whats with the hihgh $$ for retail spkrs?

[aarono]

after reading this forum, and thhen checking online pricing for many drivers that are recommended here... I am wondering just what in th he** you are paying for when you buy a paradigm, tannoy, nakamichi (insert favorite brand of speaker here).
obviosuly the whole is not the sum of its parts... i can understand there is markup for the sales people, and then there are bits and pieces that contribute(binding posts cabinet materials etc).... but stilll... it is not proportional... it is not even close!!!!!

DIY seems to be the way to go... not only do you get as good or better sound quality... but you have some fun, and can really customize to suit your listening style.

and dont tell me we are paying for the R&D that speaker companies go through during the design phase.

[Vikash]

Originally posted by aarono
and dont tell me we are paying for the R&D that speaker companies go through during the design phase.

ok i won't. but it is. its the element which need not make sense or require justification to the consumer, because a design can be worth whatever the designer thinks it is.

if a consumer is willing to pay it, then they'll charge it. DIY is certainly the way to go - if you have the inclination.

[pinkmouse]

Most of the markup is due to retailers, 75% to 100% on manufacturers prices.

[Zaph]

Originally posted by pinkmouse
Most of the markup is due to retailers, 75% to 100% on manufacturers prices.

Right, and most of the manufacturer's cost goes to marketing. So when you buy your retail speaker, you're buying full page magazine ads, and fattening the pockets of the retailers. (who also have their own marketing and other overhead to pay for)

I'd guess that less than 1/5 of the manufacturer's price goes to parts and manufacturing.

The bean counters at loudspeaker companies often give the designers a budget. They will effectively say "You have $7 each for a couple woofers, $5 for a tweeter and $1.50 for crossover components." And out pops an $800 floorstanding Polk system. Or conversely "Sure, you can use Scan Speak drivers and 30 components in the crossover, but we will have to shift our target market a bit." And out pops a $13,000 Sonus Faber system... that doesn't sound as good as what a DIY'er can do for $1000.

DIY rocks.

[chainenoble]

more like 1/10 of cost.remember manufacturers pay wholesale or less for their parts.the real problem is the retail.yes,most retailers do 100% mark-up.considering how much high end audio cost,,imagine car dealers,builders,airlines,etc doing a full 100%.

the funny thing is,that some manufacturers force retailers to sell at close to full mark-up,which can greatly reduce number of speakers sold.they cut their own profits-pretty stupid.

[SY]

A normal rule of thumb (fashion-statement speakers aside) is retail equalling 5 times bill of materials. On that basis, most speakers I've seen are priced reasonably well.

[AndrewJ]

I see this question come up so often, with lot's of replies from those who have never worked in manufacturing, or understand all the costs of funding development of product, R&D, marketing etc.
Of course building a kit or DIY is less costly than purchasing a finished product. You haven't paid for time to develop the design, rental for the factory, ads in the magazines to get the product in front of people, exhibition costs (CES etc), shipping and storage, environmental testing (temperature and humidity cycling), power testing, drop testing,safety testing, salaries, mark up of retailers, servicing, warranty, parts and finished goods inventory (at least five years for warranty claims).........
I have probably left out lot's more incidental costs of doing business.
As a general rule of thumb, the parts cost of a speaker works out at between 20% and 25% of the MSRP. The rest goes to manufacturing costs and dealer margin. From this, the manufacturer is lucky to work on a 5% profit margin after all costs are paid for.
The research costs alone for a high end product can never be re-couped from it's sales, those costs have to spread out over the lower cost higher sales volume products. As an example, one recent high end speaker took 3 years to develop, with full time involvement of over five engineers and a couple of million dollars spent. Do the math and see how to go about recouping those costs, and then tell me whether you are being ripped off!
The only reason DIY'ers get even half decent prices on purchasing drive units is that the major manufacturers have bought sufficient of them to bring the manufacturing cost down. If you were to try getting drivers built only for the small market of DIY'ers, the costs would be prohibitive.
Don't get me wrong, I fully support the DIY community, still participate myself, and admire those who enjoy educating themselves and helping others. But you are the fortunate few.
Most buyers of sound sytems can barely cope with wiring up the system, never mind designing and building it!
Just understand that there are very few cases of manufacturers rippng off the customers. This is not a good and sustainable business model, and any such attempts are usually short lived.
Those manufacturers with longevity have achieved it through giving the customers honest, reliable and valued product.

