What is the average dealer mark up?

Retailers paying the manufacturer 60% of list price is the industry standard. 

That is a sizable profit margin all things considered.

Actually, all things considered, it’s not. There’s a reason they’re disappearing, and it’s not because they’re raking in the profits.

What you have to look at is the monthly profit and loss statement. Cost of rent. Federal, state and local taxes. Inventory on hand, Employee expenses, medical and general insurance, electrical bills. Office supplies even mundane expenses like trash disposal. Lot's of costs involved in running a business. That percent isn't 100% profit that you put in your pocket.

Exactly...

And the balance sheet.... high end audio is a low turns business 

Actually they pay 40 to 60%. Most of what they sell is twice or more what they paid. This by the way from a now long retired dealer friend who for years sold me whatever I wanted for 5% above his cost. Every time he would tell me what something cost then he would say "your cost" and it was always half or less.

The same btw is true of most things, including cars. Which is why car dealerships are so incredibly profitable. Another shocker, the markup at wholesale is about the same. Double. Or more.

So you take your typical $5k component, speaker or whatever, cable, does not matter. Dealer cost $2500, cost to manufacture, $1250. Ballpark numbers.

This explains why everything at the cheap end is such absolute crap. The earbuds that cost $30 were made for $7. Half of that is shipping and packaging, so really you’ve paid $30 for $3 worth of product. If that.

This is nothing to do with margins. Profit margins include expenses for rent, inventory, sales staff, shipping, power and heat, and of course the owners own time. Profit margins in audio are in the low single digits. If a dealer clears 5% that was a good year.

Well moving $1M of high end audio that’s $50k profit, on top of the salary the guy paid himself as part of his expenses. A good dealer in the right market could move $10M, even $100M. But he had to take all that risk and move all that product to clear an extra $50k, $500k or whatever.

Its a rough business. There were components my friend liked and wanted to sell but many manufacturers have inventory requirements that force their dealers to carry all or a minimum number of their line in order to sell the one thing they actually can sell. This eats into their profits on the stuff they do sell. Then because they have to carry that stuff they wind up having to try and sell it, which being crap means shilling, which they do, which eats into their credibility. You can see them on here shilling and calling their competitors shills. Not to mention they can no longer even rely on a territory, they compete with everyone all over the world, and yet are expected to be knowledgeable, provide service, and coddle to customers who feel entitled to a 10% discount over a speck of dust. Which now having read this you understand is more than they cleared on the deal.

What is the average dealer markup? Too much. Nowhere near enough. Somewhere in there.

It ranges from what you would find at high volume Walmart to that you would find in a low volume, high overhead, exclusive Soho boutique (pre-pandemic).

I like my hifi vendors somewhere in the middle.

BS that markup on cables accessories, and tweaks is similar to electronics and speakers. That is where the big margins have always lived and where it is taken to the limits in "High End Audio" anywhere by those who can.

When I was in retail, we were trained to always make sure people had the accessories they needed like speaker wire because that is where the money was made.

Also teh markup on speakers was typically much higher than the markup on electronics. That was for popular brands that sold many units. With exclusive boutique brands, one can be certain the markup is higher in general because that is the only way to stay in business selling few units.

Here is an example of a quarterly P&L 
Revenue: $170,946
Cost of Goods Sold(COGS)$88,244
Gross Margin:$88702
Gross percent: 52%
Operating Expense $21,946
Operating Income:$67,106
Taxes: $9927
Depreciation: $1025
Total Expenses: $114,692
Net Profit: $56,254
Profit percent: 33%
This is a synopsis of a company that I worked for many years ago. A short example of where the profit goes. Unfortunately most people never look at a companies P&L statement and only look at the Revenue at the top.

The "high end" tweak hawkers will never disclose their margins.  People would riot.

I don’t mind disclosing my margins. They’re 1”, 2” and 4”. 

Well I don’t hear any riots so people clearly don’t care about your margins much like your products.

You’re obviously a disgruntled killjoy. Go take a hike! 

