When it comes to buying new gear and selling old stuff, I think many of us have a misconceptions about what price means what, and what to expect from selling used gear. So here are a few questions:
List price V/S Street price:
If two things list for $500 and one streets for $400 while the other sells for $250, is one really a better value? What determines this difference?
Selling used things:
If you were to have a piece of gear, lets just say an SM57 or a fender P-bass and you wanted to trade it in for something else at a big retailer, how much should you expect in return? (assuming its in perfect condition) Does this depend on the list or street price? or is it more up to the retailer?
thanks guys!
List Price v.s. Street Price v.s. Used price
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vibesof20hz
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LewKellogg
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Both sides...
The retailer has to make money on both transactions 1) selling your old gear and 2) the new gear you bought. You will get less than used for it in trade one way or another.
Lew
Kings Mill Audio
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I'm Painting Again
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up to the retailer and you to come to a selling/buying price..
mmm..marketing hype, brand name, word of mouth/forum/personal hype, actual build and component quality, actual usefulness (to you personally)..probably many more determinants..If two things list for $500 and one streets for $400 while the other sells for $250, is one really a better value? What determines this difference?
watch a few ebay auctions for decent mics and rack gear, and you'll see that a lot of them go for within $20 the cheapest price you'll see on pricegrabber.com (sometimes people pay a little more than street value for a used item on ebay - absolute madness, unless you're the seller 
). for an SM57, i'd say try ebay.
i think instruments are in a different category, because most people like to play the actual instrument they will be purchasing, so for the p-bass, a retailer might be able to offer a pretty decent trade value.
). for an SM57, i'd say try ebay.i think instruments are in a different category, because most people like to play the actual instrument they will be purchasing, so for the p-bass, a retailer might be able to offer a pretty decent trade value.
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kayagum
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Here's my formula (assuming the piece of gear is something that people genuinely want):
Street = 65% of list (for small shops), 50% of list (for megadealers).
Used = 25% of list, maybe 50% of street (= 33% of list), especially for trade-ins.
Used crap = 10% of list, less if original is < $100.
If you consign, seller should be able to disclose.... generally their fees will run 15-25%. E.g. sale price = $300, you get $225, dealer gets $75 @ 25% consignment rate.
Some boutique/1 person shops charge a fixed rate. So street = list, maybe forgive the sales tax.
Before you cheapskates think, "oh, I should go to the megastore", think of all of the benefits of working/buying from local stores. 15% is a cheap fee for not dealing with clueless jerks, plus they may promote/assist your work.
Street = 65% of list (for small shops), 50% of list (for megadealers).
Used = 25% of list, maybe 50% of street (= 33% of list), especially for trade-ins.
Used crap = 10% of list, less if original is < $100.
If you consign, seller should be able to disclose.... generally their fees will run 15-25%. E.g. sale price = $300, you get $225, dealer gets $75 @ 25% consignment rate.
Some boutique/1 person shops charge a fixed rate. So street = list, maybe forgive the sales tax.
Before you cheapskates think, "oh, I should go to the megastore", think of all of the benefits of working/buying from local stores. 15% is a cheap fee for not dealing with clueless jerks, plus they may promote/assist your work.
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Professor
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The music instrument & equipment retailers have developed this way of destroying themselves over the years, and they've done an exceedingly good job of it. The internet and mobility of people today has helped to spread a bit of this expectation of discounts and lower prices to other industries. But elsewhere it's considered cost-saving while in the music industry it has pushed things even further down.
MSRP is the "manufacturer's suggested retail price" and is simply what the manufacturer thinks the product could be sold for by a retailer.
But most manufacturers don't sell their products directly, they sell through dealers, and so they have to sell their products to the dealers at a lower price so the dealer can make a profit. That is what they are in business for after all.
Of course the catch is that there are so many dealers selling the same products, and musicians who will do anything to save a dollar more on any particular item. And so the dealers compete in the only they can, they lower the price to attract the buyers.
