Margin on speaker sales by high end dealer

Gross margin is usually 40-60%, which means dealers charge 100% mark-up on cost of goods. Depending on the brand it's sometimes higher or lower. 

So I buy a jbl bw or klipsh group of speakers and some equipment with delivery from a 3 man shop and I pay 20 thousand.  The product cost is 12k and his gross profit is 8k, a 40% margin.
This is helpful to know. Thanks.

40% profit margin may seem like a lot, but it's not.  There are so many costs to run a proper business, not to mention the state and federal taxes the business must pay.  Overhead, in total, consumes a very high percentage of the profit that a business makes.  Consumers only see what is up front, such as the employee they interface with.  That is only the beginning of the cost of operations.  Of course, a lot depends on the total sales volume that a dealership accomplishes over the business year.  Smaller dealers will have fewer employees and larger dealers will have more.  The list of business operating costs goes on and on.  On average, a dealer of this industry needs to make about 45% annual gross margin in order to keep the business running and take home a respectable paycheck for him/herself.  Speakers at 45%, electronics at 40%, cables and accessories typically at 55% to 60%.  Most dealers nowadays are very willing to negotiate a discount of around 10% +-  That is a great service to their customer and leaves the dealer with a respectable profit, providing they do sell enough units to keep the business successful.  The fewer the unit sales the more difficult it becomes for that dealer to provide such a discount and remain in business.  Keep that in mind when you do business with a smaller dealer.

A normally calculated 40% gross retail margin is figured by multiplying the actual landed cost by 1.67. So a $1000 item would sell for $1670. A 50% gross margin (cost x 2.00) on a $1,000 item would be $2000.

To keep things simple, the amount of margin a dealer needs to make on average is determined by his rent/mortgage, payroll, utilities, city property taxes, etc. as well as the cost of goods. Payroll as a percentage of gross sales can be zero if it’s a family run business (but usually isn’t) and as high as 25% or so in areas that need higher quality staff. High turnover businesses such a grocery stores can have gross margins as low as 5% on average due to cash flow.

Unless there is a need to have extremely sharp pricing on particular items (such as a $65 pair of Grado headphones), retailers have higher margins percentage wise on less expensive items (a record clamp that costs $2.50 might sell for $10.00 or more), and lower margins percentage wise on higher priced items. In the jewelry business, a $10,000 diamond ring may have as small of a gross margin as $500 if it was special ordered and didn’t have to sit in stock waiting for a buyer, or $1000-1500 if it were going to sit awhile. Those $10k speakers could have a landed cost of at least $9k, depending on the manufacturer and how much business the dealer does with them.

But, unlike the auto business, where more profits come from financing, add-ons and maintenance than from actual car sales, most retailers don’t have multiple profit streams available. A high end dealer that offers installation, room tuning, etc can use the profits from those services to cut the margin they normally would have to get on equipment. A dealer that "only" has equipment sales for income can’t afford to discount as much, unless he is turning a lot of product each month.

Finally, like the auto business, if you’re looking for a deal as you’re paying cash, etc, you’re better off asking for it at the end of the month than the beginning, especially if business is slow. Best deal I ever got on a new car was at the end of the month during a recession when interest rates were in the high teens. The dealership hadn’t sold a car in over a week, and very few that month.

When you call a dealer and order a pair of 20k speakers, which he then orders and when received will deliver. He does not have your model in his listening room and a consumer has to go through the dealer to get the speaker. Seems a margin of 40% or more is a lot. Maybe dealer spoke with you for awhile, sent a quote and then took a credit card number and delivered it.
Fortunately there are multiple dealers in the area and competition would seem to be present. Maybe order out of state for a longer range delivery to avoid state taxes.

i really don’t need the services of a dealer so 8k 40% seems too high. Maybe 3k.
If margin is really 40% it impacts resale of product in secondary market so it would seem. Dealer or any other dealer certainly ain’t gonna pay you more than 12k as a credit during an upgrade effort. That’s why I am interested in learning what the margin is so I can get a feel for speaker value if I upgrade.