Originally Posted by jsalk
I came across this thread because my name was mentioned above. So I thought I'd shed a little light on the subject matter.
Due to the fabricating and finishing labor involved, cabinets tend to be the most expensive part of a speaker system. As a custom builder, we finish cabinets to our owner's specifications. If they want speakers at the lowest possible cost, we typically finish them in satin black lacquer. But if you look at any of our galleries, you will see that the majority of our speakers are finished in premium woods. This is an excellent indication of the value many people place in aesthetics (since it is their choice - not ours).
That said, even the exotic veneers we are often called upon to use comprise a relatively small percentage of the total cost of a speaker system.
As for the drivers, I can honestly say that we have never chosen a driver based on cost (performance/value - yes, cost - no). Since we are a custom builder, we are pretty much free to use the best driver we can find for a particular application. We simply cost the finished speaker design based on the drivers we have selected.
Those who sell at retail don't have that luxury. Commercial speakers are generally designed with a specific price point in mind and all components must be selected to arrive at that price point.
When selling at retail, the dealer normally needs a 40% mark-up to carry a product. So a $1000 speaker at retail must be delivered to the dealer at a cost of around $600.
Out of that $600, you need to cover transportation, advertising, marketing, engineering, R&D, labor, plant overhead, material costs and profit margin. Normally, this means the total cost of all parts that go into a retail speaker can be no more than 10 - 15% of the final selling price. So on that $1000, your total parts budget will be $100 - $150 - not much in the scheme of things (the tweeters in our lowest priced models cost more than that alone).
By selling direct, we can allocate a larger percentage of the selling price to parts. So while not having dealers means fewer people will be able to hear our speakers, we think it is a worthwhile trade-off since we can deliver speakers with higher quality drivers and parts for the same money.
The bottom line is this: while one might wish for better drivers in a moderately priced speaker, the numbers just don't support it. Companies selling speakers at retail in this price range actually do a very commendable job producing speakers given the cost constraints they are facing.
People often ask how it is that we can compete with large companies that have huge engineering and R & D staffs. The answer is that we have the opportunity to work with higher quality drivers and parts to begin with. So it is really not a fair contest. Add the opportunity to select any finish you want with no limitations (which is obviously important to some and is an option most large companies are not set up to offer), and we feel we can deliver value that is hard to beat.