"High-end" audio Dealers: Should they be offended with a cost plus offer? - AVS Forum | Home Theater Discussions And Reviews
Forum Jump: 
 
Thread Tools
post #1 of 10 Old 05-11-2000, 08:37 AM - Thread Starter
AVS Forum Special Member
 
mburnstein's Avatar
 
Join Date: Apr 1999
Location: Bloomfield Twp., MI
Posts: 1,941
Mentioned: 1 Post(s)
Tagged: 0 Thread(s)
Quoted: 74 Post(s)
Liked: 68
We hear all the time about the overhead running an audio store. We are sentitive to the fact that if they don't bring in a certain amount of income, they won't have a profit and no profit no store.
Now to the point. If I'm considering a piece of equipment for which the dealer is 1) an authorized dealer, but 2) does not stock the item and has never even sold one, 3)this item is in this case purely discretionary and redundant: an audiophile cd transport that looks like a sculpted piece of art and would be my 5th cd player, how do you all react to an offer to the dealer to pay him up front cash, not VISA/MC, for the entire amount of the unit and pay shipping for a 10% above dealer cost( assuming this information is acquirable and verifyable through internet friends, forums or queries). We certainly don't have any problems thinking about how we all negotiate with car dealers and some friends say they don't think car dealers should make more than $500 net on the deal taking all holdbacks and other incentives into account! And of those of you into expensive watches, think how we "expect" 10% above cost and frequently receive it from dealers who make the phone order. In this case the dealer would be making more than this $500 for his phone call to place the order. And this item is acquirable through internet dealer searches at better pricing than this dealer is presently considering. Steve B., anybody and everybody comments please! Thanks!

[This message has been edited by mburnstein (edited May 11, 2000).]

mark
mburnstein is offline  
Sponsored Links
Advertisement
 
post #2 of 10 Old 05-11-2000, 09:40 AM
Member
 
GaryH's Avatar
 
Join Date: Dec 1999
Location: Denver, CO, USA
Posts: 70
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)
Liked: 10
I have run into this exact situation. I went to a local authorized dealer for speaker. The dealer did not stock this speaker and had no plans to. When I asked about price, he quoted full retail and would not come down from it. Then I found other dealers in others states that would order the speaker at a discount price. But after telling them where I live, they said they could not sell the speaker because I have a local dealer and the manufactors will not allow it.

Bottom line, dealer and manufactor lost a sell. I purchased another brand.
GaryH is offline  
post #3 of 10 Old 05-12-2000, 04:22 AM
AVS Forum Special Member
 
aerialman's Avatar
 
Join Date: Sep 1999
Posts: 1,308
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)
Liked: 10
I agree with your point. You are merely asking the dealer to function as a middle man. Perhaps they have other costs b/c they still had to exist but to ask full retail for a product they dont stock is a bit much.

- Jerry

[This message has been edited by aerialman (edited May 12, 2000).]
aerialman is offline  
Sponsored Links
Advertisement
 
post #4 of 10 Old 05-12-2000, 08:58 AM
AVS Forum Special Member
 
JoeFloyd's Avatar
 
Join Date: Apr 2000
Location: Fairfax, VA, USA
Posts: 1,270
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)
Liked: 10
My experience has been that certain manufactures of high end equipment protect their "image" by making it very difficult for dealers to discount. Authorized dealer programs are part of the strategy. If you're not an authorized dealer you pay MSRP. If you are an authorized dealer you agree to charge at least % of the MSRP and can't discount at all if the manufacture doesn't want you to. The benefit of being an authorized dealer is that MSRP is usually somewhere between 30-50% more than what the dealer paid for the speakers. This makes speakers a high profit item and it's in the interest of the dealers as well as the manufactures to keep it that way.

Their marketing strategy is to build a brand image that exudes quality, sophistication, power, prestige... Cost being a direct reflection of all of these qualities. Very similar to luxury cars in that regard, but for many of us the price/performance ratio is the deciding factor not the "image" or the pride of ownership. How many of us polish our speakers on a Saturday afternoon? Not many I hope. https://www.avsforum.com/ubb/wink.gif

In the end, the best deal is the one you can live with. Dealer markups and MSRP inflation are just part of the price of admission.

You can find a lot of information about how the consumer price is set for different goods by searching on the Web. There are a few web sites that provide dealer "cost sheets" for free. The ones I've found are kind of out of date, but it gives you an idea of what kind of markup the dealer has applied. By doing the leg work the next time you walk into your local home theater store you can be a more informed consumer.
JoeFloyd is offline  
post #5 of 10 Old 05-12-2000, 01:28 PM
Advanced Member
 
Dave928's Avatar
 
Join Date: Jun 1999
Location: Seattle - it's not Hell, but you can see it from h
Posts: 551
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)
Liked: 12

Quote:
How many of us polish our speakers on a Saturday afternoon? Not many I hope.
um, well, every other saturday https://www.avsforum.com/ubb/redface.gif



------------------

dave

Widescreen DVD - Because a superior format requires superior formatting.

