Welshboy is adamant that the physical cost of the procuct is only 10%, as a said before HUGE markup
matthewpiano
Well-known member
To be fair, Welshboy can't possibly know that. Furthermore the raw materials represent only one element of what goes into a product. Research and development costs, tooling for production lines, advertising, administration, staffing, distribution.... That is all before anyone has made any money and before the product has even reached the retailer.
This is why a long-running item like the Technics SL1210 turntable is such great value now. If a company designed a new direct drive turntable with the same level of engineering now, it would retail massively above the £400 odd it tends to sell for. It is only the price that it is because over the years some of the initial costs have been effectively written down.
This is why a long-running item like the Technics SL1210 turntable is such great value now. If a company designed a new direct drive turntable with the same level of engineering now, it would retail massively above the £400 odd it tends to sell for. It is only the price that it is because over the years some of the initial costs have been effectively written down.
Frank Harvey
Well-known member
Like I said, unless anyone here works for a manufacturer, we won't know. Even then, many employee's wouldn't know that sort of information.
matthewpiano
Well-known member
FrankHarveyHiFi:
Like I said, unless anyone here works for a manufacturer, we won't know. Even then, many employee's wouldn't know that sort of information.
Agreed. All speculation in terms of the manufacturer end of things really.
Like I said, unless anyone here works for a manufacturer, we won't know. Even then, many employee's wouldn't know that sort of information.
Agreed. All speculation in terms of the manufacturer end of things really.
johnnyjazz:
Hi guys, WOW a lot said about this topic, OK back to my original question, does anyone have any idea
1 A said piece of hi-fi retailing at a said price, 2 How much are the components in the said piece of hi-fi REALLY worth, 3 Is that said piece of hi-fi worth the asking price
The cost of the components? Very little. But then the component manufacturers also have their markups. So that resistor in your circuit board actually "costs" a lot less than the manufacturer paid for it.
Anyway, you can't put a price on most of this stuff. Take the casing for an amplifier. How do you quantify the cost of that? The cost of that weight of raw metal? That doesn't take into account the costs of designing it in the first place, let alone prototyping, manufacturing, finishing etc. etc.
At the end of the day, if you think a product is worth the price, then it is.
Hi guys, WOW a lot said about this topic, OK back to my original question, does anyone have any idea
1 A said piece of hi-fi retailing at a said price, 2 How much are the components in the said piece of hi-fi REALLY worth, 3 Is that said piece of hi-fi worth the asking price
The cost of the components? Very little. But then the component manufacturers also have their markups. So that resistor in your circuit board actually "costs" a lot less than the manufacturer paid for it.
Anyway, you can't put a price on most of this stuff. Take the casing for an amplifier. How do you quantify the cost of that? The cost of that weight of raw metal? That doesn't take into account the costs of designing it in the first place, let alone prototyping, manufacturing, finishing etc. etc.
At the end of the day, if you think a product is worth the price, then it is.
Frank Harvey
Well-known member
As no one knows, this will just end up in people guessing with silly figures, with others taking it as gospel then spreading it round other forms etc.
Andrew Everard:
2 Much less than the price of the finished item, but then how much is a BMW worth if you take it from the showroom and recycle it for scrap?
3 Only you can decide that.
No 3 is the perfect answer.
2 Much less than the price of the finished item, but then how much is a BMW worth if you take it from the showroom and recycle it for scrap?
3 Only you can decide that.
No 3 is the perfect answer.
You can't reduce everything to the cost of raw materials/components - expertise of construction/delivery is key. That holds true from everything from ready/takeaway foods (massive mark-up on ingredients, but you're paying for convience) to fine dining or expertly built hi-fi - where you or I may have similiar ingredients but never be able to match the skill/experience of the master chef/designer.
johnnyjazz:Welshboy is adamant that the physical cost of the procuct is only 10%, as a said before HUGE markup
cables may be!
I can't see how Welshboy can say that! I know a few manufacture owners on personal term and if they can make that much profit they would be rich by now! and even....even if somehow, he is right! there are other cost to consider, labour, business rate (now that's a killer), advertising and a big risk of the product doesn't take off! You have to be in business to fully understand really, it certainly is not a game.
cables may be!
