Why are dealers so scared to sell product out of

Simple, the distributors don't want dealers competing. If you have competition than pretty soon, you'd have discounting, God forbid!

It's a real shame that these disbributors and manufacturers are so shortsighted. Brick and Mortar audio is dead, let's move on.

My advice is to keep trying. Some of the dealers will work with you regardless of these dealer agreements.

Some of the dealers will work with you regardless of these dealer agreements.

If they cheat their suppliers, what do you think they'll do to you?

Makes perfectly good sense to me for so many reasons I can't count them on two hands.

I don't understand the aversion to paying list price when buying new; buying used is a different story. I understand wanting a good deal, but the price of a new item is, well....the price. If the item had a list price 10 or 15% lower that what it is currently, would we then stop feeling the need to expect an additional discount? I doubt it.

If they compete solely upon price profits for dealers will fall. At the same time their costs will remain the same. In the short term a few consumers will benefit, but in the longer term the number of dealers will decline because of low profits and in the end state it is possible that only one dealer will survive. Do you really want to buy high end audio from Amazon? There will be no service, no advice, no system matching, no demos, no trade ins, just a good price. But wait, they're a monopolistic seller, they don't even have to give the consumer a good price.

The aversion to paying list price comes from the fact that with due research you'll find someone who would sell it for 30% off. It's just the market and the law of supply and demand. For a dealer, I imagine, it is better to sell an item at a lower profit margin than not to sell it at all. So, if you're choosing to pay list price, you're being very generous to a dealer for no reason at all.

Competition is the main driver of economy, but I guess it's unfair for the business owners at higher-taxed states be affected by tax difference vs. other cheaper states. If I were dealer and would be affected by this problem, I would simply quit ordering particular product sooner or later as unprofitable waste of time and resources.

Your options are as follows:
1. Bargain with dealer for the better price
2. Drive out of state if that will worth difference
3. Purchase from dealer for asking price
4. Choose another product that has larger room for options.

Taters wrote: "Why are dealers so scared to sell product out of state..."

Spoken like a true consumer, i.e. one who has no idea of the competitive pressures and costs associated with being an audio dealer in today's web economy. Why don't you spend a few extra dollars for sales tax (which I assure you, CA desperately needs) and support a local audio dealer?

FYI - although almost no one does so, LEGALLY you are obligated to pay use tax in CA on gear that you purchase online from out of state. This is the Just so you know...

Another reason I moved from the People's Republic of Kalifornia....

Shakey

For people that have a full service retail shop that actually keeps their half of the consumer bargain, I agree, those people should pay full retail price. Since the vast majority of audiophiles do not have such a retail establishment, we should not have to pay full price.

I do not have a dealer providing any of the following:
1. Large inventory of demo-able components and speakers.
2. Ability to visit many times and just browse with no pressure to buy until I'm ready.
3. Knowledgable advice.
4. Post sales service.
5. Trade ins welcome.

Instead, I have local dealers with zero demo stock who have not even heard the product I want to buy. They know far less about the product than I do. Yes, they are willing to allow me to walk in, order the multi-thousand dollar product and let me pick it up (and carry to my car myself) when it arrives and only ask for a mere 40% of the sales price for their service. No thanks.

And yes, I'd love it if all high end was simply sold on amazon at the lowest cost possible to the consumer. Really I don't see what the difference would be to most audiophiles....

Jaxwired, I agree with you. Paying someone a fee in the thousands of dollars just to receive a delivery on my behalf and then swipe my credit card... well, that’s a fee that I’m going to at least try to negotiate.

I have a couple of questions for all of you guys who are buying all of your expensive audio gear on the web:
1- Just where did you go to hear this gear before you decided to buy it, or are the completely accurate and unbiased opinions on Audiogon and other sites good enough?
2- What do you do when a piece of gear needs repair or (horrors!) replacement, and the manufacturer tells you to send your gear to a dealer for service?

The OP claimed that he was looking for a dealer out of state in order to avoid paying local sales tax. I find that sad, personally. Looking for a better price is a different matter. Brick and mortar dealers need to be competitive, but so do online and remote dealers. Frankly, most of the dealers in the L.A. area that I know will cut a deal on gear if that they have a serious buyer, which is a hard thing to judge in the strange and exciting world of audiophile games.

Br3098,

I don't hear the gear before I buy it. I buy it, live with it for a few weeks and sell it if I'm not totally satisfied. Since I buy low, I can sell for little loss. With this sytem I get to home demo everything I buy.