The 'street price' is the average price you will see at dealers selling any particular product. It might be 5% below MSRP or 50% below, and that has almost nothing to do with quality or value.
It used to be that music gear followed the rest of the A/V industry with parts cost x3 as dealer cost and parts cost x5 for MSRP. That means a piece of gear that cost the manufacturer $100 to build would be sold to dealers for $300 and the dealers would sell it for $500. But the music dealers slowly drifted southward giving deals to musicians to get the sales. 10% off that $500 MSRP would drop the "street price" to $450, and someone else across town would knock off 20%, and someone else would knock off 30% until eventually everybody was selling at about 10% above their cost - meaning they would buy the gear for $300 and sell it for $330.
Fast-forward to the chain stores, and you have folks who can use buying power to get better deals from the manufacturer. The cost might be $300 per unit, but if I buy 20 units, and want them for $250 each, the manufacturer will usually oblige. That chain store can then spread the units across several outlets and sell them for $300 which is a 20% profit for them, but straight dealer cost for the other folks.
So now we get to today, and there are so many outlets for folks to buy gear, that it's hard to follow what prices 'should be', 'could be' and what things are really worth. The weird system has also messed with the sense of value for the underlying gear, and some manufacturers have acted to fix that so their gear isn't devalued by the whole mess. They simply placed the dealer cost and the MSRP so close to each other that the dealers have little to know room to discount anything. They'll sell a piece of gear to a dealer for $400 and set an MSRP of $500, and you'll be confused at why that piece of gear doesn't discount below about $450 while other "$500" items will drop to $300 or less.
The psychological effect is that we tend to think that the piece of gear that doesn't discount as much is worth more... and indeed, it probably is. But that's because the dealer cost is higher, and if the traditional model were followed, that piece of gear might have had an MSRP much higher than $500.
So that's what you're seeing in the businesses out there. Things are different when you figure in online dealers, independent sales, and the latest trend for microphones which is a new company opening every week to import Chinese-built mics under a new name and sell them directly via the internet. Nady originally introduced those ribbon mics at $499 following the $100-cost, $300-dealer, $500-MSRP formula. But then other companies started importing the mics to sell directly, so they could buy at $100 and sell at $300 because there was no middle man. Of course, once one guy does it, everybody has to, and the prices started dropping there as well, so those guys aren't tripling their money anymore, but still getting upwards of a 50% profit or so, if their careful.
Did that all make some sense?
As for the used market, well come on man, that's a used market and it is truly whatever the market will bear.
Does it make sense?
Hardly. If you go by the used market, you'll see that the single best value-retaining product available would probably be the SM-57. Because for some reason, you can buy them new for between $79-89 and sell them used for between like $75-85. I don't understand it, and I find it kind of silly, but I see it. Meanwhile a Neumann U-87 lists for about $3500 and sells for around $3000, and can be had used for about $1200-1500 (give or take). The more expensive (and better in my opinion) U-89 mic that lists for like $5k and sells for $4k will show up on the used market for about $1k.
But that has nothing to do with quality and everything to do with demand. More people know, have seen, have used, and want SM-57s and so there is a bigger market place. Plus they price in under $100, and musicians are cheap. Fewer people have used or understand the value of the U-87, and less so for the U-89, and not many musicians will drop $1000-1500 on a used microphone when there's all that new Chinese stuff that's cheaper.
Oh, and of course those are prices for direct, person-to-person sales maybe done over the internet or in-person. Used value at a dealer is different because they need to resell the gear at a competitive price to the online sales, so they will buy the used gear cheaper and try to price it a little higher to have some wiggle room for haggling, and to make profit there while losing all that money on new gear. I seem to recall that when I was selling gear, we would tend to make more money on used gear than on new gear because of all the price competition.
-Jeremy
MSRP is the "manufacturer's suggested retail price" and is simply what the manufacturer thinks the product could be sold for by a retailer.
