Economics of small speaker manufacturers

isn’t the bottom line, what is the actual quality of the product? any piece of audio gear is more than the sum of it’s parts, i’ve heard pieces that had all the best components but did not have the sound. some large companies gear is well worth the price, yet with others you get the impression you are paying more for their marketing etc than for the sound quality. we could make arguments about economies of scale vs low overhead all day long and the bottom line is still how does it sound? i think Aktchi has summed it up pretty well and one of the real benefits of the small maker is the personal attention. this makes me think of guitar builders. i’ve been a boutique amp builder in the pro world for many years as well as a player, hence i personally know a lot of guitar builders and manufacturers. i can say that while the manufacturers do benefit from scale and resources, in general the best guitars are built in small shops and usually for comparable prices. but and here’s the big but, you have to know what you want.

in general the economies of scale and resources are pretty much offset by marketing costs and extra markup. few if any high end speaker companies are churning them out by the tens of thousands and CNC machine time is readily available to small manufacturers. and yes i’m sure some small builders are putting their prices at the same point as larger companies products which you can hear at a brick & motor store while others try to keep their prices as low as possible reflecting the lack of dealer/dist. markup. again bottom line is the actual sound and quality.

this brings up another facet of this issue that i occasionally hear. sometimes people talk about the cost of the parts that go into a unit as if that should be the sole determining factor of the final price. yes it should play a large part but there is also the cost of developing the product and often that entails many years of work and sacrifice. large companies include this as development costs and there is no reason for boutique builders to be expected to work for nothing. sometimes when prices jump that is precisely what has happened, the company had been charging based on costs and overhead and then realized they needed to recoup some of the development costs.

well, back to making sawdust ; )

lou

direct or not, big or small....calculate roughly 20% of the mslp to calculate the cost of goods. though big companies of course buy components for less, they in turn have other expenditures. if a company is spending more, ironically, growing their business could put them out of business.

Some manufacturers sell direct to retailers w/o a distributor. CJ, Gallo come to mind. JM Labs, YBA, Musical Fidelity come through a distributor. Check this: MF Trivista SACD $6495 retail, $4000 wholesale. I got mine as an accommodation from the distributor for $2600. There's room on direct to buyer places like Tyler too. More? Less? The same? Don't know.

ET

If up-front money wasn't an issue and I bought a containerload of speaker enclosures from overseas, by the time they arrived here in beautiful downtown Preston Idaho I'd have saved about 30%. I could probably save a similar amount on drivers and crossover parts by buying in quantity, but couldn't expect any savings on the labor needed for final assembly. So I'm guessing that I could save maybe 25% per speaker, before the additional overhead of needing a storage/assembly facility and maybe one office employee. I don't feel like doing the math to figure out how much overhead would add, so let's say 10%. Let's add another 5% for advertising, as dealers would expect me to spend some money promoting the product. This leaves me able to sell speakers to dealers for about 10% less than what I currently charge end-users under my direct-sales business model.

So in this scenario dealer cost on my currently $4500 a pair (direct sale) speakers would be about $4050 a pair, and retail would be about $7400 (assuming a 45-point margin). Assuming you could talk the dealer into giving you a roughly 15% discount, street price would be about $6300.

Now I don't know how representative my situation is, and I haven't taken everything into account in my little run-through here. It looks like my current business model allows people to purchase my products for about 40% less than a more traditional business model would. The disadvantage is that you can't hear my products at a local dealership; you have to go to some effort to hear them, or be confident enough that they're what you want that you're willing to risk some shipping-cost money.

JohnK and Lou of Daedalus and yours truly aren't trying to take market share away from one another. We're trying to take market share away from B&W. As the number of brick-and-mortar high-end two-channel stores diminishes, our business models (or variations thereon) may become more common. Ty Lashbrook has done quite well selling direct, and more power to him. Apparently Von Schweikert has gone to direct markeing, something Ohm did long ago.

Duke

On the topic of "the sum of the parts should matter less than the end product and how it sounds", while I cannot disagree (we have all auditionned expensive gear made of expensive parts that sound crappy...hello Diamond or Be or Ceramic drivers poorly tuned!), there is a limit, as a consummer and a music lover, to pay $3,000 for a pair of vinyl covered speakers which drivers costs about $50 each (even if there are 4 of them + 2 $20 tweeters per pair). This is where I LOVE Made in China audio: the ability to make very affordable "me-too" products which designs are based on cheap components (Dussun and Aurum Cantus vs. Red Rose Music).