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Are we paying way to high margins?

Wharfedale Linton Heritage Speakers

audiopro

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I have been wondering if we have been paying way to high margins on audio products. I understand it is gross margins, but when they range from 40% upward it seems a bit ridiculous. Distributors are not keeping stock for demos nor are dealers doing the same. What are we paying such high margins for? All the guy does is place an order and deliver it to you, usually after an advance payment has been taken from the client and for this he charges a fat markup? I feel the audio community should come together and address this issue if possible. Curious what others feel or their take? Maybe my calculations are wrong.
 

elangoas

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Are we pay(v)ing way to high margins?

Yes.. There are no two ways abt it.. The prices are decided by the distributors.. This topic has come up few times on the forum and the views are the same..

In the past, audio community was small, so they had high margins..But things have changed, and more members are ready to own a piece of gear today.. But the scenario is still the same..

Only if the products are affordable, it will encourage more members to pursue their dreams.. For the last decade, prices have been scary in India..

Hoping for better prices in the next decade..
 

ratheesh

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Not only in this space, it's the same throughout the world. Demand drives everything. More the demand, better the margins. If i can sell 10 pieces at a margin of 1 rupee per day. The same can be achieved by selling 2 pieces at a margin of 5 rupees per day. As far as someone is willing to pay more they will keep selling at the same price.

The biggest motivator is competition, when someone having a mindset like Xiaomi senses the gap between the margin will pitch in and disrupt the market. Then the prices will be close to actual price demanding for better innovation and volume driven. Till then it's all about demand and supply.
 

Hari Iyer

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Mentioned it many times in the forum and am repeating again -

"Price of any product is what the buyer is willing to pay".

If an amp cost your 1L and if most buyers are willing to buy at that price then the its price is 1L. If you don't get even a single buyer at that price then its something which the dealer needs to consider. But again most dealers anyway don't stock the product and its just like an order booking. So anyway they don't have to carry inventory.

So what is demand - If you have a "Need" and also the "Money" to buy the amplifier. People have tons of money but the "Need" is not there. Hence it cannot be said that "Demand" is there. Sometimes you may have the "Need" but not the "Money" and again there is no "Demand". So only when the "Need" + "Money" is there you can say that there is "Demand" else not.

Most people buy a car for 10L+ without thinking twice. The same guy will frown when buying a speaker costing just 30K. That explains the "Demand".
 

audiopro

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The entry level market is consolidating thanks to hifimart. I think it's time for hifimart or similar stores to move upmarket. I don't have a problem with the manufacturer making money cause he invests into research production etc but why are we paying ridiculous margins to a distributor just for importing an item? Either add value which they really cannot or drop the price to a fair level.
 

elangoas

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Most people buy a car for 10L+ without thinking twice. The same guy will frown when buying a speaker costing just 30K.

If that car costs 10L in India, it must def cost 10 + Lacs in other countries.. But when a speaker or other items sold in other countries for Rs 27,000 is sold for Rs 60,000 in India, we will definitely frown..
 

Ravindra Desai

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Hello,

I know I could get bashed when I say what I am about to, but I'll bash myself if I don't.

It is sad that you'll brought the up only cost.
What about quality, both in terms of build and sound? What about easy of use and internal intelligence? What about consistency in sound quality (not sibilance to sibilance and timber to timber, but.....you know what I mean)?

Stereo users are better off. It is kept simple and so we are not buying two different speakers for left and right channels.
But HT group is in total disarray.
Two different THX cinema theaters don't sound the same. Forget two different home theaters. I don't want any body coming up with acoustics as an excuse.....

The end user experience should be putting the established brands to shame.
I hope that we start demanding more from established brands not just better cost but better over all product, better over all sound quality, and better overall user experience.

