When spending $3000 with a dealer, is it appropriate to ask for a bundle/discount?

Sounds like you've had some bad dealer experiences, Nate. All I can say is that I've never had to demand a discount. I've always gotten one without asking for it. Naturally, dealers want your money. Ultimately, you have to come up with a deal that's agreeable to you and your dealer; whether it's a lower price, an extended discount or loaners or home set up. In my experience, some combination of these things are possible without demanding it.

 

It's not a bad dealer experience but a bad business experience I've carried with me for going on 4 decades now. That experience taught me a lot.

I never demand a discount. I'll ask, but if I am not happy with the deal, I walk. I don't have money burning a hole in my pocket.

 

When building a system package at one dealer, I've never paid for cables but their quality is entirely at the dealers discretion... obviously,though, they don't want to risk harming the sound.

 

Likely closer to 100% of electronics, and much much higher, perhaps as high as 500% on things like cables. There is a reason basically every hifi brand has strict minimum advertised price contracts - it protects the cartel.

 

Right. People don't care if we have families as long as they save a couple bucks. It's sad.

 

Most of the better companies in the consumer electronics industry use neither direct sales or a distributor. They sell to the dealer, not to the consumer, which would be direct sales, and don't use a distributor. Yamaha is a good example of this. About 15 years ago, CE (consumer electronics) companies started requiring their manufacturer reps to stock merchandise but this is just for fill in orders. In this case, the rep is acting like a distributor, but the retailer is better off making a larger order that will give him payment terms, free freight and a better price straight from the manufacturer.

There is truth to what you say. Going for volume by lowering prices created the superstore but that has a poor track record. Look at all the large chains and superstores that have gone out of business over the past 20 years: Circuit City, Sound Advice in the south, Audio King in Minnesota, Soundtrack in Denver, Magnolia Hi-Fi in Seattle (acquired by Best Buy). Even Best Buy has had to raise their margins in order to survive. Trading off price for volume looks good on paper but it rarely works. Even Sears, and nobody but nobody was bigger than Sears, couldn't make it work in its purest form.

They don't sell their B-stock or discontinued models direct. They sell them to their retailers. Soundstage Direct just had a great sale on B stock VPI turntables. My store sold over $150,000 of B-stock Polk Audio over the years. It allows the retailer to have a great sale and still keep their margins up on A-stock inventory. Our B-stock Polk speakers were often 50¢ on the dollar. Consumers loved it.

Because they have a huge online presence and can play in both worlds. Abt Electronics in Chicago is an even better example. People in Chicago absolutely love Abt. They take care of their customers like nobody's business. They sell lines like B&W and B&O exclusively out of their one store, which is huge, while also doing a bang-up business online.

As for why a brick and mortar store must be priced higher, it simply gets down to overhead. Maybe 5% of sales goes into rent. 8% is payroll, not including what the owner gets paid, which in my case was sometimes nothing. Heating, lighting and insurance take another 5%. That's half of your profit and we haven't spent a dime on advertising, training, maintenance, theft and bad debt (which can be a percent or two of sales), owner's salary and all the other ways a business spends money. Stores like Abt let their online sales help pay for some of these costs, plus they sell for a higher margin on their top end gear through their stores, which the citizens of Chicago are seemingly glad to pay because they provide phenomenal customer service. They are also competitive, giving me a great price on two Yamaha receivers I purchased from them a couple of months ago. To be, Abt Electronics is the finest consumer electronics retailer in the country.

And we are in agreement that companies like B&H and Abt are the model for a brick and mortar store to survive. You can't do it relying on just the local guy to come into your store and buy stuff. You have to have a way of increasing your market share nationwide while also making that local guy want to to buy from you.

 

I've shopped at B&H since pre Internet days. Back then it was mail order and they still were great. Never been to Chicago but I am an Abt customer!

Meanwhile, online and instore prices at B&H are exactly the same

 

Is the average consumer required to support a business model that's no longer the only game in town?

I understand people have to support their families but is economic inefficiency thereby mandated? People make their choices. I have a family as well and every dollar I save is to the benefit of my family. Which family am I expected to put first? Mine of course.