No, i can't go out, i'm watching Garbo...

Dave928 is offline  
post #6 of 10 Old 05-13-2000, 03:25 AM
AVS Forum Addicted Member
 
Steve Bruzonsky's Avatar
 
Join Date: Jan 1999
Location: Gilbert, Arizona
Posts: 20,151
Mentioned: 13 Post(s)
Tagged: 0 Thread(s)
Quoted: 1638 Post(s)
Liked: 821
"The times Are A Changin'". I'm sure corner drugstores were offended many, many years ago by the Walgreens and Wal-Marts, etc. Likewise, corner grocery stores were offended by the large blockwide grocery chain stores.
A good business person isn't offended, but changes as necessary and appropriate with the times and the customer. You have the right to make an offer and if the dealer doesn't want to accept, fine. But if the dealer feels offended - hey, this stuff happens, the dealer shouldn't be in business if he or she is going to let themselves get offended over the terms of a potential commercial transaction.

On the other hand, if the dealer gives you some real value, then let the dealer earn a reasonable profit. But under the scenario you describe, I don't understand what if anything the local dealer has done for you at all. The dealer prefers to sell you what they have in stock and often will BS you to heavan's end to get you to buy the stock item, even if its not the right fit!

Of course, with some brand names like Theta, unless you have it through an authorized dealer, you may run into difficulty getting the unit upgraded when that time comes around.

https://www.avsforum.com/avs-vb/show....php?t=1158431 No dealer is authorized to tell you I refer to them - any referrals I make will be done personally by me. Over the years I have found certain dealer(s) who I cannot recommend for good reason.
! 9.4.13 Trinnov Altitude 32 Theatre renovation/upgrade starts end of July 2019!
Steve Bruzonsky is online now  
post #7 of 10 Old 05-14-2000, 07:23 AM
AVS Forum Special Member
 
Ted White's Avatar
 
Join Date: May 1999
Location: Michigan, USA
Posts: 7,779
Mentioned: 10 Post(s)
Tagged: 0 Thread(s)
Quoted: 14 Post(s)
Liked: 58
Companies like Theta, Meridian, and Faroudja ultimately charge a customer an enormous amount aver their actual cost, even factoring in R&D. Why?? Because if you stick a $40K price tag on a video processor, there is a part of the population that will want it. Same for a $100K pair of speakers PLEASE...

The march of technology would tell us that these people leave themselves open for volume driven competitors. Companies like Focus Enhancements will put the screws to Faroudja more and more. Companies that remain inflexible (ie not giving the customer what they want)will leave themselves open for problems. The internet will be a BIG part of that. Because of their lack of objectivity, magazines were able to perpetuate the past paradigm. The internet, because of its honest objectivity will change this.

Ted

__________________

Ted



The Soundproofing Company
Ted White is offline  
post #8 of 10 Old 05-14-2000, 09:13 AM
AVS Forum Club Gold
 
Dennis Erskine's Avatar
 
Join Date: Jul 1999
Location: Near an airport
Posts: 8,692
Mentioned: 10 Post(s)
Tagged: 0 Thread(s)
Quoted: 82 Post(s)
Liked: 121
Manufacturers cannot tell a dealer the price they must charge for an item. The can provide a MSRP. But the dealer can sell the item for any price the dealer wants. Should the manufacturer dicipline the dealer for such a practice, that is an anti-trust violation (price fixing is a term that comes to play here). Until very recently, certain companies (Sony, Pioneer Elite, for example) would allow the dealer to sell at any price point they wanted...they were, however, prevented from advertising a price below a Minimum Advertised Price (giving rise to the common phrase "call for current price"). Recent case law is making variations of that practice no longer legal.

What a manufacturer can do; however, is franchise the dealer to a territory. In other words, prohibt the dealer from selling product outside a defined geographic area. In most cases, these contractual provisions are to restrict mail order/telephone order/internet order sales. In other words, I cannot call a Meridian dealer in Maryland and order equipment from that dealer. I can go to Maryland, visit the dealer, buy the gear and have them ship it to me (basically, the manufacturers are looking for an existing face-to-face relationship between dealer and consumer).

If a dealer starts discounting, advertising that discount (to the umbridge of other dealers), you can bet your sweet b____y, the manufacturer will not drop the dealer for price violations. There are 50 other reasons a manufacturer can drop their lover. Some objective and some very subjective.

