Retail Buying - Reality Check

Well rogo, you've identified a major problem in high end retailing. High mark-ups vs. ready availability on the net or nearly new product. I have made a decision not to go cruising the salons when I will likely buy on the net; I have a small business (not retail) and I would feel very uncomfortable. However, if they are quoting you MSRP prices and then adding design fees on top of that, then they are getting greedy and cutting their own throat. Their mark-up should include system matching and recommendations. Unless they are doing a custom install, its not really a "design", its just the value added that a retailer provides. Even if it is a custom system, they are probably making a pretty good profit on the install work, kind of like kitchen companies. If they do the design and you buy the cabinets and labor elsewhere, you pay them a fee. If you buy the hardware from them and have them do the whole kitchen remodel, the design work is usually gratis. It doesn't sound like you initially intended to take their time and then use the knowledge you got elsewhere, but that's what you ended up doing. If you had that intention going in, then shame on you, but it doesn't sound like that's the case. Anyways, I would hope that you would now realize that the moral thing to do is to make a decision up-front; buy on the web and rely on this site and live with your mistakes, or buy retail and pay the added cost. You should also be aware that there probably is a middle ground in terms of finding a dealer you can work with long distance, who will also cut you a break on the price.

There's no clear right and wrong in issues like this but a few facts: nearly no high-end lines have margin of 50%. some cables, maybe. (Transparent springs to mind). Most gear is around 40%, maybe 45% if you pay the invoice in 7 days, etc. Video gear is even less, try like 30% or so. (TV's, etc.).

Ultimately if the retailers don't survive (somehow), the manufacturers don't survive = kiss goodbye the idea of high end in general. (taken to logical conclusion). Where do you think used/demo gear comes from?

"So, buying new at full MSRP also meant getting inferior performance for the necessary burn times." This is BS IMNSHO. burn in as a concept is overrated.

"However, 50% markups on items that they don't keep in stock and have to special order, seems out of line to me. " So tell us about your business. Do people know your margins? Do they beat you up on price about them? Is it justified in their eyes?

" Unfettered by the product lines you have to sell, you provide a far more level playing field of unbiased opinion." not really. There's plenty of dealers here masquerading as consumers, and pimping their stuff. Likewise, plenty of insecure buyers that like to reaffirm their purchase choices by talking them up. (and trash talking stuff they don't like.). Read between the lines and you will see this fairly often here, FWIW.

RE: whole-home system installation: It's a service like anything else, and there is a cost. Design may be free (or at least subsidised) but parts and labor never are. Skilled designers/installers don't come cheap and of course their labor is marked up by the store. Some stores stay afloat on their custom install departments... its' where the money is right now (along with Home Theater). 2-channel market is very slumped as far as retail goes.

Yes, I buy on Audiogon too, but I patronize my local dealers when I can and when it makes sense. No, I don't pay retail (who does?) but they make enough to keep in business and I enjoy having and advocate should the need arise (e.g. warranty issue, free loaner gear, in-home trial, etc.). The stores I go to have 7-day money back, 30-day exchange, and liberal (free) in-home trial of demo gear. IMHO, that's worth what margin they get on the stuff.

Just a little devil's advocation here.
-Ed

The problem seems to be double sided as you stated, but it is probably one sided if you think of what is involved from your standpoint. The dealer has what he/she wants to sell at the price they wish to sell at. You have your hard earned money. This is your decision to do with your money as you see fit, hence the problem is all yours not theirs (the dealers). Sooner or later dealers will need to try to understand and compete in global market. That might include competing with used prices over the Internet. I tried mightily to get my local dealer to come down from $3950 with a trade ($500 credit subtracted from $4450 MSRP plus tax) on a new pair of Thiel CS 3.6s (a 10 year old design mind you) to "just" $3500 with trade for a pair of speakers I had found used (Audiogon), but under warranty for $2210 with shipping (plus I just sold my CS2s for $450). I did NOT audition the speakers there as I had heard them previously at two other dealers over the years (1992 and 1997)while auditioning amplifiers that I purchased. So...none of the dealer's time was taken up by me. Also the dealer had no product in stock nor would he sell the demo units at my asking price. I DID tell the dealer that I had a better price to work with also. My question is WHY and HOW could I support the dealer price? Furthermore, out of town Thiel dealers were beating the local new price too! In personal economics, there is one major interest...SELF! Also there can not be a deal unless BOTH parties are satisfied. My wife was watching all this...what would she have done if I paid over $2300 more than I had to because I felt sorry for the local dealer? Did I mention major league "buttkicking"? I'm sure dealers all have margin problems, but market determines price. I have two in college so I have margin problems too!If a retailer can not make a profit at the market price no one will be happy, but clearly the product is overpriced BEFORE hitting the retail store. Dealers can always hope a neophyte buyer comes in though... BUT alternatively, if a dealer sells at twice the market price to an ignorant customer isn't that just as bad as me paying twice what I had to pay? Not for the dealer in this case or my hypothetical case... So...back the original problems...to whom does the money belong and what will make that owner the happiest in the long run? Perhaps there can be no mutual satisfaction in the local market at times because we CAN and WILL shop globally while the local dealer steadfastly refuses to acknowledge global price competition. Hopefully, this is not how every local transaction goes...

As long as an internet purchase in another state is cheaper because of the sales tax advantage, local dealers will be at a disadvantage. I buy used on Audiogon & e:Bay. I also buy new & used from my local dealers. I know them well enough, they will give me a fair price.
The more time I spend in this hobby, the more I appreciate input & advice from contacts I've made locally. I won't buy a new "big ticket" item from anyone but a local dealer with a storefront. They will give me a price nobody but a grey-market dealer can touch. And I won't buy grey-market.

In general, most hi-end 2-channel retailers are struggling due to the HT craze and the plethora of Audio Supermarkets carrying low quality, mass market fare...I guess it all depends on your approach...Im not a high roller...and pretty up front about it...I also dont dont spend alot of time with salesmen about equipment I cant afford or have little interest in...most salesmen cant even afford half the stuff they carry...so I think they can relate to the 'average joe' more than we realise ...you would be surprised at how many dealers will work with you regarding demos,b-stocks,used/trades,etc...this is afterall a luxury hobby...most dont spend 1k on an entire HT set up...let alone a pair of monitors...and yes...by the time a product has hit the foor it has passed from manufacturer to distributor to the showroom...this isnt hi-volume type of sales...mark up is the price you pay for buying a quality product...and in a tough economy...hi end dealers are willing to cut you a deal if you purchase multiple items or they get a sense you will be back...