But most manufacturers don't sell their products directly, they sell through dealers, and so they have to sell their products to the dealers at a lower price so the dealer can make a profit. That is what they are in business for after all.
Of course the catch is that there are so many dealers selling the same products, and musicians who will do anything to save a dollar more on any particular item. And so the dealers compete in the only they can, they lower the price to attract the buyers.
The 'street price' is the average price you will see at dealers selling any particular product. It might be 5% below MSRP or 50% below, and that has almost nothing to do with quality or value.
It used to be that music gear followed the rest of the A/V industry with parts cost x3 as dealer cost and parts cost x5 for MSRP. That means a piece of gear that cost the manufacturer $100 to build would be sold to dealers for $300 and the dealers would sell it for $500. But the music dealers slowly drifted southward giving deals to musicians to get the sales. 10% off that $500 MSRP would drop the "street price" to $450, and someone else across town would knock off 20%, and someone else would knock off 30% until eventually everybody was selling at about 10% above their cost - meaning they would buy the gear for $300 and sell it for $330.
Fast-forward to the chain stores, and you have folks who can use buying power to get better deals from the manufacturer. The cost might be $300 per unit, but if I buy 20 units, and want them for $250 each, the manufacturer will usually oblige. That chain store can then spread the units across several outlets and sell them for $300 which is a 20% profit for them, but straight dealer cost for the other folks.
So now we get to today, and there are so many outlets for folks to buy gear, that it's hard to follow what prices 'should be', 'could be' and what things are really worth. The weird system has also messed with the sense of value for the underlying gear, and some manufacturers have acted to fix that so their gear isn't devalued by the whole mess. They simply placed the dealer cost and the MSRP so close to each other that the dealers have little to know room to discount anything. They'll sell a piece of gear to a dealer for $400 and set an MSRP of $500, and you'll be confused at why that piece of gear doesn't discount below about $450 while other "$500" items will drop to $300 or less.
The psychological effect is that we tend to think that the piece of gear that doesn't discount as much is worth more... and indeed, it probably is. But that's because the dealer cost is higher, and if the traditional model were followed, that piece of gear might have had an MSRP much higher than $500.
So that's what you're seeing in the businesses out there. Things are different when you figure in online dealers, independent sales, and the latest trend for microphones which is a new company opening every week to import Chinese-built mics under a new name and sell them directly via the internet. Nady originally introduced those ribbon mics at $499 following the $100-cost, $300-dealer, $500-MSRP formula. But then other companies started importing the mics to sell directly, so they could buy at $100 and sell at $300 because there was no middle man. Of course, once one guy does it, everybody has to, and the prices started dropping there as well, so those guys aren't tripling their money anymore, but still getting upwards of a 50% profit or so, if their careful.
Did that all make some sense?
As for the used market, well come on man, that's a used market and it is truly whatever the market will bear.
Does it make sense?
Hardly. If you go by the used market, you'll see that the single best value-retaining product available would probably be the SM-57. Because for some reason, you can buy them new for between $79-89 and sell them used for between like $75-85. I don't understand it, and I find it kind of silly, but I see it. Meanwhile a Neumann U-87 lists for about $3500 and sells for around $3000, and can be had used for about $1200-1500 (give or take). The more expensive (and better in my opinion) U-89 mic that lists for like $5k and sells for $4k will show up on the used market for about $1k.
But that has nothing to do with quality and everything to do with demand. More people know, have seen, have used, and want SM-57s and so there is a bigger market place. Plus they price in under $100, and musicians are cheap. Fewer people have used or understand the value of the U-87, and less so for the U-89, and not many musicians will drop $1000-1500 on a used microphone when there's all that new Chinese stuff that's cheaper.