Regards,

Ravindra.
 

sidvee

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Guys it is easy to talk about margins and the killing dealers/distributors make, but why doesn't anyone discuss overhead costs these people face. What is the rent they pay, electricity, salaries etc (Electricity cost in India is highest in the world and Govt. electricity company service is perhaps the worst in the world, hence so many generators around) not to mention pressure from the Manufacturer to sell more and more and pay upfront for inventory? Running a small business honestly in India is perhaps the toughest in the world - all the corruption and other bs one has to deal with (like chandaas at festival time etc., local goons demanding haftaa, locals cops demanding their cut, excise offcials demanding their cut, IT offcials demanding their cut etc., etc.)? So I can say with 100% confidence (since I am running a small business) none of the dealers, distributors are making a huge profit, agreed margins are high but please look at sales volumes (which is miniscule in audio/video and cannot be compared to car industry, India is the 5th largest passenger car market in the world so there is enough sales volume to reduce pricing to an acceptable level - transport is a necessity, not a luxury like Audio, Video ) and cost of doing business in India. It is easy to say reduce price and customers will come, but not everybody is Jio, cut prices so the competitor is out of business (with huge Govt. support of-course) - not to mention the government's GST cut of 18-28% - which again is amongst the highest in the world and increases final sale price to a very high level. I support local dealers whenever I can, but my issue with them is not so much pricing as the service they offer. The bigger issue imo is even if a consumer is willing to pay highly inflated pricing in hope of better service when required, especially at warranty time or when some paid repair is required, there is hardly any support available - which doesn't cost much, kind words, efficient repair, timely communication etc. This is inexcusable and that is what has to be remedied - and one of the reasons I hardly buy any more equipment locally.
Cheers,
Sid
 
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ItsMe

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Once the online market place matures in India, more competition should come in and hopefully the scenario should change. Until then, the same 4k projector costs 241,000 INR here when it costs equivalent to 120,000 INR in US.
 

Ravindra Desai

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I support local dealers whenever I can, but my issue with them is not so much pricing as the service they offer. The bigger issue imo is even if a consumer is willing to pay highly inflated pricing in hope of better service when required, especially at warranty time or when some paid repair is required, there is hardly any support available - which doesn't cost much, kind words, efficient repair, timely communication etc. This is inexcusable and that is what has to be remedied - and one of the reasons I hardly buy any more equipment locally.
Cheers,
Sid

@sidvee :
w.r.t the relevance to the title of this thread, you pretty much nailed it in your last couple of sentences.

Regards,

Ravindra.
 

elangoas

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but why doesn't anyone discuss overhead costs these people face. What is the rent they pay, electricity, salaries etc (Electricity cost in India is highest in the world and Govt. electricity company service is perhaps the worst in the world, hence so many generators around) not to mention pressure from the Manufacturer to sell more and more and pay upfront for inventory?

I believe the overhead costs are the same for dealers in other countries too.. It is not that Indian dealers consume 1,000 units of electricity for a month just for demo purposes.. It is a recurring cost..

A most popular AVR was on sale for US $800 on amazon.com (50K INR).. The same AVR cost in India was Rs 1,20,000 after fancy discounts.. Do you justify the dealer taking Rs 75,000 more than the actual product in the form of these overheads per AVR?..

Once the online market place matures in India, more competition should come in and hopefully the scenario should change. Until then, the same 4k projector costs 241,000 INR here when it costs equivalent to 120,000 INR in US.

What do you mean as mature market ?.. If the projector was priced sensibly, am sure there would have been atlest 50 ppl from this forum buying it, including you.. It is as simple as that.. If the price is sky high, how do you expect to make a sale ?..

If they want more sales, they got to cut down pricing.. Sales will automatically follow..
 
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Hari Iyer

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One of the reason why I purchased my Dared Tube amp from India was, it was priced almost the same in India and international market which I think is rare to find.
 

audiopro

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What I'm talking about is when the distributor has zero stock. He just says give an advance payment and I'll order it. Where's the overhead in that case? There are only 1 or 2 distributors who have stock in which case I respect the fact that they had to invest money borrowed at interest in stock and hence probably got a better price. Infact these distributors will offer you a discount if you buy what they have in stock. But when the guy says pay upfront then I'll order it and still wants to charge high prices it's not fair.prices should be atleast 20 percent less than what's quoted easily.
 

