Originally Posted by Stephan Mire
A member from another forum enlightened in one discussion: take a given cinema amp, strip out the cost of import and distribution, strip out the cost of all the visual circuitry, strip out all of the surround processing modules' cost, then divide by 7 or 9 to work out the cost you've just invested per channel.
It may only be $50 or $70 per channel. Now if you go and buy a Marantz or Yamaha (for argument's sake) stereo amp and strip the cost layers you may arrive at $150 or $200 per stereo channel (or even higher). Is it any surprise then that the stereo experience is better?
One corollary to this argument is that if you throw enough money at an AV amp you will eventually reach cost parity with a stereo amp and the comparison should become fairer.
I'd say that the other member isn't far off, in my estimation.
I work in manufacturing, specifically R&D. I work for a kind of sweat shop if you will, one that turns out primary designs for many different manufacturers. Which in turn, mass produce a commissioned design, typically at an offshore facility.
Typically, we are given a retail price point to work with, along with the manufactures markup and distribution cost estimations. The other member was once right on the money stating 7-9 time markup, however, since 2008, markups have fallen to the 3-5 time range, 7 being the absolute highest that I have personally seen or heard of, since 2008.
Distribution channel costs for audio (electronic commodity devices) are typically 30 points (not percent/markup), which means that one derives a wholesale cost, by dividing their landed costs by .7.
As an example, if an commodity audio device has a landed costs of say $100.00, its wholesale cost would typically fall in range of $142.86.
The retailer, traditionally, will strive to sell the item at 30-points above their wholesale cost, but typically 20-25 is seen in north American markets. Therefore $142.86 becomes approximately $204.08, or most probably $199.99, or perhaps less as the product cycle enters its last quarter.
On the manufacturing side, using the 5 times markup model, the base COG's (cost go goods) would be in the area of $20.00.
These are general ranges.
Practical real world examples.
Most high quality, separates (multi-power supplies, higher quality transformer - one / channel) - 2 or 4 channel amplifiers can be manufactured between 150-300 respectively. Lower quality for much less, even below $100.00. If the power is kept below 150-watts a channel, and standard / basic case-cosmetic are used, a 2 x 120-watt amplifier can easily be manufactured for under $30.00 and produce excellent, benched, benched performances.
I once designed a 12-volt amplifier for a company and the COG's came to $12.86. The amplifier retailed for $299.00. The was in 2006, so 9 time the Cost of Goods, is likely where this landed. and the retail point scheme for 12-volt is 40-points, not 30, so items are to be divided by .6, not .7 to determine and estimated wholesale then retail sale price.
speaker systems - well let's just say that this is where we all still make our money. 7-9 time manufacturing costs is still alive and well, 40-50 points at the wholesale and retail cost conversion levels. If a retailer ever tells you that they're not making any money on speakers the odds great that they're fibbing! If they buy for $500.00 they tag them at $900-1000.00 and work down from there.
Best Buy markup on speakers is 40-points over inventory cost, but they make all vendors pay a 10% VIR on the backend, marking their average profit near to 50-points, at full price. Then they get lock-offs and special buys, and their profits get even bigger.
From my perspective, and IME, price has never been a clear indicator of design, manufacturing and sonic betterment, if you will. But rather, more telling towards target markets, and manufacturing efficiencies, as well as distribution channel efficiencies.
Then there's brand name taxation, if you will that is purely speculative. Ever notice that some brands cost more for essentially the same Feature, Advantage, and Benefit mix...?
Taking this down to an AVR vs Separates levels, I can share that the cost structuring is the same at all levels. Therefore, if you buy an AVR within the first quarter of its release, and don't find a deal, you will most likely pay 30-points over wholesale. From their you can determine the wholesale cost, and then the manufacturing cost, well at least within a few percent in most cases.
Let's take a Retail: $450.00 AVR
Retailers Estimated Cost: $450.00 x .7 = $315.00
Wholesale Estimated = $315.00 x .7 = $220.50
Manufacturing Estmated COG: $220.50/ 5 = $44.10
Now you can determine the cost per watt/channel, etc.
Well that's my two-cents... Regardless, all manufactures use percentage of markup, and major wholesalers and retailers use a point model, to determine their respective costs. Together they add to a very disproportionate sum, IMO. But such is life...