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In Reply to: RE: Some of those price projections might not be very accurate... posted by genungo on September 03, 2016 at 08:09:19
A lot of the driver and boutique part companies really don't care much about another companies bottom line. So they may cut them a break on bulk orders but not as much as you would expect.
Let me do a poor job of explain!
Company A makes 100 widgets that sell for $1 each.
Now if company B comes along and says we can buy the widget in bulk for $0.50/1000
Now company A has to produce more product. Which means more materials, payroll, etc..
So now company A decides why should I sell the widget for $0.50 or even $1. I'll just raise the price to $5. Now they can make fewer widgets, save on materials and payroll and making more profit per widget.
This is a poorly explained example of what the entire US manufacturing economy is based on today. Just look at your morning box of cereal and measure your roll of toilet paper.
Follow Ups:
There is no way that a manufacturer of niche products can hope to stay in business if it costs him over $5,000 to build, market, and distribute said niche products having a suggested retail price of only $10,000. I doubt that the profit margins on a pair of $10,000 speakers could be that slim for all concerned.The real reason that manufacturers of niche products go under? The answer probably has as much (or more) to do with the fickleness of "niche markets" than with poor profit margins at every turn.
Edits: 09/03/16
Good point. That said, I have no idea what the total build cost to list price ratio is when the manufacturer only sells direct to customer. Certainly more flexible than if he were tied to a dealer network, but still a tough go regardless. As you say, 10K speakers aren't flying off the shelves like toilet paper.
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