Dealers and discounts
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DanG

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As I wrote in the Amps+Source Components forum, I was planning on purchasing a Cary CD308 this labor day weekend at Spearit Sound in Boston. However, after visiting there today and auditioning the unit I didn't buy it... not because of the sound (which was pretty good), but because the dealer wasn't flexible at all about the price.

I've read on internet forums that it's not at all unusual to expect a discount of 20% on a new CD player that doesn't have a huge cost. The list price of the CD308 is $1500, the dealer offered $1349 (10% off). When I said that that's more than I want to pay for the player, he said "We don't work on the barter system" -- as though I were offering him a dozen eggs in exchange for his sheep. I let it go at that and said "then we have nothing further to discuss" and left.

What do you guys think? Tuberoller and other dealers, was this guy being unreasonable in not even negotiating a price that would be acceptable to both parties, or is this something that I and other buyers should expect at brick-and-mortar audio stores? The whole deal left a bad taste in my mouth -- I had come there to buy the player specifically from them because they had been nice in letting me audition equipment before, and then they didn't want to negotiate at all (and they had done so with Vka when he and I went to audition the Cary 300SEI). Thanks!
 
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Tuberoller

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Dan,

This is not an easy question to answer.I have'nt actually opened a brick-and-mortar store yet, so issues such as overhead and profitability are not major concerns of mine.I do try to work with people as best I can and try to avoid conflicts about price by steering the prospective buyer towards gear he/she can afford or is willing to pay for.I will tell you that I never offer huge discounts to new customers.There are some instances where a customer has to indicate to me that he just wants to audition something and is actually not interested in buying.I am willing to accomodate him in most cases but it is always nice to know what his intentions are.I have loaned out gear to customers who have no intention to buy anything, causing me to miss a sale to a customer with cash in hand.

Have you ever purchased anything from this dealer before?Did he offer the opportunity for an in-home audition of the player?Did he offer any type of full-credit trade policy?Did you know that the mark-up on that player is only 30% of the list?These are all things that you should consider.

I hate to see it when a consumer really wants something and is unable/unwilling to spend what it costs and then blames the dealer.I also hate it when the dealer is unwilling to offer the opportunity to audition gear and return it for full value towards new gear and then expects full retail.If you have a dealer who is willing to do these things for you, I think it is reasonable for this dealer to ask for a reasonable price,which may or may not be near retail.If you find a dealer who sells at 20-30% below list and has liberal return/trade/audition policies,then you have found a rare dealer.

BTW,Cary does not allow internet or phone sales or deep discounts.It is easy enough for a manufacturer to check these things and they often pull dealer agreements over this.Please consider what I have said in it's complete context.if you isolate any one part then you miss the point.I am still on the fence between consumer/dealer and therefore am torn as to who's side I would take in such a dispute.Perhaps you should consider a less expensive player or find another dealer.the dealer is under no obligation to sell you that player at your price.
 
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eric343

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Well, I think Tuberoller made some good points... For example, when I got my Arcam, I convinced the dealer to give it to me for list - but including sales tax. Considering that the markup is only about 30%, and this was my first purchase from them... Maybe when/if we go back and get a turntable... who knows.
 
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DanG

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To tell the truth, the dealer there said he'd give it to me for $1349 and that's it -- didn't say anything about returns or trade-in policy, just sort-of smirked and said they don't work on the barter system (again, whatever that means). He offered to show me the Adcom, but I quickly said I wasn't interested (and I wasn't -- I bet they have a hard time moving that gear). As I said, though, they were willing to negotiate on the Cary 300SEI, and I've read numerous times on AA that Cary has a high mark-up, with items like the 306/200 retailing for $5-6k but selling for just over $3k. And the other dealer who was around when Audio&Me and I were there seemed ready to negotiate about the price on the 303/200.

Is it possible the guy just saw a 19-year-old wearing jeans and a t-shirt and assumed I was going to offer him 50 bucks for the CD player?

Maybe it's because I'm a new customer, as you said. But how does that guy expect to make me a regular customer? He's not going to do it by suggesting that he didn't finish the 9th grade and isn't willing to explain to me why he won't offer a deeper discount.

But thanks very much for the explanation Fred, I really appreciate it.

Dan
 
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Tuberoller

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Dan,

you can't always believe what you hear or read about mark-ups on audio gear.there are some absolute fantasies floating around about how the margins are 100% on some gear.that is the very rare exception.Cary has variable margins and in some cases the markup is indeed 100%, or 50% profit ,but only on the big dollar gear.On the gear such as the lower priced amps and CDPs that margin is only 30%.Most margins are between 30-45% but some are as low as 12%.I don't expect to make $500 off one cable but I do expect to recoup my investment when I have had to pay for that cable in full and stock it for 3 months while tying up my cash.Cables are usually profitable but is a "flavor of the week" market all the way and the only way to stay ahead of that game is to switch and swap cable makers often to try to stock and sell what's selling.I need to mention that I have restrictions on where and to whom I can sell certain gear as well.I also have manufactuters who won't allow me sell anything until I open a store and others that demand certain floor space and display priority.There are other manufacturers who expect dealers to absorb warranty costs(VTL,VPI,Conrad Johnson,McCormack) because they feel it is a privelege for the dealer to be allowed to sell their gear because of supply/demand issues.keep this in mind when shopping but I would recommend that you find another dealer,the one you have now does not seem worthy of your business.I would never want anyone to leave me with a sour taste even if we didn't do business,this time.
 
