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Arcam Cost Margins?

Discussion in 'Arcam Owners' Forum' started by radio, Jul 5, 2005.

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  1. radio

    radio
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    Hiya,

    Why is it that the arcam products are so overly priced here in north america? e.g if a preamp is bought at 2200 dollars from supplier to dealer the dealer will msrp the unit for 3500 and subsequently you wont be able to get it for less than 3000.

    Seems like an awful lot of margin is this the case in the uk also?
     
  2. Crustyloafer

    Crustyloafer
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    Margin on these products is what it needs to be. Bear in mind that in the grand scale of things you are talking about fairly low quantity of sales and therefore for a dealer to sustain a business selling less numbers of items they need to make more on each one. If I sell 10 items that cost £200 and make £50 on each one then thats £500. Lets say that's what I need to take in a day to survive. Am I likely to sell 10 items at £1000 in the same day which also only make me £50 on each one, no I am likely to sell maybe 1 or two at the most, therefore to survive I need to make £500 on each one.
     
  3. radio

    radio
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    True Agreed.

    In my business we have margins but they are not as large as i portrayed above. If it costs 1900 and sold for 2400 i understand.

    but 1900 to 3200 thats a little steep.

    When our company is marketing our margins are extremly tight on a 1000 unit our margin is about 235. 2000 is about 345....

    But my original question was if these kind of margins are also observed in the UK or is it here only because arcam does not have a huge demand here?
     
  4. Crustyloafer

    Crustyloafer
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    I am not in a position to comment on exact margin figures on any items we sell, that is confidential information between myself and Arcam and any other suppplier. Can you imagine the mayhem that would ensue if customers knew what every retailer was making from every sale. I not suggesting that it is a stupidly high amount but just that a small amount of knowledge in the wrong hands is very dangerous. All I will say is that I don't think that for the products in question the margin figures over in the states are unreasonable.
     
  5. Crustyloafer

    Crustyloafer
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    Can I presume that you meant 23% and 34% when you typed 235 and 345? Make sure you dot your 'i's and cross your 't's.

    :lesson:
     
  6. RaceTripper

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    Probably not much. We know what dealer invoice price is when we buy cars and that doesn't produce any mayhem. When I bought my new car 2 months ago, I knew what dealer cost was on the car and every option I added to the car. So if we know what dealers pay for Arcam we can go in and make a purchase offer. The dealer can either accept or decline to sell at offered price.
     
  7. Crustyloafer

    Crustyloafer
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    As a dealer I prefer to keep it the way it is. All lot of customers do not comprehend the running costs of a business and therefore would wrongly assume that we could run on far lower margins than we do.
     
  8. Greggles

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    Not strictly on subject but I have a friend who used to work at the Naim Audio factory in Salisbury. I do not know if it is still the policy, but at the time Naim workers were allowed to build their own equipment at cost price (in their own time of course). I remember being amazed at the low cost that she was able to get stuff for.
     
  9. Steve.EX

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    I am aware of 100% increases in many instances.
     
  10. Member 231429

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    I am with Crustyloafer on this.

    I suspect the dealer margin will be somewhere between 25% and 40% but what you also have to take into account is the 17.5% VAT in the UK. Therefore on a £1000 product, approx £150 is VAT, leaving the dealer with between £212 - £340 profit assuming my estimate above is reasonable.

    That only leaves £510 for Arcam to build the machine and make a profit themselves ?

    The buyer who thinks a shop can survive on 10 -20% gross margin is kidding themselves.
     
  11. radio

    radio
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    Hold your horses gentlemen!

    I guess i did get a bit sidetracked initially but i did not mean by this topic by any means to complain about margins i was just inquiring about the fact price comparison between north america and UK.

    We (canadians) don't tend to consume as much as the americans so we end up paying a premium for that most of the time.

    I actually know the cost on the arcam here (a new division of our company starting up and in negotiation with arcam reseller here). It seems from all the comments that it may be in line?

    I figured you as a retailer/arcam dealer would know if the arcam products across the board. So you may be able to comment like "yes in north america because of not many sales arcam costs a little more to the end user" OR "that they are fairly streamlined".

    I meant to say on a product that is sold for $1000 our profit is no more than $245 and that requires a lot of time in terms of worker time/installation etc...

    thanx

    P.S Shame about the terrorist blast hope all you av-iers are alright and condolonces to who were effected.


     
  12. NicolasB

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    Arcam products are a bit cheaper in the UK because Arcam is a British company, so there are no exchange rate issues or transport costs to be factored in.