But, if the manufacturers would stop fighting the inevitable change to their business model, they could stop propping up failing dealers and instead focus on more audio shows. Also, as I suggested before, they should be producing high quality videos of their gear with high end pro mics. This is obviously not the same as an in person demo, but it would still go a long way.

If something breaks, then the manufacturer must provide some type of service. Why does that require a dealer? Bryston for example services all their amps themselves.

Br-3098,

I recently bought an expensive pre-amp without ever hearing it. The price was right and I figured if I didn't like it I could sell it on the Gon for what I paid or a few dollars less.

There are a lot of repair shops in Southern California and I can get most things fixed here. In fact I have never had to ship a piece to get repaired.

Br3098,

I'm not just trying to save the sales tax. I'm also looking for a discount.

Look harder for discount(s) to find it or them and fill up yourself with patience. They will happen if not today, but maybe tomorrow or later and pretty darn local to ya!

I will use Jaxwired's response as an example: "...Since I buy low, I can sell for little loss."

So as I see it, you want to buy new gear for (close to) the price of used, depreciated gear. There is nothing wrong with that, except that this model does not allow any operating margin for B&M stores to operate. Maybe you are OK with that; I am not.

I buy and sell a lot of gear, mostly used. I find that most anything I am looking for is available in good condition and at a substantial discount on the used market. But when I do buy new gear, I insist on a fair deal from the dealer - fair for both me and the dealer. And I prefer to buy locally, even if that means that I have to pay sales taxes. In my case and yours, it's the cost of living in sunny California.

Brand recognition! Rolex and Ferrari (your examples) are well established and world renown brands. Building brand recognition costs $$$. B&M stores can be good for building brands. If you have already established your brand and therefore have brand recognition, then maybe the direct sales method (web) may work.

Also, contrary to popular thought, B&M stores as a means for audio sales is not dead. Is it changing? Yes, but it is not dead. I would argue that, like every other business, the B&M stores existing today are in locations which still support their existence. This is an example of the laws of supply and demand. Perhaps fewer dealers have larger territories than before.

Sales tax is irrelevant. You are required to pay it regardless of where you purchase it. Thank you Br3098 for stating this. I wasn't sure about CA but I know it is true for my state.

Finally, I echo Tpreaves statement. The reason dealers won't sell out of state is because they are honoring the agreements they signed with the manufacturers/suppliers.

"A couple of dealers I talked to refused to sell product out of state.They said they have an agreement with the distributor not to sell out of state. It's amazing how distributors have such a hold on the retailer. High-end audio Isn't exactly setting the world on fire yet they have all these restrictions for the retailer."

I used to be a retailer for many high end lines. For the most part, dealership agreement are very restrictive. The reasons for doing so are not to try to take advantage of customers or to keep the price unfairly high, but to insure that the customer gets what they pay for and to help insure that the dealer is able to turn a profit and stay in business.

Think of what goes into an audio system. The careful system matching, setup and overall time and effort to get everything working properly is considerable. Its not easy and takes a lot of skill. Equipment makers want nothing less than to have customers listen to their gear at its full potential when they demo it. If not, they run the risk of damaging their reputation. If you want a good example, look at Martin Logan. How well do you think the people at Best Buy are able to set up a pair of their speakers? Not only that, look at the equipment they have. ML ELS's were never meant to be powered by mass market receivers. In fact, they had to change their designs to make them more efficient. Most people think their older models are better sounding. I agree.

As far as selling to someone out of state, they can do it if thee person comes into the store. Not only that, a lot of companies will give retailers permission to ship if the customer has no local dealers.

Even if you can find items out of state, sometimes consistency of pricing makes it useless. The last few days I was searching for a best price for Xbox 'Black Ops 2' for my son for Christmas. $60.00 across the board. I found one place a few dollars less but shipping put it over. Where's the competition for my money?

Mt10425, why should there be competition for "your" money. Is it somehow more valuable than say, "my" money.

BTW, Black Ops 2 sales reached $1 billion dollars in only 15 days. Clearly price is not any issue for their intended market.

Instead, I have local dealers with zero demo stock who have not even heard the product I want to buy. They know far less about the product than I do. Yes, they are willing to allow me to walk in, order the multi-thousand dollar product and let me pick it up (and carry to my car myself) when it arrives and only ask for a mere 40% of the sales price for their service. No thanks.

This is the key point. Why pay top dollar & a huge markup, just for the privledge of letting them order a product for you? It would be different if they had stock on hand, demo units, knew the products and could make educated recomendations, but they don't.

