What is the average dealer mark up?

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.