How does component value relate to product price/whole greater than the sum of parts?

[mds]

Hey guys,

I'd just like to hear some thoughts about what is a reasonable ratio of the cost of the parts of a piece of gear versus the cost of the final product. I totally believe that intellectual property is worth a lot, and is hard to quantify, but some products seem to have big dollar price tags but are only filled with $30 worth of parts. How do you guys feel about this?

Mike

p.s. I'm not trying to throw stones at anyone, just kind of an interesting topic to me...

[peeceebee]

I guess a certain (large?) part of the price is r&d, tooling up costs, business overhead, promotion, etc...

[rufus13]

In Mass-Market gear (found at ToysAreUs, GC, etc. in unlimited quantity) typical target part cost is 20% of wholesale (the "real" wholesale that GC gets for 40-foot container lots, which is much lower than a Mom-n-Pop music store pays for onesy-twosie quanities), then marked up lots, then marked down for "mere" 50% mark up. So, the answer is that the factory has approximately 10 cents on the dollar in the very-lowest-closeout price found at a major retailer. There are real bargains on closeout- cheaper than you could ever make a chassis and power supply DIY.

On the other hand, "good gear" or Boutique gear, may have 30% of the wholesale price in parts inside the box, and considerable knowledge/skill in the design and construction (the designer/owner may be available by phone!). The problem is that small manufacturers have to pay a lot for small quantities of good parts and don't have a pool of slave labor to draw from to get the units built/boxed/shipped. The little guys usually have a need/want to ship a product that is nearly as good as possible (within their target price), instead of a product that just barely...... and has massive markup and profit attached. Quantity is often limited, sometimes requiring a deposit and waiting while the unit is manufactured.

The big advantage is in broken vintage gear. Buy for pennies on the dollar and fix it yourself. I just bought an early-1950's Magnecorder portable, and expect it to be a fun effect processor. Nice Triad mic input transformer, and a cool black crinkle pleather case. Toobs!

Karl

[tINY]

Karl

Your posts are always spot on and entertaining.....

Of course, when it comes to musical electronics, most folks wouldn't believe that more than half the cost is in the chassis and connectors.




-tINY