front of other customers. During this negotiating I offered to pay more than my other sources for same equipment. Needless to say, I've never done business with them since. And this is after paying near list for several items previously. Too bad for them, they could have had subsequent sales to me.
The other problem with buying from local outlets is state sales taxes, 6% here, local B&M and home based outlets suffer greatly here! I bet many sell more out of state than in state.
How does one become a "local dealer?" I wanted to at one time, but it is not something I could do now...so if I could get 50k together I could start my own home based dealership?
Our economy has been in trouble for a long time but we chose to ignore the fact until it was inescapable. The same goes for the entire high end audio farce. We have been paying the price and believing the reviewers while blissfully overlooking the fact that there was a scam afoot and we were sustaining it. Now we are finding that we can no longer afford the luxury of wanton spending and can no longer allow ourselves to be used in that way. B&M stores are only the first line to evaporate. Manufacturers will soon start dropping like flies and hobbyists will slow their activity as momentum wanes. The magazines have long been meaningless and are on the brink of outright obsolescence. Then there's the fact that we, as a demographic are aging and dying away, either literally or piece by piece. You can't have much of a system in the nursing home. And you may not be able to hear it anyway. For me, and I suspect, many others, high end audio is largely nostalgic at this point. It's still kinda fun but my enthusiasm has waned substantially. I suppose at least some of the trading that takes place anymore is in search of an audio Viagra.
The dream is over ...... but the dreamers persist.
While I like and as many know champion dealers who have commercial stores I do also enjoy and see the benefit of home based dealers, its not about fair or unfair its about a shift in audio that many times cant justify the full blown commercial application. Being in stores is great but its also great to be in many home based dealers with real world rooms and accoustics that many times can offer a better idea of what it may or may not sound like (ofcourse nothing is like in your own room) but furniture, room size, ceiling heght and all that make in a closer representation if what you get in a home. For those reasons I sorta like the idea but what I dont like is any dueschbag with some extra cash can become a dealer now and some lack serious talent, technical and social skills so perhaps in a way it dumbs everything down, but in this day and age what isnt? I do assume the market will likely weed out the losers in time but its a pretty new trend so its gonna take time to play out.
So what we are likely to see in future is pure mail order. To get the lines I carry I gave assurances that I would not sell on the internet. At least some of the companies want to preserve a dealer network. I pay 60% + shipping. If I give a 40% discount and home trial I am losing money up front and donating my time and effort. If 40% off becomes the standard there will be no local dealers of any type.
I think for a dealer to make it in these times, they are also going to have to be proficient at internet sales, and will need access to a large number of manufacturer lines. There are a few such dealers here on Audiogon, who can also have the equipment drop shipped directly from the manufacturer to help limit their overhead and storage requirements. The dealers like that I have worked with provided pretty deep discounts for a buyer like me who knew what he wanted, paid in full and didn't require a lot of hand-holding.
I know a guy that does in home audio. He carries all the esoteric brands. He is really struggling in this economy. He will let you take equipment home for a few days to try it out. The most discount he will do is 10%. I only know of one dealer that offers 20% off. He owns his own building so he has low overhead. Most other dealers want full list if it is a current product. If it is discontinued or demo I have seen up to 40% off.
I expect an 'In Home Dealer' to give me a 30-40% discount off list price, and allow me a free in home audition. I've had it, but I can't say from too many 'dealers'. I do know the 'In Home Dealer' that I will go to in the future though, the same one that I've dealt with in the past.
I really don't see how B&M stores can compete....and they do not in my area.
TVAD It is true. I always went to a dealer who gave me a 20% discount or more. I can't in fairness to him risk broadcasting it because his product lines may insist that he only sell at full retail. An example from the jewelry business is Rolex watches not the excellent fakes but the real ones. If you are found discounting they simply pull the plug unless they say "dump your remaining emporor line" we are intrducing the economo-Rolex it's Swiss made from all the watches we can't sell, beside they were parts made elsewhere.. I actually know that no one ever discounted JM Focal when I got mine. Now I bet you could find some sealed in box opened to show you and sold as demos.
