What is the average dealer mark up?

I rarely shop at retailers for the same reason I dread going to car dealerships — I feel like the salesperson and I are on opposing teams.  I want “best bang for the buck”, and I am not a lavish spender like someone who expects to pay $10,000 for a pair of loudspeakers or $125,000 on a Porsche.  If I go into a hifi store, I expect the staff to try their best to up-sell me on a more lavish system than what I want, and while I don’t mind looking, I know what I want to spend and that might not even be worth the salesperson’s time.  I want retailers to be able to stay in business, just in general, but I don’t want to consider what they need to pay rent or keep the lights on, or pay for staff, when all I want is a good deal.  There is a high-end audio retailer in my town, but I have never been there because I assume that I can get what I need, for less, and not have anyone try to talk me into a home theatre when all I want is stereo music.  I have been in stores in which the employees obviously see that I am not spending the kind of money they need to bring in, and I don’t like disappointing people.  

Well bob540, you are clearly not a B&M customer, you said: "I want retailers to be able to stay in business",  right why? So you can take up their time for free? Listen to gear you might be interested in to purchase elsewhere? Just so you know, savvy dealers can spot you out in just a few minutes if not sooner. Please don't bother B&M dealers, they will be fine without you, by used or online. 

hmm. “most audiophiles aren’t really that good at listening”’etc. that’s a very arrogant statement. just saying.

Quick add to my post so you numbers guys can see it in text:

SONY TV's (Trinitron) were THE MOST POPULAR in the world at one time--it was a great TV.  The dealer cost was 80% of the FIXED (these were the days of "fair trade" pricing where you were legally required to sell at the manufacturer's price or lose the line, period.  No second chances, and they "shopped" you pretty much every week.)

Fixed overhead at my shop was 21%

You numbers guys figure that one out, OK?

So much "profit" I could hardly spend it all when I sold a Sony...

heaudio123"BestBuy runs a GP of around 23-24%"

Actually they would be bankrupt if that were true you clearly lack sufficient sources, data, and  information to reliably state any thing about Best Buy profit.

clearthink  - per the Wall Street Journal BestBuy's  gross margin for 2020 was 22.86% , and a net margin of 3.53% (net imcome).  What are you referencing to contradict headaudio123 and the Journal?

That said can you blame a customer for attempting to secure a better price?

@4425 - no. Everyone wants the best price

You would think they would advertise to a highly selected mailing list.

@larry5729 - most dealers do this; at least the successful ones

Let me offer some special words in retail that mask the real costs and flow of money

barryaudiophile - I don't know what products you carry as a dealer, but I never had a single audio manufacturer or distributor offer a co-op, rebate, spiff, show special (only to customers) or program (whatever that means). Most audio manufacturers and distributors are small, unsophisticated firms from a marketing perspective

@dill:  I typically do buy on-line and am not taking up salespersons' time needlessly.  I know that in my locale the available audio stores will not carry what I want.  I bought used Parasound amp and drove to the next state to pick it up. I bought a used Parasound pre-amp online and had it delivered.  Now, I spent a bit over $2,000 for the pair. Could I get those items in local stores? I don't think so.  They would be selling new equipment for thousands more, or selling new equipment with less quality, or I could take my chances finding what I want at a pawn shop.  I don't see local purchase options that come close to what I find on-line.  Maybe in a major city the options would be greater and I would shop B&M.

For the 10 years I worked part-time in the business, mid-fi and high end, it was 40% for speakers and 25% for electronics.  Accessories and cables higher.

I just talked to my local dealer a couple of days ago.  He said they are doing fine.  They are appointment only right now.  I live in a small city and there are only 2 dealers in town.  I believe that he is still paying his employees as well, at least he was when this started.

I am a bargain hunter but I also appreciate B&M and am willing to pay more(to an extent) to support them.  My dealer does things right.  He will let you take something home for a week and try it in your system or bring something in and listen side by side.  I recently bought a nice integrated and I went with his recommendation(which wasn't even on my list initially) because I got to try it out with my own equipment.  I won't buy everything there because I like a good deal too much, but I will ask his opinion and give him the opportunity to get my business first(which he appreciates.)

It all depends on the overhead of the business. If your fixed overhead is 20,000 a month less payroll, that is factored into the price of each unit sold. If that causes the price to be too high then the business will close.
This is why there are so few left. Our Audio business is in its 80th year. I hope this helps. 

