There are a number of posts here that seem based on incomplete understanding
of the difficulties involved in achieving long term longevity if you are specialty
manufacturer of goods with a limited market. If a manufacturer's parts cost to
retail ratio is 9, I don't see that as an indicator of obscene markups necessarily.
You also have to factor the cost of machinery involved in tooling the parts, the
cost of USA based skilled labor to construct a speaker as complicated as the
Magico line, real estate to house the manufacturing facility, etc. When you have
an informed view of the real costs of maintaining a specialty manufacturing
operation that can stay in business profitably for years, a 9 to 1 parts cost ratio
seems reasonable.
I've been interested in high end audio for forty years and I've seen many upstart
audio companies started with the idea of delivering exceptional value for money.
They start out as a small operation getting by with shoestring margins,
inadequate facilities, and insufficient labor. Word of mouth gets out about what a
great "value" they are and demand builds. Demand outpaces the
ability of the business to deliver products at the initial price point and then
prices have to rise or they go out of business because they can't manage the
transition long term, full fledged viability.
If you look at the long term survivors in this business like Conrad Johnson, Audio
Research, McIntosh, Pass Labs, Bryston, Luxman, Audio Note, etc., I bet they all
will have parts/retail ratios that are similar. Sure, they don't offer the same
seemingly great deals as that new guy building amps in his garage with no
workman's comp insurance, but they'll be here in ten years to take care of your
product (which is unlikely with the upstart "value" model.) I'm not an
apologist for greed, but if you believe in efficient markets, every manufacturer
that survives does so because they offer what some segment of the market
perceives as fair value.
of the difficulties involved in achieving long term longevity if you are specialty
manufacturer of goods with a limited market. If a manufacturer's parts cost to
retail ratio is 9, I don't see that as an indicator of obscene markups necessarily.
You also have to factor the cost of machinery involved in tooling the parts, the
cost of USA based skilled labor to construct a speaker as complicated as the
Magico line, real estate to house the manufacturing facility, etc. When you have
an informed view of the real costs of maintaining a specialty manufacturing
operation that can stay in business profitably for years, a 9 to 1 parts cost ratio
seems reasonable.
I've been interested in high end audio for forty years and I've seen many upstart
audio companies started with the idea of delivering exceptional value for money.
They start out as a small operation getting by with shoestring margins,
inadequate facilities, and insufficient labor. Word of mouth gets out about what a
great "value" they are and demand builds. Demand outpaces the
ability of the business to deliver products at the initial price point and then
prices have to rise or they go out of business because they can't manage the
transition long term, full fledged viability.
If you look at the long term survivors in this business like Conrad Johnson, Audio
Research, McIntosh, Pass Labs, Bryston, Luxman, Audio Note, etc., I bet they all
will have parts/retail ratios that are similar. Sure, they don't offer the same
seemingly great deals as that new guy building amps in his garage with no
workman's comp insurance, but they'll be here in ten years to take care of your
product (which is unlikely with the upstart "value" model.) I'm not an
apologist for greed, but if you believe in efficient markets, every manufacturer
that survives does so because they offer what some segment of the market
perceives as fair value.