Good idea.  It's a beautiful day.

the income statement is interesting..but only a part of the fiction

a 4” stack of hundreds sounds pretty fair to me GK

The one dealer who was willing to talk about this, was always talking about 50 points.  Sounds great... if you were making several big sales each and every day, but that's obviously not what happened in most small shops.  When anybody was in the store at all, it was most tire-kickers.

For hardware around 60%, but for accessories up to 90%.

And the flood of new entrants into brick and mortar high end is a literal tsunami in seek of monopoly rents

There’s an old saying. “ if you have to ask,you can’t afford “. Everybody has to eat. 

it’s very simple. dealer doesn’t have to sell and buyer doesn’t have to purchase. if one prefers to have more money than required go into the seller’s pocket then this buyer has more money than sense which is perfect for the dealer. 

mc is ballpark correct. When I had my store I paid approx: 40% off retail PLUS shipping for components for one at a time. Small additional discounts where available with the purchase of multiple units. With cables and other tweeks, up to 60% off was the norm, again with modest discounts for larger orders. All varied a bit with the different companies and sales reps. mc is also correct about companies requiring minimum purchases for the whole line up to be able to carry the line. This, for me was a deal breaker, too mush initial investment. The old saying is true: "If you want to make a million dollars in audio, start with 2 million".

For hardware around 60%, but for accessories up to 90%.

I have never seen 90% off and rarely 60% off.

Typical discount is 40% with some up to 60% off mostly on accessories.  But in the past 5 years things have changed to 50% or less with 40% being the standard.

Happy Listening.  

As a salesman, I once ran into a guy who told me “if it ain’t keystone, it ain’t .” Huh? I learned that meant he wanted to mark up 100% so he needed to buy at a 50% discount. I also learned about “turn,”
meaning how many units were you selling per year. And floor space, meaning how many $$ per square foot were you turning. That’s how good retailers think. Retail is tough, and if you don’t have volume to support inventory it’s even tougher. Manufacturers have it tough too. You want to be able to support your suggested retail pricing and if you have a outlier retailer selling mail
order under that price, you risk cheapening your brand. Anyone who hasn’t operated in this arena likely has no idea.

numbers from above are largely correct, but like the fiances of car dealers, it gets more complicated.  most dealer cost sheets will have the 60% (40% discount) as the baseline.  But then there will be a few more points for larger orders, and occasional incentives to move stuff.  The first unit, to be a floor demo model, and maybe loaned out repeatedly, may garner an additional 10%. There may be cooperative advertising allowances.  And of course, some dealers will modestly discount especially in a package.  Its a lot of money, but as noted, there are a lot of costs to retail in a low volume business -- and we can be a demanding lot.  And as also noted, most manufacturers work on 5+X parts --> retail or maybe 4X parts + labor (which is a bigger proportion in small volume, weird component high end compared to a mass market product that can be efficiently produced by automated SMD lines,and stuffed into a blow-mold box.
Think direct sales is the answer?  Now the manufacturer needs to cover hand-=holding, free in-home demos and the depreciation of "used" equipment, more advertizing, etc.  It saves less than you might imagine.
The value from dealers, if they truly help you sort through alternatives and find the component that a) YOU like and b) delivers high value, is very, very significant.
G

The dealers markup is between 40-50% depending on the company,and international distributors get 55-60% 
i was a dealer for 10 years this is the average.

First off, markup and discount are not the same number.  If a dealer is getting a 50% discount from the manufacturer from MSRP and prices at MSRP his markup is 100%.  Second to the poster above that said car dealer markups are similar, that is wrong.  Margins are so slim on new cars (other than luxury brands) that the major profit centers at new car dealers are the service centers and used car sales.  The trade-in/retail markup is quite a bit more than the new car markup.  Dealers are grossing 5 to 10% on new car sales these days.  That's why they have a person dedicated to trying to sell you snake oil wax jobs,  upholstery treatments, and overpriced extended warranties.