Oh, and of course those are prices for direct, person-to-person sales maybe done over the internet or in-person. Used value at a dealer is different because they need to resell the gear at a competitive price to the online sales, so they will buy the used gear cheaper and try to price it a little higher to have some wiggle room for haggling, and to make profit there while losing all that money on new gear. I seem to recall that when I was selling gear, we would tend to make more money on used gear than on new gear because of all the price competition.
-Jeremy
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vibesof20hz
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ubertar
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I think that has to do with durability. A used 57 is probably as good as a new 57. You can drive nails with it and it hasn't changed. If you tried to drive nails with a Neumann you'd be left with a pile of junk. Delicate stuff will drop steeply in value when it's used. Durable stuff will stay about the same.Professor wrote:If you go by the used market, you'll see that the single best value-retaining product available would probably be the SM-57. Because for some reason, you can buy them new for between $79-89 and sell them used for between like $75-85. I don't understand it, and I find it kind of silly, but I see it. Meanwhile a Neumann U-87 lists for about $3500 and sells for around $3000, and can be had used for about $1200-1500 (give or take). The more expensive (and better in my opinion) U-89 mic that lists for like $5k and sells for $4k will show up on the used market for about $1k.
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Professor
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You know, I've heard that Neumann is including free hammers with their mics specifically so that isn't an issue, since that's been said about SM-57s since they were introduced.
And I like that as a possible explanation, but that wouldn't account for why Electrovoice mics drop more than Shure 57s. I mean, you could bludgeon a half-dozen hookers with an RE-20 and still record with it in the morning, but people won't go more than maybe $250 or so on the used market. I'll stick with the psychology and familiarity of the product. And I'll also back that with two interesting examples:
I was running monitors for a church in Colorado and the sound guy told me they had somebody steal a bunch of mics a few months earlier. They took all the SM-57s and 58s from the stage, but they left the much more expensive KSM-44 in the piano and the drum overheads and a whole bunch of other spendy mics. He couldn't figure out why until I suggested that they stole what they knew and figured the rest must be crap.
I also had a home theater customer who had me over to replace some gear and reconnect his system after somebody broke into his house. The gear was just stacked on top of his big-screen, and he thought it was hysterical that the guy lifted up the $3,500 Proceed AVP preamp in order to steal the $350 Sony DVD from underneath it.
People seek, and apply greater value to, what they recognize.
-Jeremy
And I like that as a possible explanation, but that wouldn't account for why Electrovoice mics drop more than Shure 57s. I mean, you could bludgeon a half-dozen hookers with an RE-20 and still record with it in the morning, but people won't go more than maybe $250 or so on the used market. I'll stick with the psychology and familiarity of the product. And I'll also back that with two interesting examples:
I was running monitors for a church in Colorado and the sound guy told me they had somebody steal a bunch of mics a few months earlier. They took all the SM-57s and 58s from the stage, but they left the much more expensive KSM-44 in the piano and the drum overheads and a whole bunch of other spendy mics. He couldn't figure out why until I suggested that they stole what they knew and figured the rest must be crap.
I also had a home theater customer who had me over to replace some gear and reconnect his system after somebody broke into his house. The gear was just stacked on top of his big-screen, and he thought it was hysterical that the guy lifted up the $3,500 Proceed AVP preamp in order to steal the $350 Sony DVD from underneath it.
People seek, and apply greater value to, what they recognize.
-Jeremy
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bobg (homestudioguy)
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FYI, I worked in Music Retail during and 6 years after college.Professor wrote:MSRP is the "manufacturer's suggested retail price" and is simply what the manufacturer thinks the product could be sold for by a retailer. The 'street price' is the average price you will see at dealers selling any particular product. It might be 5% below MSRP or 50% below, and that has almost nothing to do with quality or value.