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eric343

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Why would a manufacturer restrict to whom you're allowed to sell?
 
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Tuberoller

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Quote:

Originally posted by eric343
Why would a manufacturer restrict to whom you're allowed to sell?


to keep their gear from being sold by unauthorized dealers or on ebay/audiogon.I have been approached several times to buy a dozen Rouge amps by a unauthorized dealer who would probably sell them at a 10-15% profit on one of those sites.
 
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eric343

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Ah, that makes sense. So it's not really "don't sell to Foo Bar" it's "don't more than one or two to a guy, and don't sell anyone who asks for lots any"
 
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Zanth

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tuberoller, you really seem to like a great person to deal with. I need to move to Chicago
 
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mbriant

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Profit margins can vary considerably from Brand to Brand. Some manufacturers are serious about "Suggested Retail Prices" while others inflate the "SRP" to allow for constant "sale" prices. Available discounts can vary accordingly.

It can be helpful to deal with someone higher up the retail food chain when buying. A manager or preferably owner has more flexibility with the discounts they can make than a regular floor rep.

When it comes to getting a negotiated discount, shopping on the last few days of the month are usually better than the first few days of the month. Most stores have monthly sales quotas they are trying to achieve, and quite often they are struggling to achieve these quotas. Owners/managers are often desperate to make these quotas as the month end approaches and will sometimes accept less profit to top off the month end numbers.... or to receive the increased cash flow to pay monthly expenses.
 
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Tuberoller

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Quote:

Originally posted by mbriant
Profit margins can vary considerably from Brand to Brand. Some manufacturers are serious about "Suggested Retail Prices" while others inflate the "SRP" to allow for constant "sale" prices. Available discounts can vary accordingly.

It can be helpful to deal with someone higher up the retail food chain when buying. A manager or preferably owner has more flexibility with the discounts they can make than a regular floor rep.

When it comes to getting a negotiated discount, shopping on the last few days of the month are usually better than the first few days of the month. Most stores have monthly sales quotas they are trying to achieve, and quite often they are struggling to achieve these quotas. Owners/managers are often desperate to make these quotas as the month end approaches and will sometimes accept less profit to top off the month end numbers.... or to receive the increased cash flow to pay monthly expenses.


WHAT?

this advice may have applied well at sometime(long ago) at the retail level but this is not how things are done in the high end audio business.Retail prices are generally set in stone by the manufacturer and any discounts are the product of the retail seller or dealer.On occasion a dealer may get a deal on a close out item which may be passed on to the consumer but most often deals are made from retail.I have been fortunate enough to be able to buy most of my gear in cash and sometimes I get further discounts from a distributor but most often a dealer has an open account and sometimes pays big interest.After I have sunk $7,000 in CD players that are not moving,believe me when I tell you,I could care less how much profit I make as long as I get my investment back.

My advice,be patient.Never buy gear when it is first introduced and super hot.You will pay full retail and wait for it for God knows how long.Buy used.Give a dealer ,or dealers, your name and a want list,this works.Join an audio club,there are always super bargains to be had amongst friends and fellow listeners.Put a "want" ad on Audiogon,in your local ad paper,and at audio club meetings.I have purchased a lot of audio gear this way and over half of my record collection.With a little cash and some smart buying/trading habits you could make your audio purchases self-supporting.If you buy stuff cheap be willing to sell stuff cheap,this keeps the wheels moving and frees up cash to buy other gear.Cruise the audio forums and find out what's hot in another part of the country(or world) or in different ends of the hobby, you may find that stuff like old tube amps are cheap and plentiful where you live and you can buy and sell them.Check out ebay to see what people are paying for gear and pay/price accordingly.When a dealer seems firm on a price,ask if he has any other payment options,like a lay-a-way of some type.He will often just cut the price further or offer you a payment plan with no interest.My best and last advice,if you are willing to have a dealer spend time and effort to allow you to audition gear, be honest about your intentions.You may be suprised at how many dealers will allow you to take stuff home and listen to it even when you tell them you can't afford it, or better yet, are willing to work with you to get the gear in your hands.
 
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eric343

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Damn, this thread is great! We should stickify it!

"Tuberoller's Guide to Equipment Buying"

You rock, man


Let me add another tip to the "financing your audio habit" section... TUBES! eBay's great, if you know how to search. For example, an auction titled "Quad of Telefunken ECC803 (12ax7/5751/7025), NOS NIB" will probably go for Full Market Value + 10%. But an auction for "Bunch of old tubes" that lists some ECC803 tubes in the body/description and has tubes that look like the Telefunkens... Sure, it's riskier. A lot riskier. But if they're at $10 with no bids and 10 hours to go... What's $50 in the long run, when you can take the tubes, run them through a tester or swap them into your MG Head or whatever, take some high quality photos, and turn around and sell them for $600 each? (if they're NOS, of course...) Obviously, very few tubes have the kind of FMV as Telefunken 803s, but hey...