Onhwy61-'your money, my money', what are you talking about? Consumer dollars, jeez. I've heard the million in sales already argument. How about the Capitalism argument? Never mind.

Mt- what I think you are missing is that this IS capitalism at work. Huge demand coupled w at least some limits on supply (production and delivery capacity are have some practical limits) results in high price. If a retailer can sell every unit he can get this hands on at $60, why should he sell it for less? Not say that it's right, but that's they way an unregulated market operates. Wait a few months and as demand ratchets down, there will be more price competition. The fact that there are some vendors willing to sell for less shows that there is SOME degree of freedom to the vendors in setting price. The fact that you have to pay for shipping is not their problem. Oh, and who is not to say that the game manufacturer is not wholesaling them at a level that makes $60 the practical minimum a retailer can get and still make a profit.

Zd542, recently had the same experience when trying to buy speakers. One out of state dealer told me he was restricted to his area under the manufacturer's dealer agreement. Failure to comply could cost him a valuable dealer relationship.

So, I worked with a local dealer near my house. Yes, he discounted the price by about 19% off MSRP. I thought there might have been more margin with the product with which he could deal. He said not so. His margin was not what I might have guessed, say 40% to 50%. He said it was much less.

And bty, I priced the speakers elsewhere. The deals were no better.

You mentioned that you used to be on the retail side of the business. Is it true that profit margins have been squeezed, at least with respect to higher end speakers??

As an aside, being in the business world, I realize that one must be realistic. The dealer has to make a reasonable profit on the deal. Otherwise, there will be no dealer. OTOH, in my case, the speakers are stored in the manufacturer's warehouse and shipped on special order. That means the dealer does not bear the risk of inventory carrying costs and market fluctuations. So, he clips a fast $n on a riskless transaction. This is also called a "flash title" transaction.

Thanks

Very interesting.Whow i didnt know that!!

SW-I understand that to be true, especially for various audio items. However, I'm not buying it across the board. I'm waiting to hear the 'it costs $53 to make a video game' argument. There's too much blind acceptance of financial complexities and monetary entitlement.

Suppliers contract with distributors or dealers under binding terms and conditions of sale, and distributors must abide by these terms in order not to breach, which could trigger legal recourse. Dealers also need to abide by such terms and conditions, in order to qualify and that they agreed to in becoming a dealership for a given line. This is to ensure that the sales channel to a regional market is adequately covered and that dealers can be ensured of serving a given territory and be not trampled on, or in competition by other dealers carrying the same line. This is an industry standard and is practiced across a broad base of sectors. To me it is IMCUMBENT on the purchaser to savvy up on his/her negotiating skills and get the best deal possible. Oh yeah, negotiation skills, something they don't teach in grade schools, and it's a shame.

Mt10425, rather than wait to hear an argument that convinces you, why don't you make a coherent argument for why a retailer should sell you something for less than everybody else is readily willing to pay?

Onhwy61-you're right. I'm very sorry.

Bifwynne,

With regards to markup, generally speaking, the markup on electronics is about 40%. Speakers and cables/accessories is about 50%. Markups do change, however, as the cost of equipment goes up. When you get into very expensive equipment, the markup is usually lower. Keep in mind that the info I'm giving you is not absolute; its just a general picture of the industry as a whole.

Thanks Zd. If your right about mark-up, which I would have guessed you are, I'm surprised that every dealer I spoke to about pricing my new speakers acted like he was cutting his throat with the absolute minimum price he could offer. One dealer told me that the margin on my new speakers is thin and there just wasn't that much he could do. If it was only one guy telling me this, I'd take it with a grain of salt. But for three dealers to come up with practically the same price discount causes me to raise an eyebrow. As I said, the dealer I usually work with doesn't even carry the speakers in inventory. He orders them from a factory warehouse and then flash transfers title as soon as they are delivered. Seems to me, that with so little risk, he would have more to work with in terms of dealing. OTOH, my speakers are a tad pricey for the general market. Maybe the dealer figures that my speakers are not a volume, typical supply and demand type item. Which may mean that the time to make his margin is when he makes a sale since the volume is thin. Just guessing.

ZD542, I assume you are referring to the manufacturer's markup and not the dealer's, right?

Bifwynne, I imagine the dealer probably buys the product from the manufacturer at a 30% discount. This leaves a 10% markup for the manufacturer. When the dealer sells the product to you at a 20% discount, he too is making a 10% markup. Shipping and insurance can be costly so unless the dealer passes this additional cost directly on to you, it can really eat in to his markup.