It used to be that music gear followed the rest of the A/V industry with parts cost x3 as dealer cost and parts cost x5 for MSRP. That means a piece of gear that cost the manufacturer $100 to build would be sold to dealers for $300 and the dealers would sell it for $500. But the music dealers slowly drifted southward giving deals to musicians to get the sales. 10% off that $500 MSRP would drop the "street price" to $450, and someone else across town would knock off 20%, and someone else would knock off 30% until eventually everybody was selling at about 10% above their cost - meaning they would buy the gear for $300 and sell it for $330. -Jeremy
I can't comment on Jeremy's fact of what a manufacturer's mark-up would be but I'll share what I know relative to my experience.
Most manufacturers provide retailers with a list of products they sell with the suggested selling prices (ie LIST PRICE/MSRP).
As a general rule, If the MSRP on an item was $600, the retailer had purchased it from the maufacturer for $300. Thus, a 100% mark-up (ie 50/50). The retailer generally called that $300 price charged by the manufacturer, "COST".
If the retailer bought large quantities of that same item/unit, the retailer could get better prices dependent on the number of items purchased thus the "COST" was reduced.
This is an example only to explain, NOT an exact example:
Buy 1-49 units, price to retailer is $300 per unit.
Buy 50-99 units, price to the retailer is $290 per unit.
Buy 100-249 units, price to retailer is $277 per unit.
Buy 250-499 units, price to retailer is $264 per unit.
Buy 500 or more units, price to retailer is $250 per unit.
(Shipping Costs would generally be added to all of above)
So, the more you (retailer) buy, the more profit margin you have, thus, the more you can discount. Discounting 25, 30, and even 40 percent can still give you an acceptable return on high volume sales. Which is good if you are Guitar Center or Musicians Friend, etc. However, if you are a small chain or a mom and pop music store, you don't have the finiancial capacity to buy (or sell) such large quantities and find yourself not able to compete well or even survive.
Now, when talking about PRO AUDIO/RECORDING EQUIPMENT, much of the equipment, especially hi-end stuff does not provide for that standard 100% mark-up.
When I was in Music Retail, A nice 24 channel mixer may have retailed for $2000 but it cost the retailer, not $1000 as above, but $1200 (ie 60/40) if not more, thus, not as much room for discount.
Another example: A High End Pre-Amp may have a MRSP of $3000 but costs the retailer $2000-$2500 (ie 70/30 or 75/25) for one unit and there may be no or limited possibility for large quantity discounts thus there is not much if any financial "wiggle room" for discounts.
Hope this helps!
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Professor
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Yeah, I should have been more clear there. My experience was in pro audio sales, and also in home theater / snooty hi-fi. For consumer audio the 3x parts for dealer cost, and 5x parts for MSRP is really common, and that would give you what you referred to as '60/40' split. Some products would lean closer to a dealer cost that was 50% of MSRP (like speakers) and some would be really narrow margins, like 20% below MSRP (TVs and video sources). But the majority of the audio components in that market are priced that way.
On the pro side, I don't think I ever saw 50% dealer cost except for maybe cables. Actually I think we had such a low cost on cables that we tripled the price and they were still pretty fair, but we had the far end column pricing from AT. (that would be the lowest discount due to volume) But of course that was about the only place we ever made money since everything else had to be dropped down to barely 10% over cost to meet competitive prices.
I can say from being on that side that it sucks for a business to try and make money on 10% profits. Consider that if a store bought a million dollars worth of product in a year and sold it at only 10% margin, they would only make $100,000 for the year. Take away the cost of rent, utilities, insurance, security, taxes, etc. and you've probably got enough to pay the owner $30-40k and one employee working minimum wage.
And unlike most folks, I don't blame Guitar Center for that, because I know it was there long before they came to town, at least where I grew up. It's the psychology of the musician as a consumer, always looking for a lower cost before service, loyalty, or convenience. That's why the chains, catalogs and internet were able to so thoroughly dominate the market, and only mom & pop shops with steady teaching schedules have survived.
