Interesting Article on Costs

[Nikhil]

Why Does This Stuff Cost so Much" - Audiophile Review

Some very interesting info on the markups for distribution and sales costs. I would like to caution those who who jump to conclusions on the "high margins" that dealers get is to first understand the economics of the business. I don't think that there are many dealers making a lot of money in audio.

The "typical" operating model for most manufacturing businesses of any kind, in any industry, calls for retail pricing of 5X the cost of production for most goods and 8X the cost of production for anything made of plastic. This high cost for plastic goods may have something to do with the VERY great expense ?(and capital investment) involved in producing the necessary production molds, and the considerable expense of operating, maintaining, and when necessary, replacing them and their related production mechanisms. - See more at: Why Does This Stuff Cost so Much" - Audiophile Review

Do you really want to know why this stuff costs so much, though? To the last reason, add this one: Some years ago one of the very top High End electronics manufacturers came out with some wonderful and utterly gorgeous amplifiers, featuring extremely thick machined aluminum faceplates with even heavier machined aluminum front lifting handles (each amp weighed well over 100 pounds). When I commented to him that the amps were beautiful, he said "Well, they ought to be: Those faceplates and handles cost me US$200 a set, and, at a 5X markup from cost, they add US$1,000 to the price of each amp." I thought about that for a moment and then asked "But the amps only retail at US$5,500 apiece; wouldn't you sell more by cutting the price to US$4,500 and using just a plain sheet metal face plate and handles?" His response was that "Quality goods have to look like quality goods; if I used cheap appearance parts, even if the amplifiers were the same in all other ways, I might not sell any at all!" - See more at: Why Does This Stuff Cost so Much" - Audiophile Review