 

Your a little high but then the poster you were responding to was a little low. Let's talk margin (cost as a percentage of selling price) as opposed to mark-up (selling price as a percentage of cost). As a retailer, I think in terms of margin. Most consumer audio is 40 points at retail (cost $60/sell$100). Speaker lines can be 50 points at retail, with a cost of $50 if it sells for $100, but the better ones are down to 40 or 45 points. But these are retail prices. As this whole thread is about, a store often doesn't sell at retail. A store has to be able to operate at 35 points (cost $65/sell$100) or lower.

And let's not even talk video. Video margins are 15 to 20 points (cost $80-$85/sell $100).

Cartel? You don't know the industry. There is no collusion. Yamaha hates Denon. Pioneer hates Matsushita, which is Panasonic. B&W hates KEF. And everyone hates Sony.

As for unilateral pricing, which is what you are talking about with minimum advertised pricing, it is not a conspiracy but a way a manufacturer avoids their worst nightmare, and that's becoming Pioneer. Pioneer long ago lost control of their pricing and is a reason they had to sell out to Onkyo recently. I don't like unilateral pricing any more than you do but it comes from manufacturers wanting to control their own destiny and not have the marketplace determine their future.

An old salesman's motto is you have to keep control of the sale. By controlling their price, manufacturers keep control of the sale.

The worst offender? Bose. Ever notice in an ad how sale prices always exclude Bose? It's in the fine print. They will cut off retailers for selling their stuff for a couple of bucks below retail. It doesn't even have to be an advertised price. It can be offering a $5 discount to a customer to make a sale. If you do that and Bose finds out, they will terminate your franchise. No warning. No second chance. Poof! You are no longer a Bose dealer. It's legal and it stinks.

In that circular firing squad of hate, I hate Bose. I actually think many of their pieces sound really good. I hate Bose because of their business practices.

 

I truly respect firms like B&H that are real stores with inventory and investment. Many online stores are just drop shipping orders from the factory. I love that I can (as an example) go to B&H and get nearly any Mac (Apple) MTO configuration right out of their stock.

 

While you want to insure your store keeps thriving, i do think your seller should offer a discount of some sort when the numbers reach a point. Keeps the store going AND creates repeat customers.

 

I'm not sure it's ever inappropriate to ask for a discount when you're buying audio electronics. I dunno if I'd ask for a discount when I go out to dinner at a premium restaurant like Per Se or Del Posto or something; but when I'm buying a durable good -- a car, an appliance, a coupla thousand dollar pair of speakers -- some degree of haggling seems pretty commonplace. I dunno about feeling entitled to a discount -- that's up the the seller and his or her circumstances. But appropriate to ask? Sure.

 

Another point I would add would be the margin that is needed based on the buyer. I am one of those hated "manufacturers reps" but in the lighting industry. I write specs, do design layouts, engineering calculations, tech support, and many, many other support functions to earn my commission. Large projects are many, many times easier for me to deal with than small jobs. And dealing with residential end users is a special kind of PITA. I'm not talking about the savvy types that hang out in online audio forums, but the average Joe, that can't seem to get their VCR to stop blinking. I deal with wholesale and some people ask me why wholesalers can work on a 10% markup, but showrooms need to make at least 30% and I assure them that the residential showroom guy earns every nickel.

 

Plus FREE PARKING in midtown Manhattan when you buy something!

 

Why do you think that a manufacturer enforcing consistent pricing stinks?

As a consumer, I strongly prefer a set known price. As a manufacturer, I'd always want to compete on quality and not the whims of a dealer discounting my product unilaterally and cheapening my brand in the process. Also, as a dealer, I'd much prefer to be able to tell a customer that, "Hey, I just can't discount this item because the brand won't allow it." Most people want what they want. If brands were more strict with their pricing AND set fair prices in line with the perceived quality of their product, I think we'd see a healthier industry.

 

Absolutely. Starts with manufacturers and distributors working with dealers that protect their brands and each others territory. One of the reasons for Tone Imports success. Anything you buy that comes through Tone Imports as a distributor and his dealer network have a value that will last.

 

For one, I can't believe it's legal but somehow it has survived challenges. To me, it's price fixing.