DIYers can also make some spare change building amps - perhaps not enough to finance those Halcro monoblocks, but enough to cover some tweaks. (or the shipping on them Halcros, if you save up a bit) The internet market is a bit saturated at the moment, with two people doing CHA47s, three doing META42s, and one doing Gilmores, but there's always local audiophrends and that uncle who likes listening to Wagner late at night, at volumes loud enough to drown out the combined snoring of everyone else at the family reunion, and set all the dogs within a half mile radius howling. A pair of Etys and a CHA47 (or a META42) would be something both he and Aunt Patty would gladly pay for... Maybe even your dealer would want something for his desk (can you say 'trade'?)! Of course, for the latter, it would probably help to have some glowing VU meters, diddle switches, brushed black anodized aluminum (see Apheared's Project Scrapbook in the HeadWize library for ideas)... And blue LEDs turn anything into a high-end component that can be traded for the aforementioned Halcros
(don't believe me? Take a look at some Krell equipment!)
 
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mbriant

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Quote:

WHAT? this advice may have applied well at sometime(long ago) at the retail level but this is not how things are done in the high end audio business.


I don't quite understand your disagreement Tuberoller. What exactly is it you disagree with?

You seem to be in complete disagreement with me, yet you then go on to say the retailer is the one who gives the discounts. That's pretty much exactly what I'm saying....along with some reasons why. Discounting to get rid of stale inventory, like you've mentioned you yourself would do, is another valid reason for discounts.

The practices I've mentioned apply to not only audio/video dealers, but all sorts of high ticket retailers such as auto dealers, jewellers, appliance stores, etc., etc., .... and yes they existed long ago, and yes they still exist.....even today. Cash flow is still cash flow. Sometimes inventory has to be liquidated at little or no profit just to make payroll, or the rent, or to pay suppliers. And these sorts of bills tend to pile up at the end of the month.

Granted, not every store owner/manager operates exactly the same. Some won't budge at all on selling price while others will go as far as to base their selling price on what they think the buyer can afford.

And yes, manufacturers have been known to pull their lines from a retailer who discounts their products....but this practice is in fact illegal and has been challenged in the courts many times. That's why "Suggested Retail" and "Fair Market Price" are the terms used. If a manufacturer tries to dictate the price which must be charged by the retailer, it's called price fixing. That's illegal.
 
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Tuberoller

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Quote:

Originally posted by mbriant


I don't quite understand your disagreement Tuberoller. What exactly is it you disagree with?

You seem in complete disagreement with me, yet you go on to say the retailer is the one who gives the discounts. That's pretty much what I'm saying....along with some reasons why. Getting rid of stale inventory, like you've mentioned you would do, is another valid reason for discounts.

The practices I've mentioned apply to all sorts of high ticket retailers such as auto dealers, jewellers, appliance stores, etc., etc., .... and yes, they still exist.....even today.

Granted, not every store owner/manager operates exactlly the same. Some won't budge on price while others will even base the final selling price on what they think the buyer can afford.

And yes, manufacturers have been known to pull their lines from a retailer who discounts their products....but this practice is in fact illegal. That's why "Suggested Retail" and "Fair Market Price" are the terms used. If anyone dictates the price which must be charged by the retailer, it's called price fixing. That's illegal.


I'm sorry,I didn't mean to sound like I was in complete disageement with you,when in fact,you are correct about some of those things.This thread is asking questions in the context of the high end audio dealer.In these instances the normal retail practices rarely apply.What you call "price fixing" I call a sure-fire way of getting my dealership yanked.My good friends at Decibel Audio put prices on their site for Grado headphones at very deep discounts and the Grado rep called and said the prices had to be changed at once.They were threatened with loss of the dealer agreement and given a stearn tongue lashing.This practice is real and takes place everyday.The audio dealer community is very small and most dealers have met one another or a least knows who's around.these people want the lines that I(or any other dealer)sells so they'll happily report any super discounts.Also another dealer in my area,or right near my area who carries the same lines may report discounts or sales outside a dealer area.I recently got a lecture from a turntable manufacturer when I let it slip that I sold one of his tables for super cheap.Since that time my wait for his tables has increased substantially.I have,in effect,been placed on his ****list for offering this dicount.I have lost several sales because of the long wait that I have been subjected to.These are some of the reasons I don't think I will be doing this much longer.
 
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mbriant

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You're right. Manufacturers do indeed bully some of their dealers. The smaller the dealer, the more they can dictate. They're betting (correctly) a smaller retailer will not challenge them because they are either too afraid of losing the line or don't have the financial resources to challenge them in court over price fixing. Since the vast majority of "high end" A/V retailers are small independents, manufacturers get away with it.

On the other hand, the big chains such as Best Buy have so much clout, they'll often dictate what they will pay their suppliers....and because Best Buy sells so much, if their offer is at all reasonable, the suppliers will reluctantly agree rather than lose a huge customer.
 
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