Now, all bets are off for big dealers. I know of a Krell dealer that pushes Krell stuff "out the back door" (at one point had an 800 number operation). Krell "unofficially" knew it; on the other hand, they were not about to drop one of their largest volume dealers in the country. A bunch of wink, wink going on here. (There would be an interesting piece of case law that could come from this but most dealers are too small to take on the cost of some expensive litigation. The case would be based upon the fact that dealer agreements have a bi-directional effect. In other words, while the agreement prevents me (for example) from selling discounted products over the Internet, it also provides an implied protection to me that my turf will not be eroded by another dealer discounting outside their franchised area. Thus, if the manufacturer is aware of such practices and does nothing about it, I could get real nasty with 'em. You can just imagine the cost of discovery alone for such a challenge. Thus, the manufacturers policies (and actual practices) are to a degree protected by the dealer's shallow pockets and their deeper pockets.)

The concept of "controlled distribution" is one from a bygone era and many manufacturers have not, or have avoided, this shift. Such practices can NOT be supported by any economic, social economic, consumer behavioral, or marketing theory. Yet the practice persists. I predict, within the next ten years cache brands will either have changed their practices or be absent from the market place.

One such manufacturer came within a couple of months of losing 80% of their U.S. distribution unless they changed that policy (they, BTW, were clueless about what was happening). While this event did not occur, the circumstances that will force this issue, I am certain, will come on the A/V scene againin the near future (if they are not already fermenting somewhere). In the meantime, your choices are to deal with your frustration and/or vote with your pocket book.

------------------
D. Erskine
DEsign Cinema Privee
www.DEsignCinema.com
Imagine what you could do, if you could do all you imagine.

Dennis Erskine
Dennis Erskine is offline  
post #9 of 10 Old 05-15-2000, 01:23 PM
AVS Forum Special Member
 
JoeFloyd's Avatar
 
Join Date: Apr 2000
Location: Fairfax, VA, USA
Posts: 1,270
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)
Liked: 10
You've made several interesting points. The gray market that mail order used to be is becoming the open market of online e-commerce. Overall, this is a very positive thing for everyone involved.

My personal experience with trying to buy mid-fi (Def Tech) speakers online is that the economic pressure manufactures place on resellers is next to price fixing in practice. Just a few areas that come to mind are the minimum advertised price, advertising reimbursement programs, dealer discounts, and warranty restrictions for not buying through authorized dealers. Each state may have different laws for each of these issues, so it's difficult to know what laws apply for a particular location. It also seems, that some companies will push the legal limits of the various federal, state, and local laws until someone calls their bluff.

It's also important to note that neither the manufacture's nor the consumer's interests will always be severed by discount resellers. If the company won't stand behind the product, both the consumer and the manufacture lose. Although the local home theater shop can screw you just a bad as a discount reseller, it's not in their interests to do so. Keep'em coming back for more is their motto.

What is unacceptable is that for certain premium brands the choice is made for the consumer. You must buy from this store or this company. No other options are valid. This is very much like buying a car. (One of my favorite analogies.) Perhaps, the business model does serve a useful purpose in bring the consumer and the retailer together for a face to face meeting. This is an important part of the buying experience for luxury items. However, we would be naive to believe that is the primary reason for keeping such a (adversarial in the case of buying a car) system in place for so long. The simple truth is that it makes more money for the manufactures and the reseller/dealers. Is that extra expense worth the personal attention. For some it is, for others it's not. I would like to have the choice myself, and that is something I think everyone would agree to as being a positive thing.
JoeFloyd is offline  
post #10 of 10 Old 05-20-2000, 06:50 AM
AVS Forum Club Gold
 
Dennis Erskine's Avatar
 
Join Date: Jul 1999
Location: Near an airport
Posts: 8,692
Mentioned: 10 Post(s)
Tagged: 0 Thread(s)
Quoted: 82 Post(s)
Liked: 121
Quote:
The simple truth is that it makes more money for the manufactures and the reseller/dealers.
Actually, this is not entirely clear. If you examine the social economic behavior in a free market economy, controlled distribution does not increase revenue to the manufacturer. It will indeed stand in the way of reaching optimization when it is perceived that competition exists for the product. Controlled distribution (as practiced in the "high end" A/V market*) only 'good' purpose is to constrain sales to prevent those sales from exceeding the manufacturer's ability to supply. There, however, other, equally effective means of achieving this goal.

*Often times, "controlled distribution" is effected under the guise of selecting only dealers meeting certain training, financial, showroom, and other criteria. This is truly a guise since otherwise qualified retailers are denied access to the product channel.

------------------
D. Erskine
DEsign Cinema Privee
www.DEsignCinema.com
Imagine what you could do, if you could do all you imagine.

Dennis Erskine
Dennis Erskine is offline  
Sponsored Links
Advertisement
 
Closed Thread Speakers

Thread Tools
Show Printable Version Show Printable Version
Email this Page Email this Page


Forum Jump: 

Posting Rules  
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off