Do not confuse mark up with profit!  From that mark up all overhead has to be paid BEFORE a profit can be realized.  Even if the retailer is strictly online, there are significant expenses that have to be paid first before the profit kicks in.   And once there is a profit, then taxes have to be paid on that. 

There really is not much markup for the dealer for new cars (used cars there is usually a LOT of markup).  New car dealerships make their money with add on services, financing, the trade in, mostly peripheral endeavors.  

The dealer mark up is his building lease...his family needs.... his food... his clothing... his transportation.    You know.  What you want to save your money for.

To the offended and bashers of this thread.

 Disclosure of this type of material is not such a bad thing. It helps customers appreciate that their local boutique dealer is most likely not getting rich off of your $3000.00 speaker purchase. It might make some not want to beat them up on price everytime they buy a piece of gear. 

How many demos have you done in store, at home?  Sought advice then bought elsewhere on line or even  used gear. It's all time and takes away from the stores bottom line. 

Now that the secret is out... Be kind to your local dealer.  

That could be the result of a thread like this. 

The dealer mark up is his building lease...his family needs.... his food... his clothing... his transportation.   You know. What you want to save your money for.

It's probably more for his business expenses, one of which (hopefully) is a salary for himself so that he can take care of those other expenses, which we all have (except the building lease).

All businesses need to make a profit to cover not just their lease, but payroll, insurance, utilities, advertising/marketing, supplies, and so many other things.

big_greg...

I do not know how you did it.  But you found a way to disagree with me by essentially agreeing with what I said.  I forgot one word to add to the list. Which was a given. 

@millercarbon Cars generally have 10 to 15% margin. This excludes Holdback which is as little as 2% or as much as 5% Most of a dealers profit comes from parts and service. 

I wasn't disagreeing, but now I am.  I elaborated on what you said as you vastly understated the expenses that go into running a business.

No wonder manufacturers are selling directly more than ever these days.. they can lower their price and still make more money.  

I am a small business owner, specializing in a high end custom home improvement product with an average sale price of around $2K.
My gross profit margin is around 75% on average.  
This sounds like a lot or profit until you factor in all of the overhead costs.  I won't list all of these here as several others already have.  
My gross sales per year are around $1 million and at the end of the year if we've done a good job I can expect about $50K additional income above my salary.  This might also sound like a lot but for the amount of risk I take in owning the business it's really not that much.  
I get a lot of customers who come into my shop asking me to match a competitor's price, and I never bend on price, knowing that my product and service are much better than the other guys.  The best audio dealers are the ones who understand their value to the customer based on their market position and their overall service offerings.  
Prior to starting my business I had considered a high end audio shop.  After running my current business (successfully) for 5 years and having a deeper understanding of all the costs involved in running a B&M business, there is no way I would start an audio store.  I honestly don't know how several local shops in my town have stayed in business as long as they have.  There are two shops in my town that have been around for more than 30 years.  
My guess is that they have developed a strong customer base who are repeat customers, and provide great service.  They also offer consignment sales, which they get 30% of the sale price with no inventory cost involved.  Some of them also sell audiophile vinyl and used records to add some extra revenue.  
I like to get a discount on large purchases, but if I ask for one from a dealer I offer them something in return.  For example, I offer to pay cash rather than credit card.  Many dealers are very receptive to this as even the 3% cost of taking credit cards is a lot.  If they offer a 10% discount and also have to pay a 3% fee that really hits them hard.  
We live in a free market and everyone wants a deal.  It's not a crime to ask for a discount but it is important to understand how expensive it is to run a business when asking a B&M dealer for a price break.  This discussion is valuable (IMO) for the reason that we should all use this info to seek win-win scenarios.

There used to be this country, now vanished beneath the seas, where countless small retail shops flourished and customers would come in and buy things like televisions and stereos at retail prices that they could afford because they had solid middle-class (or above) jobs with wages and salaries that went up every year along with that country’s economic productivity-- that they helped create. This let them use some of their savings to routinely make purchases like this throughout most of their lives.

Massive big-box retailers could not score deals with manufacturers or sell products below cost to crush their competition (and then jack those prices right back up after most of their small shop competitors were wiped out). The small customer-centric shops had protections that came from "fair trade laws", and domestic manufacturers were protected by laws that did not allow foreign countries to dump products onto our shores that were made by slaves, by children, or by otherwise exploited workers-- all as a means of unfairly competing with our own manufacturers. So they had to sell on value and quality through stores that had to focus more on customer service and locality to remain in business and thrive.

