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How much markup do retailers put on their gear?
Old 21st May 2012
  #1
Gear Nut
 

How much markup do retailers put on their gear?

I've been researching monitors recently and I'd be really interested to know how much retailers are generally marking up the 'trade' prices they buy at.

I've seen Focal twins for example ranging from around 2200 - 2700 inc VAT at retail. I'm presuming all retailers get their gear for the same prices, or do they?

I don't want this thread to turn into a debate about whether the markup levels are reasonable or not. Pro audio sales is a tough business these days and everyone has to meet overheads and make a bit of profit.

Anyone shed any light?
Old 21st May 2012
  #2
Do a search, this has come up before... here's something I posted almost 18 months ago on the subject.

Quote:
Originally Posted by Whitecat View Post
From the thread How much $$ over cost (on average) do dealers charge for music gear? on 13th Jan 2011

There's probably more to it that just a cost -> markup -> profit model.

There obviously is a dealer cost. This may vary from dealer to dealer too depending on order size/minimums.

Often there is a demo unit available at an even further reduced cost. Sometimes dealers will simply average the cost of this into all of their inventory (and sell the demo on anyway at some point). It reduces the overall cost of any given item across the board so the margins look higher.

Usually, the higher priced the item gets, the smaller the profit margin gets in terms of percentages.

Some lines will offer better margins than others, thanks to enforced MAPs etc.

There's a few other things in play - one is that manufacturers will often pay back-end rebates instead of giving big discounts. There is some risk to a dealer with this model to sell anything low because they may not hit the threshold required to trigger a rebate. Apple Computer works this way - that's why discounts on Apple machines are rare and small when they do exist - the actual up-front cost of goods are high, but they can't sell for more than the next guy, but they can't discount because they could lose money - but if they sell enough, they get a percentage back every quarter/half/end-of-year/whatever.

Second, manufacturers will often subsidise advertising for companies if their products are prominently featured. This helps with the bottom line.

Third, the small accessories game is where the money is really made... that's where you're talking 50 to 200 points markup. The extras like leads, cases, etc do more in terms of raw cash.

But I doubt that on basic gear the markup is any more than 25% ever and in most cases much lower - probably more in the range of 10 to 18% pre-rebate.

Indeed the claims of xx% off!!! (of MSRP/RRP) are little more than a sales tactic. There is still margin in those BIG DISCOUNTS.
Worth noting too that different manufacturers have different RRP/costing models so the margins on some similar items between makers can vary a fair amount. Depends on how strong the 'network' is (i.e., how much will competing dealers hold their markups to without colluding, if that makes sense), how much the market will simply bear and other not so random factors.

Knowing the "cost price" won't necessarily get you a better deal.
Old 21st May 2012
  #3
Gear Nut
 

Thanks for digging that up. My quick search didn't turn up the thread so apologies for retreating old ground!
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