There's too much blind acceptance of financial complexities and monetary entitlement.

Agree completely.

Some companies have very profitable margins! Audio Note Japan (KONDO) for example sells their new Overture integrated at 3,200,000 Yen ($$38,800) and sells to the dealer for 898,000 Yen ($10,880). Although some dealers even mark the retail higher! Buyer beware.

(Dealer disclaimer)

Pgawan2b & Bifwynne,

I wasn't talking about manufacturer's markup, I was referring to what an actual audio store would be selling equipment for. Keep in mind, high end audio is not a high volume business. Even if a dealer drop shipps an item he dosen't have in stock, that dosen't mean there's no outlay on the the retailers part. I find that most people don't realize how much of a committment it takes for an audio retailer to get a dealership for a well known high end brand. You just don't call them up and fill out some paperwork. These people are serious. A bad dealer can destroy a company's reputation. Just to get your foot in the door, you will have to show things like: A store front (usually a very nice one), trade references (not just for credit but to show that you have other quality dealerships that will be used to support the brand you are looking to acquire, tax returns, insurance, delivery vehicle, employees, credit checks, the list goes on.

If you make it past all of that, then someone from the company gets on a plane and comes out to meet you and have a look at your store. That's the hardest part. You then have to sell them on why you would make a good dealer for their products. You'll have to prove to them that you have the knowlege and experiance it takes to sell and match equipment. Its not just about money. You can easily have a million+ dollars invested and still not be approved a dealership.

I can go into more detail about all of this, but right now I'm out of time. If there's anything I missed, post and I will try to answer as best I can. This is a very important topic that really needs to be addressed. I'm starting to see how important it is for dealers to show potential customers what goes into this from a business standpoint. The products can be very expensive a lot of people don't always see the value in them. If you're buying something expensive, you have every right to ask some questions. Better communication, I think, would benefit everyone.

Sksos1, So you are telling us that a product that cost 10, 880 sells for 38,880? Wow! No wonder the dealers around here are driving Ferrari's, Porsche's and Bentley's.

Taters this is not the norm but for ANJ it is the case.

Good post, Zd542

Regards,

I buy everything from my local dealer and always receive 15% to 20% off without asking for a discount.
Find a good local dealer and establish yourself.

Tmsorosk,

In what city are they offering 15 to 20 percent off without you asking for a discount.

Same here.....15-25% off (and more for cables) without even asking!

Rsf507,

Name the city where you get 15 to 25 percent off?

Nigeria

If you don't have a local dealer you can work with, you may want to try The Cable Company/Ultra Systems. As far as I know, they always give discounts. Also, the discounts get bigger the more you buy from them. They are an extremely reputable and knowledgeable place to do business with.

Another option to consider is Music Direct. Not in the same league as the Cable Company, but they will discount. They won't automatically give it to you. You have to ask them.

You can probably get 15% off with both of them.

Yes discounts can be had and we do ship out of State but ONLY if there is no other dealer in your area selling that brand.

(Dealer disclaimer)

Hah! 'Dealers' out of Nigeria are not affraid to sell anything anywhere especially without providing a merchandise.

Have Toyota Avalon '08 fully loaded. Moved to Paris due to the wealthy marriage and use it no more and will sell it for $4000 in mint condition. Once I receive wire transfer, I will send you 2 original sets of keys and enjoy the ride:-)

you don't have a problem if you buy direct.

Taters ,, Edmonton, the Audio Ark. They even delivered the last few products .

Mrtennis , who can you buy direct from, a few odd ball brands ? Pass .

In the same sense that it is neither unreasonable nor unfair to expect a certain level of service when the cost of that service is incorporated into the price of a product, it is not unreasonable to ask for a discount if one isn’t getting that service.

A friend who used to own a traditional high-end shop had customers who took months to finalize a system purchase. The way these customers would hang around the shop, it was clear that they wanted this to be a special experience. They took hours and hours of his time and tied up his listening rooms. He had no problem with that and frequently invited them out for meals, concert events and sometimes introduced them to other customers in their homes. In short, he earned his commission.

On the other hand, I have walked into shops that had exclusive territorial rights to an entire product line, but only carried a few products from that line. When I inquired about auditioning something from that line that wasn’t in inventory, I was informed that I would have to make the purchase before they would order that product because they didn’t want it in their inventory. In those cases, since I am receiving none of the services that one associates with a hefty retail markup, it’s not unreasonable to ask for that markup to be lessened commensurately.

On the other hand