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Posts: 302
Joined: January 20, 2002
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" ... IME most dealers give 10-20% off of MSRP on brand new sealed boxed items. So a used demo product where, as others have said, have had numerous people fiddling with it in store or in their homes shuould be at LEAST another 10-20% off on top. ..." Purchasing anything ... from watches to new cars (factory incentives come off the dealer cost, so go by the "regular" negotiated prices if you want to learn the margins) to mattresses to children's toys to audio ... is pretty easy to figure out, because when the product goes on sale, they sell for a bit above dealer cost, or at dealer cost. So if you read the ads over 12 months, you can always figure out what the store is paying for the product. Easy peasy. There is an exception with regard to "loss leaders" which are sold below dealer cost, in the hope you will buy other things that make up an overall profitable sale. But these are easy to identify as they are the featured items in a sales flyer and will carry disclaimers such as "quantity is limited". If you did that, you would learn the obvious. I'll save you some time with a few examples: Clothing and jewelry is usually about 200% markup ($10 jeans sell for $30; a $100 necklace sells for $300), appliances about 25% ($100 washer sells for $125). Most things are somewhere in between those margins except new cars and trucks (10~15%). Clothing, by the way, has high margins because the store must carry a variety of sizes, some of which won't sell well, and the product is both seasonal and trendy, so the store has to be able to sell off inventory a couple of times a year at bargain prices. Many product categories have margins that are beyond the known retailer's necessary margin, so that an artificial MSRP can be advertised while every single reseller sells for less (eg: beds and mattresses; cookware sets), but still makes the industry average profit. Consumer psychology is well understood, in other words. In consumer electronics large resellers negotiate for special models with some obscure features that most consumers will not notice are removed to bring down the dealer cost. Thankfully it's not very common in audio, but you never know when it might arise, since it's a very competitive industry with bankruptcies and consolidation becoming common, so never say never. But to use an example, since Panasonic is out of the TV business, the apparently identical model at Best Buy and Costco and Wall-Mart will all have some features removed (fewer HDMI ports, no anti-glare coating, etc) to allow a low sale price while still earning the identical profit margin. If they offer price matching, they will also carry a unique part # so that price matches can't be obtained, while the independent dealers selling Pana TVs would get the full featured models but would have to sell at a higher price, as the dealer cost would be higher. In Audio, with a specific brand / model, do a search, find out what dealers are selling it for. If the margin is lower on that line than other competitive lines, you will see it in the prices offered, and the dealer will offer a lower discount on that particular unit. If the margins are in line with industry standards, you will see that as well, and if the line offers margins higher than the industry average ... well, do I have to say it? The point being that every component * that goes out the door via an audio reseller sells for the exact same profit margin, regardless of the MSRP. The only variation is when an item is on closeout or sale price, where the margin is lower, because if you turn over the inventory faster, you can end up with the same net profit over a 30 day business period. Obviously that strategy only works if the retailer moves many more than normal copies that month. The price is the price. Pay it, after doing your due diligence, or not. But it's a mistake to think that every item has the same markup in the store. Retail doesn't work that way, and audio retail in particular doesn't work that way. Be careful if you are buying more than one item, because the retailer will blend the markups ... an amp plus a nationally advertised cable might ad up to $xx, but you can be sure most of the discount came from the cable, which will have a huge markup in comparison to the amp. And so on. With regard to demo units, first of all the failure rate is low. Of those that will fail, the well known failure rates of electronics components are thus: 90+% fail in the first 24 hours; the majority of the remaining 10% fail in the next 30 days. Less than 1% fail after 30 days. So, I would not shy away from demo units; it works, the staff have listened to it and know it is up to snuff, and it almost certainly will last for as long as you own it. That cannot be said for an untested out-of-the-box new unit. Refurbs are somewhat different, but no less scary to me. In a production environment, every unit may be tested for basic functionality, but no more. Perhaps every 10th or every 100th unit will be pulled to check for production issues, and it will receive a full suite of tests by an individual technician. It's the same with refurbs ... an individual will run the full suite of tests on it, change what has to be changed, and run those tests again. It almost certainly has had more scrutiny and has spent more time on the bench than any unit you buy new-in-box. The post-sale failure rate for refurbs is way lower than for new production. Furthermore, the vast majority of refurbs were refurbished not because of a failure, but because they were customer returns and need new documentation, accessories, or packaging. So you get a fully tested unit that had nothing wrong with it in the first place. * Components, like receivers and loudspeakers have one markup, and accessories have another; the accessories will cost 2x or more less, compared to components, at the same per-$1 retail price.
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