Don't get me wrong here either - I'm one of those guys who wants to always pay the lowest price too. And I felt great satisfaction when I was buying all the equipment for the school studio here, and I split my purchases up into relatively small peices so all the dogs would fight for the scraps. Well, I felt great satisfaction because I knew the big dogs weren't used to fighting for the school purchases, and all my little dogs would swoop in and snag the prize $10k at a time. Oddly enough, I was able to maintain some loyalty to the good dealers through all that.
But I'm rambling... sorry.
Either way, that's why this topic intrigued me. I wish there were some easy formula or predictor of what prices mean, but basically it comes down to value (whether real or perceived) and good ol' supply & demand.
-Jeremy
On the pro side, I don't think I ever saw 50% dealer cost except for maybe cables. Actually I think we had such a low cost on cables that we tripled the price and they were still pretty fair, but we had the far end column pricing from AT. (that would be the lowest discount due to volume) But of course that was about the only place we ever made money since everything else had to be dropped down to barely 10% over cost to meet competitive prices.
I can say from being on that side that it sucks for a business to try and make money on 10% profits. Consider that if a store bought a million dollars worth of product in a year and sold it at only 10% margin, they would only make $100,000 for the year. Take away the cost of rent, utilities, insurance, security, taxes, etc. and you've probably got enough to pay the owner $30-40k and one employee working minimum wage.
And unlike most folks, I don't blame Guitar Center for that, because I know it was there long before they came to town, at least where I grew up. It's the psychology of the musician as a consumer, always looking for a lower cost before service, loyalty, or convenience. That's why the chains, catalogs and internet were able to so thoroughly dominate the market, and only mom & pop shops with steady teaching schedules have survived.
Don't get me wrong here either - I'm one of those guys who wants to always pay the lowest price too. And I felt great satisfaction when I was buying all the equipment for the school studio here, and I split my purchases up into relatively small peices so all the dogs would fight for the scraps. Well, I felt great satisfaction because I knew the big dogs weren't used to fighting for the school purchases, and all my little dogs would swoop in and snag the prize $10k at a time. Oddly enough, I was able to maintain some loyalty to the good dealers through all that.
But I'm rambling... sorry.
Either way, that's why this topic intrigued me. I wish there were some easy formula or predictor of what prices mean, but basically it comes down to value (whether real or perceived) and good ol' supply & demand.
-Jeremy
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bobg (homestudioguy)
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Big box stores will always have the edge via their ability to purchase large quantities and demand lower COST. Thus they will always have the edge on the retail markets because they can.Professor wrote:I don't blame Guitar Center for that, because I know it was there long before they came to town, at least where I grew up. It's the psychology of the musician as a consumer, always looking for a lower cost before service, loyalty, or convenience.....I wish there were some easy formula or predictor of what prices mean, but basically it comes down to value (whether real or perceived) and good ol' supply & demand. -Jeremy
As far as the psychology of the musician as a consumer? Our entire Social Structure lives by consumerism and we are psychologically/sociologically trained in consumerism whether we are reading the paper, listening to the radio, watching the TV (all television is pay per view if you think about it) and even going to the movies!!!
One thing I do notice in the forums is that "you have to have more or the best" as opposed to doing the very best with what you have.
Perhaps we have seen the enemy and it are us?
PS-remember when we were told that 50% of your stereo system cost should be in the speakers?
I kinda believe that somehow that mathematically works with microphones and monitors.
Spending $2000? OK.
First start by spending $500 on a mic and $500 on monitors. Or something like that.
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I'm Painting Again
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Oldnsaxy
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There have been some good posts on this and it's an interesting topic.
As someone who used to work at a few music manufacturing companies before getting my head straight, getting out of making gear and going postal (into post production that is) here is my info to share.
MSRP = whatever dollar figure the manufacturer whans to list. It means nothing. It's not the "suggested" retail price at all any longer. They aren't suggesting anything. It allows the dealer to show "SAVE 50%" or something. MSRP is meaningless now.
MAP = the price that dealers are allowed to advertise a product at. This is what they can print online, in catalogs, on radio, etc. This is part of a dealer agreement.