The employees at these countless shops were not paid a fortune, but they were decently-compensated. They had steady jobs and benefits that allowed them to live respectable lives while working in those stereo shops-- many of them located right there in your town. Remember? No? Some of those employees lived right down the road from you, right next to the English teacher, or the auto dealership service manager, or the grocery store clerk. Remember? No?

This long dead country also had higher annual GDP, their children did a little better than them when they grew up because they went to well-funded schools that were paid for by the taxes that everyone paid according to their means, and in most cases, if they had kids, and almost all of those households did, it only took the salary of one parent to accomplish all of this. Hell, they even had dinner together every night. Remember?

That country’s political and business leaders decided somewhere along the line that it didn’t want that life for its own people anymore, and the kids that are growing up in this new country can’t afford to desire or buy things like stereos, new cars, appliances, houses, or to even send their own kids one day to college-- the way that their parents helped them do. It’s just no longer possible for most of them-- so their kids go into debt and make decades worth of payments to just hang on-- dreaming of a new set of ear buds so that they can stream crap-sounding digitized dreck into their heads everyday, partly to shut out a world that shut them out long ago.

It does not have to be this way. Every crisis brings with it new opportunities to change this world. The question is, just what kind of country do you want to live in? A winner take all society, run by global monopolies, that mostly sell cheap disposable crap out of warehouse sized stores to going nowhere stressed-out families, or would you maybe like a country where that little hi-fi shop down the road can exist again and prosper along with you and your family?

We actually have that choice- whether we know it or not, we have it.

And yes, this is absolutely on topic.

Some of those employees lived right down the road from you, right next to the English teacher...

@wesheadley Well said. Does anyone else remember when the English teacher could live the "middle class" lifestyle?

In the end, I think that what matters is that it's a free world, at least in America, and you can't tell business owners what they are suppose to charge or how much profit they're supposed to make. Nor should you want to. Too much price control would just water down the creativity and expertise that goes into the advanced audio gear we enjoy today. I don't expect that audio dealers are making a killing because most are in high end neighborhoods that have high rent and have to keep the place looking nice along with retaining and paying reliable and knowledgeable staff. If they are making big profits, more power to them and foo on me for not doing the same.  Having been in business myself I know it's not a gimme to run a successful business.  I want to shop audio where the staff is knowledgeable, can demo the gear in a way that I can relate to, and is there when I need help.  You'll never be able to control prices or profits.  You yourself may open a business some day and then you'll see why things cost what they do.

garrettc

... at least in America, and you can't tell business owners what they are suppose to charge ...

Actually, in the US, a manufacturer can indeed tell a business what it can charge for its products, and some do.

Who said anything about price control or limiting profits? Cheating is not "savvy business", it’s just cheating. And in the long run, it’s toxic to almost any capitalist economy. The comments were about a rigged system that has been anything BUT good for small business. I pity any small business owner that just benignly accepts monopoly power as a given or as a positive force for business and innovation-- it has been anything but. More importantly it has led to the USA becoming a downwardly economically mobile society-- and those, like it are not, are the facts. Regulations are critical to all human endeavors from sporting events to businesses. Sad that so many people no longer "get" that. Mass deregulation has led to a hyper-consolidation of industry and capital-- and the data is in after more than forty years worth of it-- it is toxic to small business, to innovation, and most importantly, to the lives and fortunes of MOST people. France has a higher launch and success rate for small businesses than the US-- and that is truly pathetic. While in America more than forty percent of our household can no longer come up with $400 to pay an unexpected bill-- so it's a small wonder small businesses have done so poorly for so long.

In terms of accepting a typical dealer markup, the ethical answer for me is whether I want to listen to a product before buying. I recently auditioned 12 pairs of speakers at 7 different stores before buying a pair of speakers that I love. From the perspective of my time, that was a lot more efficient than doing 12 separate in-home trials from direct-to-consumer speaker companies along with mailing the speakers back to the manufacturer. The mark-up is the cost I was willing to pay for this convenience.

I am open to direct-to-consumer selling models, but would need to be pretty sure that a component is likely to be the right fit for my needs before doing an in-home trial.

Keystone

Hmm. In all candor it’s our system at work when larger businesses push out smaller businesses primarily due to economies of scale. Take Walmart as an example. I don’t like the fact that they often crush their smaller competitors but how can it not be so in a free economy like ours? 
Who benefits from the lower prices?
The other thing that irritates me is the rabid criticism of larger corporations started big time by our last president. Are corporations not a conglomeration of many individuals working together to deliver a widget to the marketplace? When govt seeks to punish or destroy corporations who suffers the most? What exactly are laid off employees supposed to do? Work for the govt is the solution of certain factions in our society and that’s not good.
An enormous problem we’re facing now and will be more so in the future is our overall taxation. Income tax is just a part of our overall tax burden. This directly impacts the pressure put on households. Unfortunately it’s the American household that lets our govt pilfer OUR tax dollars away. Obviously this is just my opinion but I believe that it has merit. My true apologies for being so verbose. 