So carry on building. You are able to truly get good value by having the ability and inclination to do so, and also can match the sound to your particular taste, but just go easy on your judgements of the commercial products please.

Andrew

[Exhifi]

Speakers at retail typically sell/msrp at a 50 point margin, or, if they retail at $100, they cost the dealer $50. Electronics are typically 40 points, or $60 for a $100 item. The dealer can get shipping and fast pay discounts, and discounts of a few percent for ordering to a certain dollar level, usually free freight. Merchandise is anyones guess, but 50 points is typical there as well.

After that, the manufacturer has to make a profit, pay for R & D(believe it or not), shipping and storage of materiel, and sometimes, really expensive machines. Of course there is a bulk discount to alot of this, and they can't make 500 pair of speakers a day on 1 table saw with a $100 router, so they have to get giant saws and CNC machines to handle it, but, that is part of doing business. Some of them that have good testing facilities have that cost as well. But those are usually the BIG manufacturers. Little guys, like even Sonus Faber as mentioned, I beleive, even farm out their cabinet construction to local factories/craftsmen, which, adds to the price.


So, yes, it is very much to our/your benefit to build our own, and experiment, and mess up a few things. But even the drivers cost is increased by shipping, the cost of design software, or the horrible cost in time doing all the math , delivery of sheet goods, missing thumbs , etc...But is is fun and it is learning.

The only way I have come up with to defend the cost at retail is the concept of obtaining a "custom" product. But even that is only borderline for the so called "high-end" gear. The dealer gets a cut for bringing you a custom designed product that the manufacturer could not reasonably market in your locality by himself, however, the internet may be pushing that concept away.

Oh, and I almost forgot. There is the manufacturers rep! This is the middleman that sells the manufacturers product to the dealer, and he gets a cut, typically a commision on the dealers order. These vary, figure 5-15 points typically with NO rhyme or reason.

[Jim85IROC]

Originally posted by Zaph


Right, and most of the manufacturer's cost goes to marketing. So when you buy your retail speaker, you're buying full page magazine ads, and fattening the pockets of the retailers. (who also have their own marketing and other overhead to pay for)

I'd guess that less than 1/5 of the manufacturer's price goes to parts and manufacturing.

The bean counters at loudspeaker companies often give the designers a budget. They will effectively say "You have $7 each for a couple woofers, $5 for a tweeter and $1.50 for crossover components." And out pops an $800 floorstanding Polk system. Or conversely "Sure, you can use Scan Speak drivers and 30 components in the crossover, but we will have to shift our target market a bit." And out pops a $13,000 Sonus Faber system... that doesn't sound as good as what a DIY'er can do for $1000.

DIY rocks.

I agree to an extent, but I think that once you get into the realm of Sonus Faber, B&W and other well regarded brands, the ability for a DIYer to do much better for the cost becomes more difficult, at least if you take the cost & build effort of the cabinets into account. Sure DIYers can stuff a few revelator drivers and an XT25 into a generic cabinet, and sure DIYers can probably make it sound as good (or better perhaps), but any DIYer with the woodworking talent to reproduce a Sonus Faber Concerto cabinet will probably tell you that if he was to charge somebody for his talents, it would cost as much as Sonus Faber charges. If you're capable of that level of work, or if you're happy with lesser quality cabinets, then I agree that major money can be saved, but that aside, I don't think that some of the nicer speakers are overpriced for what you're getting. I've seen furniture that's less complex than a pair of Sonus cabinets that costs as much or more.

I guess I can relate it to cars too. For me, I enjoy building and working on my IROC, but when I really get down to the finantial side of things, it becomes painfully obvous that my used Corvette cost me less than the running total on my IROC, and it's a better car in every way.

[K-amps]

I empathize with manufacturers, they sometimes dont make enough a margin as do the Retailers (for all the work they do), thats where the big savings can be had. (Unless the manufacturer binds them to a fixed price).

Remember for every good sounding DIY speaker that is better than a B&W, there are 5 that are not....

Most of all us DIY'er do not assign much value to our time, if done, would push the price of DIY stuff higher (especially those 2x weekend rates. )