arunkvivek

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excise offcials demanding their cut, IT offcials demanding their cut etc., etc.)
Haftas to goons is something that cannot be avoided and unfortunately has to be taken as overheads. But the rest are something that can be dealt with through upright practises. I think these are battles that the distributor will have to fight. By not opposing it, they are colluding and promoting the corruption and recovering the cost from us + a margin on the bribes paid.
I don't know any IT official expecting a cut from legal business. It is only when any businessman tries to evade tax, that paying IT officers come into picture. There are a lot of things that are murkier in audio trade (like any other trade) such as accounting of old exchanged items, sales without bills, cash transactions etc. There are provisions in IT law which make it very easy for small business to run without any hassles. Being an accountant, I am not able buy that these are legitimate overheads and consumers will have to pay for it.
Service side of the audio world in India would never improve until there is a consumer revolution resulting effective litigation and conviction.
 

jls001

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This dead horse has often been flogged;). We've ranted and generally cursed our AV distributors and dealers.

Let's progress to the next step: what can we, as buyers, do to change it? Unless we propose concrete steps to favour us, and can influence distributors and dealers, this remains an academic rant.
 

elangoas

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We've ranted and generally cursed our AV distributors and dealers.

All we expect is a fair price..Do we not deserve that?

I bought a pair of speakers for US $400.. This includes cost price of the product + distributor / dealer margin + Shipping from China + over head costs.. Lets say, if we skim the distributor / dealer margin + Shipping from China + over head costs from the above, the cost price must be $250..

It should have been sold in India with a fair math, Cost price 250*65 + Duty + distributor / dealer margin + Shipping from China + over head costs) = ? (Rs 25,000) Fair.. Or even Rs 30,000.. But the product is still priced Rs 65,000 before fancy discount..

Shipping from China to India should cost less than shipping to US..

Let's progress to the next step: what can we, as buyers, do to change it?

Each member would have their own opinion, i would ignore such products and embrace the most sensibly priced..
 

sound_cycle

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I have been wondering if we have been paying way to high margins on audio products. I <snip>Maybe my calculations are wrong.

Have you considered that the 41.5% on cost + insurance + freight may be involved, and the exchange rate. maybe other "friction factors" too. Why look at audio, consider fuel prices :) The only option is to suck it up and ignore the burn.

ciao
gr
 

sidvee

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I don't know any IT official expecting a cut from legal business. It is only when any businessman tries to evade tax, that paying IT officers come into picture. There are a lot of things that are murkier in audio trade (like any other trade) such as accounting of old exchanged items, sales without bills, cash transactions etc. There are provisions in IT law which make it very easy for small business to run without any hassles. Being an accountant, I am not able buy that these are legitimate overheads and consumers will have to pay for it.
.
@ Op sorry for the OT. Not so sure Arunvivek. I have heard many cases even if IT department scrutinizes a return and everything is in order just to close the case they demand payment - not only from business but also individual tax payers. Again perhaps my experience is very limited and I am very wrong and the IT department must be working very diligently and according to the law.
Anyways this is our country's ranking of public sector corruption based on a popular index.
https://timesofindia.indiatimes.com...ion-perception-index/articleshow/63025403.cms
Cheers,
Sid
 
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sidvee

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I believe the overhead costs are the same for dealers in other countries too.. It is not that Indian dealers consume 1,000 units of electricity for a month just for demo purposes.. It is a recurring cost..

A most popular AVR was on sale for US $800 on amazon.com (50K INR).. The same AVR cost in India was Rs 1,20,000 after fancy discounts.. Do you justify the dealer taking Rs 75,000 more than the actual product in the form of these overheads per AVR?..

..
I disagree Elangoas - the actual costs for dealers in a ratio between units sold and cost of fixed and variable overheads. So if you consider the miniscule volume of sales of high end audio/video in India the overhead cost is significantly higher than other countries.
Secondly in the example you described you are again missing out on the volume of sales of this $800 receiver on Amazon.com. How many units were sold at this price? And can the Indian dealer sell the same amount of units (legitimately with import paid etc.). If so it is apples to apples, if not he has to charge whatever it takes to cover his costs. Anyways these are my opinions, I must be wrong so please ignore. You are right - we are paying too much for everything in India.
Cheers,
Sid
 
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