[JohnnnW]

Do these headphones we all talk about actually cost the company a lot of money to make? Can anyone chime in on the margins that the headphone manufacturer typically have?
 
There are certain products products in the market that are highly price just because that's how it's always been. The company charges that because they can, even if it means an extremely high margin. If you can make more money then surely you will do it. Consumers of headphones have always seemed willing to pay very high amounts of money, thus headphone prices stay high. 
 
Are headphones one of these products?
 
Do some of these headphones really cost a company so much to justify a final retail $400, $600, even $1000 + prices. 

 

[TMRaven]

As with nearly every other facet of the commercial industry, there's more and more diminishing returns the further up you go the product ladder, and there will always be some companies/products with much less justified prices than other companies/products.

 

[JohnnnW]

Quote:

As with nearly every other facet of the commercial industry, there's more and more diminishing returns the further up you go the product ladder, and there will always be some companies/products with much less justified prices than other companies/products.

 
It's a good point and I definitely understand that. The obvious answer being Monster and their Beats headphones.
 
I was more getting at in general. It seems headphones have just always been something priced extremely high when it's possible they actually don't cost that much to make. In design they are pretty simple. 
 
I was hoping someone who knows the industry would be aware of margins.

 

[squallkiercosa]

-"First off, I am going to reiterate a point which I have made in several other articles since many of our readers are not familiar with the audiophile world when it comes to sound quality. With high end audio equipment, the value per dollar greatly decreases as you go up the cost ladder. For example, a piece of audio equipment that costs twice as much may only sound slightly better. But this is what the audiophile world is all about. People spend big bucks on audio equipment to get ultimately great sound rather than spend less and maybe settle for only great sound. And remember, good sound quality is a very personal thing. If it sounds good to you, you have accomplished your goal, (but to be on the safe side, you might just consider avoiding listening to someone else’s audiophile setup)."

- "...I've learned that once you get up to a certain level in the audiophile headphone world, one headphone is not necessarily better than another"....

Copyright © 2009 Bill K and Listening Station

 

[Kernmac]

I'm not even convinced about the accuracy of the title of this thread.  Is the general high price of headphones justified?  Is there consensus that headphones are generally high priced?  In comparison to what?  People pay $100 for jeans, $30 for a steak, $50 for a brand name Tshirt, $2000-$4000 for a flat screen, $400 - $800 for a smart phone. So is $300 for a good headphone relatively expensive?
 
To answer the subjective question - to me headphones are generally worth the money and I don't consider them expensive at all.  I would rather pay $500 -$1000 for a headphone than put mag wheels on that clapped out motor car I see so many doing.
 
Value is always relative.

 

[noxa]

I don't think he's asking if the price paid is worth it to the end user, because everything is relative, Kernmac is right in his opinion though, my brother couldn't believe the money i spent on the Signature Pro yet he thinks nothing of putting a £1000 exhaust system on his car which i think is crazy.

As to his original question, a fair amount of money is put into research and development, so the actual cost to produce the actual physical headphone i would say is perhaps 20-30percent of the cost, put in the r&d costs maybe 10-20 percent. Aso my guess is the profit marging is say 50-70 percent. If you compare this to certain fashion items where markup is often 90+ percent profit.

 

[warth0g]

I think there's a couple of dimensions to this. First off, I imagine the margins are pretty decent, although i suppose R&D costs could be fairly high on high-end audiophile products. But cost is not the only variable in business, the size of the market is important too. High-end headphones are pretty niche, so the market is not that big, plus it's pretty crowded. To make it a viable business, firms have to charge a certain amount per unit in order to even break-even. Basic I know, but even if the margins were 99% - if the market is very small, then you're still not going to get rich in this business. So margin isn't everything.
 
Secondly, it's all relative. As a newcomer, to this world, it was a real wake-up call for me to suddenly realise that for a significant amount less than a high-end hi-fi set-up (you know, with speakers!) you can get amazing sound by going the headphone route. So actually, I personally think that a good quality, let's say mid-fi set-up, is a serious bargain.
 

 

[JohnnnW]

I may have expressed my question a little wrong. I understand the value is relative point. 
 
It may have been a stupid question and I'm not even sure how to word it. I was more trying to ask if headphones really cost a company so much money that the headphones need to be $1,000. or $1,500. etc. Again with the margins thing. If they really do cost a lot to make then fine the high price is totally "justified". Or they are possibly one of those products are have the ability to be priced high because of upper class audience they attract and the companies knowledge of this and therefore an "over-priced" product is born.
 
Trying to put the value to the customer point aside, what are the raw details of a headphones cost of producing vs retail price. 
 
Best way I can put it. 

 

[Miss Tique]

I am in the international purchasing and marketing business so maybe my experience with prices might be somehow helpful. The first thing to remember is that the price you pay in the shop or on the internet is not the price the manufacturer is selling it for. That is the selling price of the retailer. The manufacturer sells his headphones to a dealer or retailer in quantity. That might be as little as 25% of the retail price in a quantity purchase of 100 pieces. The retailer has to make a profit that will cover his operating costs. So if he bought at U$25 and sold at U$50 he would only have U$25 to cover all his costs. Unless he is selling many of them each day then there is no way he can make a living out of that U$25. So he has to increase his selling price till he finds the one that keeps him afloat.

 

[Kernmac]

Coming from the perspective of a manufacturers margin, there are a lot of variables to consider and there won't be one clear answer.  For example, Sennheiser will have a very different set of costs in comparison to Audeze.  Are you looking at Gross margin or net margin?  Although people are very critical of marketing (and therefore related costs) from headphone companies (EG: Monster Beats, Bose etc) the fact is that market share through volume sales will impact significantly on margins and those costs along with development costs have to be factors.  Companies such as Audeze and Mr Speakers (are both manufacturers and retailers) very different to Harman (AKG) Sennheiser and the other corporate giants.
 
I realize my initial answer focused (wrongly) on the relative value to the consumer (end user) however looking at manufacturers margin (not to mention retailers margin) has so many variables and such great variation from company to company without even considering product variations within a brand - plastic machine manufacture (EG Pro900) in comparison to hand made/assembled exotic materials (EG ED8).  I don't think anyone  can answer your question regarding average markup with any accuracy, due to the range of variables I have outlined.
 
And as NOXA has indicated fashion retail has initial markups of %100 -%1000, what would be considered reasonable?  Often many of those products have to be reduced by significant percentages to break even ( at retail).
 
Markup is also relative.

 

[unamped]

If they're not made in 3rd world countries that undercut prices even further through currency manipulation like most of the stuff you buy, you're going to see prices that make you feel a lot less artificially rich.

 

[Kernmac]

Quote:

If they're not made in 3rd world countries that undercut prices even further through currency manipulation like most of the stuff you buy, you're going to see prices that make you feel a lot less artificially rich.

Apart from the fact that I don't understand the point you are trying to make, not many headphones mentioned on this forum are made in third world classified countries.

 

[Miss Tique]

Are there any high quality headphones made in 3rd world countries?
 

 

[duncan1]

In the UK some time ago there was a lot of talk of "Grey imports" . These were generally much cheaper than the official goods. but didn't  carry the same guarantee  and if faulty you had trouble getting service from legit dealers. Price Japan seems to be cheaper than the authorized Stax dealers in this country. 

 

[Sound Quest]

Some headphones are overpriced, some are spot on and others will make you feel like you've robbed the company.
 
But remember that it's not only prices that are subjective, but also the actual sound of the headphone. A headphone that sounds like garbage to one man, might be the perfect headphone for another. So the first man may feel ripped off, while the other might feel like a robber.