You can wax a car with snake oil?

" The same btw is true of most things, including cars. Which is why car dealerships are so incredibly profitable."
Not exactly.  I retired from GM and the dealer cost was typically 15-18% under MSRP.  Dealers would get a 3% bonus when a car sold, which was all the profit they got if they sold you a car at "dealer cost".  Dealers made more profit per unit on used cars, which they would buy at auction nearly every day.

Keystone (2X) is pretty standard for B&M dealers in most consumer goods, except for food and vehicles. That’s why  I ALWAYS compare online sellers (Amazon, Crutchfield, Reverb, and Sweetwater) generally before buying   Last B&M purchase was floor model top of the line Senheiser ‘phones, a Melos DAC and SONOS streamer at a Sacramento dealer Xmas sale. Mostly I buy from Amazon. 

@badger_erich... you are clearly an idiot and a troll!!

Well done alll... discussing margins and what Dealers can or do make on a sale. This should be taken down immediately.

Just another clear example of how unprofessional the Hi-Fi Industry really is. For those of you who work in the business or have worked in the business, shame on you to even disclose margins, Again, just goes to show how unprofessional you are and the business as a whole. To think you are somehow being clever discussing it is even more embarrassing and ignorant.

Margins should never be disclosed as selling Hi-Fi as a retailer is hard enough as it is.

Another example of why forums like this do nothing good.

+1 rwisem. Car dealerships make money on service and trade ins. The profit margin on a new car is low. I would think in high end audio that they would need to have a 100% markup just to make overhead and have some bargaining power with the buyer.  I feel for those guys, must be incredibly hard to keep a business going with all the info the buyer has at his/her fingertips. 

Average mark-up information is nice to know - not sure how you utilize it for negotiating your price unless you are able to clearly define the audio store's fixed and variable costs.

• fixed costs will include the store, its fixtures, infrastructure, overhead and inventory
• variable costs will include inventory costs, labor costs and such
• Additionally, there will be advertising costs and other overhead that may be variable

It's not uncommon for a retailer to require a 100% mark-up based on the velocity of product moving off of their shelf.  Many luxury items are only purchased after folks get an opportunity to experience it with their sense.

Manufacturers will have different programs for 'authorized dealers' and may offer tiered discount or rebate based on volume for a period (often yearly) or other promotions. 

There are some manufacturers that protect their authorized dealers and some who don't -they will definitely have different mark-ups.

I expect mark-ups to vary significantly between manufacturers (brand reputation and placement) and within their product lines (good, better, best options) because of the size of the market and recent trends in market growth.

In looking for the best deal, I think it might be worth develop a relationship as a customer of choice and exploring purchasing demo models and close-outs where special programs enable a store to 'move product'.

As a former dealer of high-end audio equipment, I have to laugh at most of this.  It is such bull.

FIRST, open a store.  That only costs about $3.00, right?  Then, stock it with, oh, maybe $200,000 worth of stuff.  That is all free, of course.

THEN, pay your employees, who work for free and you never have to pay social security, workman's comp, taxes, insurance, shipping, floor plan costs (CAR DEALERS ANYONE???) or anything for that, of course.

SO, EVERY PENNY you take in goes straight into YOUR pocket and you laugh hilariously at your dumb customers while sitting with a cocktail and 5 Playboy bunnies on the poopdeck of your billion dollar yacht.

You people are dumber than fire hydrants, and that is insulting to the fire hydrants.

I would hate to have had most of you for customers, but I am SURE your current dealers just LOVE it when you enter their establishments with your big mouths and know-it-all attitudes.

Good grief!  It is a wonder to me that most of you every buy anything at all.