Apple works this way with computers and ipods. The music companies have taken to this too.
Dealer cost = some number of points below the MAP. It varies on the product and as stated before, on the deals made by each dealer. They can get lower prices by taking other products in a line, buying in quantity, etc.
The old structure was pretty much pro audio gear dealer cost was 30% lower than list price (A mark). Keyboards and the like 40% (B mark), and guitar products 50% (C mark). Many dealers would quote you 15 to 20% off the B mark when walking in. If you were a regular you could get 30% off. There was room to deal and the dealers could advertise whatever they wanted. The MAP thing was brought in to help fend off the price wars that went on in the 80's and 90's. Dealers were having a hard time making money because the bigger dealers were able to advertise super low prices and they then had to match or better them, leaving them little profit.
MAP was designed to help the dealers.
MAP makes it harder for a customer to get a good deal, everyone has the same advertised price. It makes it harder for the manufacturer to make a decent profit on their gear because the dealer cost varies per product and some large dealers expect 40 - 50% on all gear now or they won't stock it. The company then loses about 30% of it's world wide sales if they won't stock their products. To be competitve with the cheaply made chinese stuff, manufacturers are now in the same type of low price war that the dealers were in before. In most cases the dealer is making a lot more than the manufacturer who has to develop the product, invest the money, advertise it (they even pay for space in the dealer catalogs) etc. I know a product that sells for $199 and the cost to build it is about $85. The manufacturer is making about $20 per unit the dealer is making $95.
Due to this, I wouldn't be surprised if the next turn is more direct internet sales where the manufactuers decide, hey we do the work, we invest in RD, we should be making the money. It works for the really small independants who in some cases work at a higher profit margin than the bigger guys.
As someone who used to work at a few music manufacturing companies before getting my head straight, getting out of making gear and going postal (into post production that is) here is my info to share.
MSRP = whatever dollar figure the manufacturer whans to list. It means nothing. It's not the "suggested" retail price at all any longer. They aren't suggesting anything. It allows the dealer to show "SAVE 50%" or something. MSRP is meaningless now.
MAP = the price that dealers are allowed to advertise a product at. This is what they can print online, in catalogs, on radio, etc. This is part of a dealer agreement.
Apple works this way with computers and ipods. The music companies have taken to this too.
Dealer cost = some number of points below the MAP. It varies on the product and as stated before, on the deals made by each dealer. They can get lower prices by taking other products in a line, buying in quantity, etc.
The old structure was pretty much pro audio gear dealer cost was 30% lower than list price (A mark). Keyboards and the like 40% (B mark), and guitar products 50% (C mark). Many dealers would quote you 15 to 20% off the B mark when walking in. If you were a regular you could get 30% off. There was room to deal and the dealers could advertise whatever they wanted. The MAP thing was brought in to help fend off the price wars that went on in the 80's and 90's. Dealers were having a hard time making money because the bigger dealers were able to advertise super low prices and they then had to match or better them, leaving them little profit.
MAP was designed to help the dealers.
MAP makes it harder for a customer to get a good deal, everyone has the same advertised price. It makes it harder for the manufacturer to make a decent profit on their gear because the dealer cost varies per product and some large dealers expect 40 - 50% on all gear now or they won't stock it. The company then loses about 30% of it's world wide sales if they won't stock their products. To be competitve with the cheaply made chinese stuff, manufacturers are now in the same type of low price war that the dealers were in before. In most cases the dealer is making a lot more than the manufacturer who has to develop the product, invest the money, advertise it (they even pay for space in the dealer catalogs) etc. I know a product that sells for $199 and the cost to build it is about $85. The manufacturer is making about $20 per unit the dealer is making $95.
Due to this, I wouldn't be surprised if the next turn is more direct internet sales where the manufactuers decide, hey we do the work, we invest in RD, we should be making the money. It works for the really small independants who in some cases work at a higher profit margin than the bigger guys.
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