    Or, to paraphrase slightly, "we think you're stupid to understand the significance of the numbers, so we're not going to tell you them."

    You'll forgive me if I don't react particularly well to that assessment. Who the hell are you to tell me that I'm too ignorant to understand how your business works? :mad:

    Let's say you're right, and the consumer doesn't have sufficient knowledge to judge whether this is a reasonable margin or not. What will the result of that be? If he looks around at all the other products that are all also publically disclosing dealer margins, and he finds out that the margin is pretty much the same for Arcam products as it is for anything else, then why would this in any way prejudice him against Arcam or Arcam dealers? If, on the other hand, Arcam dealers do actually charge a much larger mark-up on Arcam equipment than they do on other brands, then it is entirely reasonable for a consumer to want to know that, and to enquire why it is - and it seems distinctly underhanded of dealers to try and prevent consumers from finding out.

    Frankly I think this is one of the very few cases where it actually is true to say that you cannot possibly have anything to worry about unless you do have something to hide.
     
  13. Crustyloafer

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    I believe you are distorting the meaning of what I was saying. Most customers have absolutely no idea what sort of margins are required to sustain a healthy business and have no interest in knowing. Should these customers know what we buy each product for then most, but not all, willl assume that as long as we are not making a loss on the items then any price is suitable. Quite frankly I think it is the retailer's responsibility to keep trade prices to themselves and let the customer decide whether to buy the product on the basis of its performance/price ratio relative to its competitors. The question of how much the vendor is making in the process is not a valid piece of information when deciding what to buy. Would you purchase a slightly lower performance product at the same price as another superior product on the basis that the dealer made less profit on it? I didn't think so.
     
  14. Steve.EX

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    I believe 25-40% is somewhat off the mark.
     
  15. GW43

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    I think it is unfair to criticise dealers regarding the marigns thay charge. When I sold to retailers (not hifi, tools actually, but similar principles apply), then once the VAT has been removed from the sale price, that takes a £100 sale down to £85. For this item the dealer may have paid £45, giving a gross margin of between 40-50%.

    Whilst on the face of it it seems like a huge amount, consider the costs of running a successful dealership:

    Rent/Rusiness Rates
    Utility costs
    Staff costs
    Working capital - stock, demo equipment etc.
    Advertising

    ...the list goes on.

    I'm not on the side of the retailer particularly - it's just that pre-sale (demo facilities, advice etc.) and post sale (when something goes wrong - it does happen!) it's a damn site easier going back to a physical dealer than it is to a web site.

    That service and peace of mind has a value, and hence a price.

    The choice is always with the customer to buy from where he or she likes, but don't forget, the dealers are there to make a profit, not as a charity.
     
  16. Steve.EX

    Steve.EX
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    Mine were not comments of disparage, i have no personal feelings regarding this. Simply replying to a question.
     
  17. Henry

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    The vast majority of people would have no clue as to the overheads of a business. I understand my own business, but whilst I would understand the principles and some of the specifics of the cost of running an AV/Hi-Fi retailer, I would not pretend to be so arrogant as to claim to understand their business to the point where I could decide whether the margin they are charging is fair or not.

    And why should the consumer overtly dictate whether the margin a dealer charges is fair? We do this in any case by deciding whether we wish to purchase an item in the first place. If you are not prepared to pay the price, you won't buy it. If you are not happy with the service the dealer offers, you won't buy from them. How much the dealer makes on this is no-one's business but their own and why should they have to justify how much they make.

    If you are just shifting boxes in volume, then maybe disclosing the margin might work, but otherwise you are asking retailers to explain and quantify intangible things like the quality of their service.

    Dealers have a hard enough time as it is competing against internet "retailers" why not cut them some slack.
     
  18. Palu

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    Well now they are producing in China. Thats a costsaving of 70%.

    :)
     
  19. GW43

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    Sorry Palu, you are misguided if you think that by manufacturing in China at lower labour rates products will automatically be 70% cheaper, or 30% of their original price. Raw materials will largely cost the same wherever they are used, research and development and design are still carried out in the UK, shipping is more expensive from China to the UK than UK to UK. Profit margins still have to be maintained. Labour costs only make up a small proportion of the delivered cost of an item. Shifting manufacturing to China is not going to result in massive end-user price reductions, manufacturers making excess profits or dealers growing fat on big margins.
     
  20. Crustyloafer

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    Hurrah, finally some people who actually appreciate the point I'm trying to get across.

    Henry, you hit the nail on the head, I couldn't have said it better myself.
     

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