Why the lack of interest in Accuphase?

I just can't believe that multichannel SACD is the next best thing. How studios could be pursuaded to invest into yet another SACD 'gimick' after the abysmal two years two channel SACD has had is beyond me. I strongly believe that unless two channel SACD suddenly takes off in a big way or shows massive improvement, there will be no multi channel SACD investment, and rightly so. The only saving grace for multi channel imho is DVDA.

Cheers

Disclaimer: I am not in the distribution business (I do finance) and have no relationship of any kind to any importer/exporter, dealership, or audio equipment maker other than the fact that I have bought used audio equipment in the past from a dealer. I post (which could get long) because I think distributors/importers may be getting a raw deal in this thread. Those in the know, please let me know where I go wrong…

Imagine you are a distributor. You sign an agreement to advertise, promote, distribute, and service the little-known products of a privately-held (my impression has been that Accuphase Labs is closely held), foreign company in a low-volume and somewhat fickle niche market (high end audio). You may have little legal recourse if something goes wrong and even if legal recourse were available, many foreign companies (future clients?) might view you as a less than desirable business partner if you sued a former client.

For pricing, you could simply change the dollar price of the product whenever the forex rate moved but one might risk losing both dealers and end-customers. So you figure it’s in your and your dealers’ best interest to guarantee the same USD price for the foreign-sourced piece of equipment for the expected life of the product (3yrs for the sake of argument), within a 20% forex band. That means taking into account the forward forex rate and the fact that to some extent you're buying and selling forex options around the center of that band. Oversimplifying the financial math, let's assume you just use the 3yr forex forward and tack on a 10-15% "forex-move buffer cost" and you only change the price on your dealers in the future if there is a 20+% move in the exchange rate. In the case of USD/JPY it means you would have to charge 25-30% more (than the simple cost price converted into USD at the spot rate) just to cover your forex/finance cost because of the interest rate differential and average forex volatility. A long product life, higher foreign exchange volatility, or higher hedging costs mean a bigger front end “cost.”

You also have to take into account the costs the maker would bear in the home country – i.e. a) advertising costs, b) pre-dealer inventory costs, c) physical distribution in the US, and d) the not insignificant cost of servicing the warranty (stocking replacement parts, maintaining a skilled technical/repair/support staff – probably much higher expected cost per unit than in the home country). None of the above protects you, the distributor, against the possibility the foreign manufacturer will decide to raise their local currency price to you (for whatever reason – lower volume; higher costs for labor, parts, social security, insurance, shipping; regulatory or industry standard changes; low volume; whim; etc.). It does not protect you against significant foreign exchange market movements, capital controls, manufacturer bankruptcy, etc. Nor does it protect you against your own success. Should you see great success selling the product and creating a long-term viable brand presence, you may find the foreign manufacturer deciding to do their own distribution at the end of your X-year agreement, leaving you with fond memories but not much else. What is all that worth?

The mark-up on Accuphase from home market to the US may be high but it is no higher than on the products of most small high-end US manufacturers selling in Japan. Most Japan retail prices for non-major brands (for “major” brands think Krell, ML, McIntosh; for “non-major”, think almost everyone else) are twice the US retail price (or higher), despite the fact that the above-mentioned forward rate works for the benefit of Japanese buyers the way it could work to the detriment of US buyers of Japanese equipment.

Glassboy and others… If a reliable seller offered me a new, Japanese spec DP-75V in the U.S. for $2500, I would jump on it. MSRP for a DP-75V in Japan (I live in Japan) is and has been JPY 650,000 since it came out. While this means current "retail" is the equivalent of US$5120 (as of Friday's f/x rates), 18 months ago it was more like $6000+. Accuphase seems to have one of the lowest street price vs. MSRP "discounts" of any Japanese manufacturer (generally 10-14% at the ‘low’ end of the product range, a few percent more at the higher end, and one can tack on an additional 3-5% discount for the cheapest internet-only dealers). Used and in decent condition, they can very occasionally be found for JPY 350-400k though used Accuphase CDPs of so recent a vintage are reasonably rare (there are, however, a bunch of DP-75s and DP-65s for sale these days because of the DP-75V and the DP-85).

Nice T Bone. But how do you explain that some manufacturers (ie Chord) manage to sell products at practically identical costs all over the globe ???

Cheers

Badwisdom... My take on the Accuphase problem was USD/JPY and direction-specific. Japanese buyers of US or European products should actually benefit from the forex forward (though not from volatility, company risk, etc). For trade between the UK/US/Europe, forex forwards change a lot less(which means savings of 15+% vs case of Japan exports to US) and forex volatility is a lot lower historically (meaning the buffer one needs to take is lower). While I laud makers which make efforts to keep prices similar across markets, I might have chosen slightly different words to your question, replacing "practically identical COSTS" with "practically identical PRICES".

Intrigued, and having heard of the Chord DAC 64 and the big amps, I did a quick search. Indeed, it seems as if the price of the SPM-5000 amp, anywhere you go is going to run you the equivalent of $22-23k retail in many places (I checked France, Sweden, UK, US, Germany), and the Chord64 will cost a mite over $3k. I note however that continental European (and perhaps UK) prices include V.A.T. while the US price does not, suggesting that if selling at MSRP, US' dealers' net prices are probably 15+% higher.

I have noticed that UK makers (B&W, B&S' Meridian brand, Linn, E.A.R., etc) are better than others at keeping prices similar across markets (and perhaps as a result, small UK makers sell significantly better in Japan than do small US makers). I do not know if such uniformity is due to manufacturers keeping distributors in line with an iron hand or if the makers simply keep MSRP high and let "street prices" vary across markets [e.g. while B&W speakers have a higher USD-equivalent MSRP in Japan than in the US or Europe, the "street price" is competitive with and in some cases actually lower here than in Europe].

I would tend to think that for certain makers there is a bit of both; but I would also posit that if volumes are not high, then margins are (few build businesses to sell a low volume, low margin product), leaving ample room in many cases for room to manipulate MSRP across cost structures.

Thanks for alll the great advice, and the interesting posts.