To me, that's why it's important to find a dealer that you like and trust.  That way, you find his/her service and insight valuable and show you appreciation by buying from him or her.

To me, the greed portion or this business has always been in the distributors (in instances where they control pricing in countries they serve).  A real example.  Pair of speakers X goes for $6,850 at U.S. dealers.  Same set of speakers goes for $6,790 in Canada or $4,864 in US$$.  The Canadian price is in line with the price in their country of origin.  So why am I paying a 40% mark up for the right to buy in the US?  

In this instance, I feel bad for the dealer as he/she has no control over the pricing.  To me, that's what's out of whack--and it's very rarely the mom and pop shop that you have grown to trust who is "making bank".

@badgerms4
Have you ever imported a product into the U.S. from another country for the purpose of resale? No, I didn't think so. Please review this: USITC Harmonized Tariff Information. Some import tariffs that importers (distributors) have to pay for electronics are over 25%.

And how much product have you purchased and warehouse, in expectation of future sales to *audiophiles*? I don't know about you, but in my business there is a cost of capital. That changes year to year but it's something. And then you have to warehouse and insure the gear you are importing. If you can figure out how to do it for less please let my favorite audio distributors know how.

The same btw is true of most things, including cars. Which is why car dealerships are so incredibly profitable. Another shocker, the markup
at wholesale is about the same. Double. Or more

As others have noted that is completely false.

Well, you think wrong.

Badger_erich

I have a very close friend who owns a high end brick and mortar retail audio store (remember those) he is kind enough to sell me his products at his dealer cost and has been doing that for decades so I know exactly whay he pays for his gear. 

Most electronics have a 40% markup, though not all. Some speakers have 50% but not all brands, some are still 40%. Cables can be a little higher depending on the name brand, usually 50% and he sells one name brand that has 60% markup but that is unusual. So, the answer to your question is 35% - 60% markup depending on the name brand. The problem is that they rarely do high volume. He may hit a home run one day and strike out the next day. Take into consideration, rent, salary’s for employees, insurance, taxes, etc and you soon realize he isn’t getting rich. There’s an old joke in high end audio that asks how do you make a million dollars in high end audio, you start with 2 million dollars. He does it because he loves it, which in my opinion, is the right reason to own a high end audio store!  Take care and stay safe.

Scot

I agree with your comments on Tekton.  But did you ever feel guilty paying your friend just 5% above cost?  Must have been a really good friend.

I think we need a moratorium on this tired joke :-)

There’s an old joke in high end audio that asks how do you make a million dollars in high end audio, you start with 2 million dollars.

Perfectly legit question for this and other forums. 

50 %.....

I will echo a previous poster, it’s important to get the terminology correct. Audio dealers have:

100%+ mark-up (% of the cost of goods they inflate to form their selling price)
which equates to 50%+ gross margin (% of revenue left after cost of goods)

Those are typical numbers on hardware, accessories and "tweaks" you are in the territory of 300% to 500% markup easily. To the dealer that isn’t doing well despite 75% gross margin, you are grossly mismanaging your costs and your business.

My challenge with B&M dealers is that they are not offering the value they are supposed to. Most of the dealers I’ve visited are not knowledgable, at times I knew more about their product and their competition than they did. They would praise every piece in the store without an honest assessment of their weaknesses or my needs. It feels like they are steering me to whatever brand/piece they want to sell at the moment. In fact I had two different dealers wire speakers out of phase just so they could boast about how big the "soundstage" was.

This to me is not all that complicated.  While I realize it may be part of someone’s nature, or they grew up in a place where bartering is the accepted norm, I find having boutique dealers in this consumer segment to be essential.  I think many of the commentators on this thread probably have some measure of business acumen and understand the economics of being in this hobby (for lack of a better word).  The commenter who was complaining about letting the cat out of the bag for dealer margins is not considering that a.) humans can’t keep secrets, ever and b.) so what?

I expect to receive knowledgeable advice, and I don’t mean like basic info, I mean real help in guiding me toward the next inevitable upgrade.

i fine paying a premium for this.  If you just can’t help yourself from going into the bazaar mode, wait for sales and buy online.