Margin on speaker sales by high end dealer

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.

You can't look at gross margin in a vacuum.  You need to understand the dealer's monthly overhead cost/cost of operations.  That's why it's so important to push volume through.  Only through volume can you even start to cover the fixed monthly overhead.  If you don't sell enough widgets you could easily post monthly losses on your P&L even if you show a 40% gross margin on a single product sale.  This is really a ridiculous analysis the OP is trying to apply because the equation is far too dynamic for a linear thinker.

Someone mentioned, buy used. I have done this several times (at a dealership). If they have a demo item you are in the market for, you can get a good deal and a full factory warranty.