I was an "in home" dealer in Knoxville, Tenn. for 20 years, 74-94. I didn't hurt any storefronts because none of them were interested in selling high end. I had most of the high end brands current during that period; I didn't survive by discounting but by giving good service. I would give a better price on a complete system or overvalue trade ins but all the stores I know do that. All the brands I carry have a 40% off dealer price , I have seen some "new in box" items cheaper than my cost so the question is how do home dealers survive in this economy? I am in Louisville , Ky. where there are Home Theater dealers but no audio ones save me. I get inquires about selling outside the local area but don't do it on new equipment. I invite anyone who thinks it is a good way to make money to try it. If you want to demo equipment at a serious, not top end, level be prepared to invest , say, $30,000 in stock. this is probably very low. I have spent on the order of $12,000 on new stock and I already had an inventory that would run 3 or 4 times that to purchase now. If you think you can operate on a 15% mark up let me know and I'll close up and buy from you. If you are not interested in meeting other audiophiles and the challenge of setting up systems that reflect the taste of your customers forget about it.
I've noticed an increase in home dealers and decrease in 'brick and mortar' dealers in my area.
I would think home dealers are the future, they should be able to offer lower prices vs. the 'big' store dealer because of lower overhead. This should serve them well in a 'downsized' economy. Still, I'm sure there will always be exceptions, local stores near me survive by catering to home theatre enthusiasts and wealthy audiophiles.
I am also starting to see more discounts of 20-25% off list, wonder if futher discounts will become the norm.
High-End audio dealers are currently being offered "incentive pricing" by most of the manufacturers and their distributors. This allows retailers to discount prices by 20-30%, or more. There are a few retailers who refuse to budge and still demand the full MSRP even in the face of a seriously damaged economy. Possibly they purchased their inventory prior to wholesale price declines.
Commcat....where did you hear that high end retail prices are "declining rapidly." I buy from a brick and mortar who is 325 miles away from me and will continue to support that business as long as it exists. I agree with Tvad...where are these 25% off list dealers? That's never been my experience although the dealer I support usually gives me 20% plus off list.
I have a great local dealer. They offer wonderful service and support that takes many forms. I feel badly for those without a quality resource such as mine. Their experienced, and professional staff has been my audio hobby an extremely rewarding. I would strongly suggest anyone with a long term interest in hifi do anything possible to pursue a relationship with a high quality retailer.
It would seem to me that the fact that you are always working with the owner is an advantage for the customer with home dealers. Most home dealers would seem likly to represent what they truly appreciate as opposed to buying to have items at different price points as stores do.
The era of the bricks and mortar dealer appears over. Many of the 'home' dealers, are people who have turned their hobby into a sideline or their business. Some are a lot less professional, and less committed than others. The model is cheaper, but is it better?
My brick and morter dealers have been wonderful and I support them 100%. Due dilligence, one cannot get a full sense of system synergy when adding a new product until after having added it. My dealer has saved me several thousand dollars by allowing me to demo products in my home, at no charge and return them if they did not work out the best. These were all very good products but what might be great for one person is not for another. As far as 40%. Yes, that is a typical margin except some small items and some cables may be higher. A very, very well run business that can reduce overhead cost to 25% margin for break even is doing very well. Add that many long standing dealers will make deals of 5%-10% off and that leaves about a 5%-10% profit margin. Not get rich quick figures. Now, if you don't have a good dealer in your area or have not been able to develop a good relationship with a dealer thats too bad, your missing out. Just don't lump all dealers in the same boat. You may even find a dealer from a long ways away that can be very supportive and helpfull. It's worth it.
The local Audio Dealer just closed his retail store, forever, after a gradual and painful decline in sales for several years in a row. Defiant in the belief that it would "turn-around", he is now selling audio equipment from his Home. Presumably his relationships with manufacturers and distributors continues unabated. After all, what difference does it make if he operates from a retail store-front or in the comfort of his living room? Since high-end audio equipment retail prices are declining rapidly, guess any sale under any circumstance is OK with the manufacturer/distributorship network.
What dealer network, brick and mortar dealers? I din't know there were enuf left for the manufacturer/distributor to bother with that hassle. I guess that for really expensive stuff we could get on a plane and fly into NY/LA etc to audition really expensive highest end stuff, but for moderate priced stuff that makes little sense at all. I'll take my chances with a 25% discounted item after I've done due dilligence.
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