I’ve spent my life working in Audio, and some of the posts above are substantially correct. The real issue is so what does this tell you?  B&M retail is in decline for many reasons. The vast variety of products that can be found on the internet, many now “direct to consumer”, skew the perception of value, and what is possible for a dealer to support. Face to face discussions with experienced pros and live demos can be very valuable to the audio buyer, and they take time and care to set up. Most dealers pay a bonus for sales at retail (no discounts guys) and that salesman has mouths to feed too. Sure, I can save you some $$ on that, but it’s going to cost me a lot to do so. Audio retail does not pay all that well. Our customer typically has a much higher income. Those of us who still do this love the work, love to help customers enjoy music and sound, but our market is aging out (we too), and CV is going to take a big toll as well. 

Just to make sure we're talking the same language, the business term of art is "Gross Margin." That is the percentage of gross markup you receive on the sales price. In audio as well as many other businesses it is common to have a Gross Margin around 50% (sales price is double the wholesale cost to the dealer).

If you think the gross margin is too high (in any business) then you should open your own store. Then you can buy all your stuff at wholesale! As you put together your business plan you will quickly find out that a 50% gross margin in most businesses barely covers your expenses on a good day.

It's sad that audio buyers get preoccupied with the margins of the dealers and the manufacturers. 95% of buyers have absolutely no concept of what it takes to run a business and even fewer understand the difficulty of running a low volume boutique business like high end stereo.

There is one corner of the high end audio market that seems to be doing extremely well - ultra high end speakers. We know this because new models seem to be entering the market every week. I haven't tried to count them but I'm guessing that you can buy at least 50 different models of speakers that retail for over $100,000 per pair. To have this part of the market so saturated indicates two things: 1) The margins in this niche are extraordinary, and 2) People must buy a lot more expensive speakers than I can imagine.

If you are a high end retailer in a wealthy urban/suburban market (say Seattle or San Jose) you are probably doing OK. You can make pretty good scratch selling six figure speakers and components. Other dealers who are selling real world gear like home theater have a harder time. I don't begrudge any retailer the gross margins they capture. If the product/service package meets my needs and I can afford it I appreciate their hard work to be there for my benefit.

richopp, crustycoot and 8th-note are spot on. With all due respect, most of you guys have no idea of what it takes to open, run and maintain a B&M audio business. To paraphrase an old saying, the best way to make a small fortune in the audio business is to start with a large fortune.

Just a thought: when you audiophiles shop for other gear, do you ask what it costs to manufacture or what the retailer paid for the product? You might just try that the next time you buy a case of Budweiser. Or a piece of furniture. Or a car...

Maybe we should start a support group for recovering audio dealers?

@badger_erich... you are clearly an idiot and a troll!!

Well done alll... discussing margins and what Dealers can or do make on a sale. This should be taken down immediately.

Just another clear example of how unprofessional the Hi-Fi Industry really is. For those of you who work in the business or have worked in the business, shame on you to even disclose margins, Again, just goes to show how unprofessional you are and the business as a whole. To think you are somehow being clever discussing it is even more embarrassing and ignorant.

Margins should never be disclosed as selling Hi-Fi as a retailer is hard enough as it is.

Another example of why forums like this do nothing good.

Whoa! I asked a simple question, not like it is national security.

You sir, are a Cactus.

BR3098 you are correct that a B&M store has to be extremely challenging which I get. That said can you blame a customer for attempting to secure a better price? That customer has also worked hard allowing him/her to come into the store in the first place. Your job is to be patient and endeavor to show the customer added value by purchasing from you. You have to figure out what works best for your operation. Isn’t the choice volume vs selling at retail? Many audiophiles have the weird misconception that audio dealers are public servants in some way different from any other businesses. Only a fool would begrudge a dealer for trying to sell at the highest price that he can while the customer’s job is to secure the best price he/she can. That’s the American system which has served us well for a few hundred years. I wish every audio dealer great success . I really do. Customers wanting better than retail pricing are in no way scum. They’re just customers that you don’t have to sell to without malice. FWIW

Guys,
I appreciate the insight into what it takes to open and run a business. I also appreciate the insight on running a HiFi shop et.al. and it certainly doesn't sound like something I would ever be successful at.