Second, it kept me as a retailer from running my business the way I wanted to. Frankly, I ignored unilateral pricing for my lines even though the manufacturers always threatened to enforce it. We had a huge sale between Christmas and New Years where everything in the store was on sale for cheap. It was our thirteenth month. For that week, just get it out the door was my mandate to my salesman. I knew that for La Crosse, Wisconsin, my store was the only game in town (other than Best Buy) so I was sure Alpine or Polk Audio, two of my manufactures with unilateral pricing, couldn't go elsewhere if I put their stuff on sale below M.A.P. (Minimum Advertised Price). I did and the manufacturers blinked. It helped that we sold a ton of Alpine and Polk Audio the other 51 weeks out of the year. But if I was in Minneapolis, I wouldn't have had that freedom and flexibility. They might have pulled their lines and gone to another store.

Third, it is terrible for the image of the industry. Just look at Tyler Eaves post upthread talking conspiratorially about cartels. I believe in open markets. I wanted my customers to think they are getting the best deal possible. If they think they are being hoodwinked, it's bad for business.

I understand your position, too, Brian. As I explained in my previous post, I get why manufacturers do it. They want to control their pricing, which means they don't want others to determine their future. They want to be around in ten years. I like stability and marketing from a position of strength. Also, when I buy something, I want to make sure I'm getting the best price available. The trouble with consumer audio is that many people are convinced somebody is getting a better deal than them. I'll even get you a deal on Bose. I know tomorrow I could go into the right store and buy a pair of Bose speakers and a Sony receiver. I'd finagle the deal so that the Bose speakers would be at M.A.P. on the invoice but the Sony receiver would be pennies over cost. Are the Bose speakers still retail in that situation? Not really. Nobody is fooled. Everything is negotiable in consumer electronics, which is the point of this thread.

That's the fourth reason I hate unilateral pricing. It's a game that's rigged, and as with most games, there are winners and losers. The consumer shouldn't be the loser.

 

Exactly.

 

Want to make many millions of dollars and a name for yourself, councilor? Go after Bose and their unilateral pricing. I remember the Attorney General of the State of New York trying to do just that maybe 20 years ago and failing. Or maybe it was somebody else. Maybe it was the AG of Massachusetts. Bose is in Framingham, Massachusetts.

As I remember it, here is how it works. It's in the dealer franchise. (This is based on my franchise with Polk Audio but they stole Bose's language.) The franchise states that as a dealer, I understand the need to operate a profitable business. The manufacturer also understands I need to be a profitable business. They only want to have dealers that are profitable. By establishing a M.A.P, they are helping me be profitable. By maintaining the M.A.P, I agree that it is the way for me to be profitable. M.A.P. becomes part of our contract. The manufacturer sets it and I keep it. If I break M.A.P, then I am breaking our contract. I am in violation of the terms of the franchise. They can pull the line.

Talk about a f*****g game.

 

It's price fixing when multiple parties conspire to keep a price at a certain level. If 3 grocers in a village all agreed to sell chocolate bars at the same price, that's illegal. But if a single manufacturer tells the 3 grocers to sell the chocolate at a certain price " or else" that's not price fixing. Might be restraints of trade though. Funny thing, to th end user, the results are the same.

 

I'm curious...

Of those here that feel little or no hagling is right, how many of you own businesses? Of those here that feel you should get a discount no matter if it's a $100 or $10,000 purchase, how many of you work for someone else?

The reason I ask is...I don't think most people have any idea the challenge/cost involved with running a business and actually being able to stay in business.

 

Having sold a couple of UK brand in the US in the 90's, EVERY dealer I dealt with expected to sell below retail. Every dealer I bought or traded with the same. If you want to pay full price go for it, but no audio dealer in the US I've ever met is expecting sell for that.

 

The additional reach they have (in customer base) with their online sales affords them the ability to maintain their B&M.

 

Insightful post.

As for myself, once was a business owner. Now work for another. Takes a lot to stay in business. You need to have a market and sell above cost. The rest are details. Unless you subscribe to the old question- how do you make a small fortune? Start with a big fortune.

 

Yes, to both. But understanding how much you need to be selling at above cost is the key. Being able to predict sales volume is critical, but so is planning for fixed and variable costs associated with the business.

I typically buy used from another consumer when I feel the need to acquire something that I can't justify the "new" expense of. I figure at least that way, perhaps the seller I am buying from is selling to upgrade to something else from one of his/her own dealers.