My question was legit. I meant no harm in asking, but I did feel that it might create some discussion...good and bad. During these surreal times of a pandemic, some of the discussion has been regarding reduced prices etc. I personally have not seen it and some of the private sales here border on the ridiculous. My opinion is all in that regard. Small shops have to reduce staffing during these times, which may or may not provide some relief for the owner/manager which I would think might benefit the consumer if the savings are passed on. Apparently in this industry it doesn't happen very often unless you're someone with an inside track.
Again, I appreciate the response (with the exception of one post) and will hope to hear more.

I certainly appreciate the added value a relationship brings - remember many sales people are in commission and times are tough - reach out and buy em lunch !!!

That's 40% GROSS margins, not NET.
They also offer discounts to most customers so their real gross is probably more like 30% before expenses.

Then you add-in sometimes a distributor's "rake" on top of that and you see UK brands like LFD that sell amps for $7,500 in the US when they really should be $2,500 direct to consumer...;-)

And it's not a dealer "mark-up" but rather a manufacturer discount to a reseller..;-)...as manufacturer sets MSRP, not dealer.

Doh!! Sorry, I suffered mathematical dyslexia.

I meant to say dealer markup was 40% for big iron/speakers, but up to 90% for accessories including low end LP cartridges.

Best,

E

And then the dealers wonder why their sales are so low?  

You would think they would advertise to a highly selected mailing list.  The data they collect for mailing lists can be very narrow.  Andy then they only carry a few speakers and assume their customers cannot afford to pay more for the more expensive ones.  If I were a dealer I would rather sell speakers for $10,000 too $30,000 than speakers for $4,000.

 “Small shops have to reduce staffing during these times, which may or may not provide some relief for the owner/manager which I would think might benefit the consumer if the savings are passed on.”

There are not any savings. Staffing is reduced right now because hi fi shops, like most other retailers have fewer if any customers coming in the door. Do you think retailers are celebrating their savings from laid off employees with their doors closed and no customers?

Let me explain it for you: Sales go down so Gross Margin drops. Fixed expenses stay the same. Employee count is reduced because less customers and less sales volume. Profit drops. No savings to pass on to customer.

Let me offer some special words in retail that mask the real costs and flow of money:

Co-op -  The dealer advertises and gets an ad cost sharing payment from the manufacture based on how much the dealer bought  or some other percentage of what was pushed in the advert.  Given the Dealer this may or may not be an additional profit center.

Rebates - Based on sales of a product, a 'rebate' is issued at the end of the quarter or year for a sliding (changes with volume) percentage of the sales.

Spiffs - A direct payment to the salesman for pushing a product, may be 1) paid directly to the salesman by the manufacture or 2) paid by the store with a deal from the manufacture or 3) paid directly by the Manufacture's Representative in cash, product, or other ''gifts'.

Show Specials - CES  or other trade show 'deals' that are a special event where all kinds of deals can be put together to move last years stock, pre-sell product not yet built, strike volume deals, ect..

Programs - Deals based on volume usually that offer discounts to the dealer before the product is delivered.

The list goes on, clever ways to change the name of the flow of money for accounting and margin forming relationships.

Now use your imagination.

A lot of this discussion helps explain why Tekton speakers sold direct are such a bargain. The $4k Moab that competes with a lot of $15k speakers makes total sense. If sold to retailers Eric would still have to get the same $4k out the door. But the retailers would have to sell it for $10k. Only nobody would pay $10k for a speaker that looks like that. People spending $10k expect it to look at least as good as all the other $10k speakers. 

So Eric would have to improve the cosmetics. Let's say he's really good and manages somehow to do this for only one or two grand. Not easy but let's say he pulls it off. The extra cost for appearance by the time it reaches retail has made his bargain Moab the same $15k as all the rest.

It sits there, sounding just as good but costing nearly three times as much. Most audiophiles aren't really that good at listening, they goo and gah over shiny gleam and fancy doo dads. So instead of the bargain of the century we got just another also-ran.

Economics. Get some. Sure glad Eric did.