I can't see how Welshboy can say that! I know a few manufacture owners on personal term and if they can make that much profit they would be rich by now! and even....even if somehow, he is right! there are other cost to consider, labour, business rate (now that's a killer), advertising and a big risk of the product doesn't take off! You have to be in business to fully understand really, it certainly is not a game.
matthewpiano
Well-known member
Clare Newsome:You can't reduce everything to the cost of raw materials/components - expertise of construction/delivery is key. That holds true from everything from ready/takeaway foods (massive mark-up on ingredients, but you're paying for convience) to fine dining or expertly built hi-fi - where you or I may have similiar ingredients but never be able to match the skill/experience of the master chef/designer.
Perfectly put.
Perfectly put.
OK guys thank you very much, as i said at the beginning, it all started with me supplying signage to my customer, as Thaiman so rightly says you have to be a business owner to know, the question i was asking was that having owned my own business for more than 20 years, i have enough experience to remove someones signage, take it apart, look at the components, work out how much those components cost and design, manufacture and install like for like at a given price based on the components price.
I had just thought that with the amount of experienced hi-fi people on this site, there would at least be one who could do the same witrh a hi-fi product.
Thanks john
I had just thought that with the amount of experienced hi-fi people on this site, there would at least be one who could do the same witrh a hi-fi product.
Thanks john
Frank Harvey
Well-known member
Even if someone could, it's all down to the component costs in regard to bulk buying - this will be different for someone like Sony and Naim, so stil a little hard to tell as we'd have no idea what the individual manufacturers pay for those components. But as already mentioned, it's probably cheaper than you think, it's just everything else that needs to be taken into account.
John
Since you run your own business I find it hard that you can't grasp hold of the argument.
If you build a sign for somebody do you simply add up the cost of all of the components and say that's the price of the sign? No, of course you don't, - you add a margin to cover your wages, the cost of your company van, your advertising, the tax you'll have to pay, the cost of your accountant, the cost of any other specialist advice you need, the cost of training, the cost of keeping up with the electrical regulations, the cost of your business insurance etc etc.
Like everybody else you need to have a level of expertise and you face competition. These things determine the price point you can sell at. Now it might be that in your market and if your business is a low overhead business then the cost of materials might well be 50% or more of the selling price of the finished item. This is certainly true in one of the businesses I have an interest in. I know as an example a bathroom fitter who has used the same pricing policy for years he takes the cost of the supplied fixtures and fittings and multiplies it by 2 and that's the price he quotes. The effect of this is that the more expensive the bath you choose the more expensive he becomes. His justification is simple - he puts more time and effort into the high end bathrooms to get them perfect and it takes a much higher level of skill. At the end of the day is a £2000 bath worth more than a £200 bath - well you have to decide that for yourself.
Since you run your own business I find it hard that you can't grasp hold of the argument.
If you build a sign for somebody do you simply add up the cost of all of the components and say that's the price of the sign? No, of course you don't, - you add a margin to cover your wages, the cost of your company van, your advertising, the tax you'll have to pay, the cost of your accountant, the cost of any other specialist advice you need, the cost of training, the cost of keeping up with the electrical regulations, the cost of your business insurance etc etc.
Like everybody else you need to have a level of expertise and you face competition. These things determine the price point you can sell at. Now it might be that in your market and if your business is a low overhead business then the cost of materials might well be 50% or more of the selling price of the finished item. This is certainly true in one of the businesses I have an interest in. I know as an example a bathroom fitter who has used the same pricing policy for years he takes the cost of the supplied fixtures and fittings and multiplies it by 2 and that's the price he quotes. The effect of this is that the more expensive the bath you choose the more expensive he becomes. His justification is simple - he puts more time and effort into the high end bathrooms to get them perfect and it takes a much higher level of skill. At the end of the day is a £2000 bath worth more than a £200 bath - well you have to decide that for yourself.
Dear all,
This is a fascinating discussion, which I have followed with interest. I have a close friend who owns two branches of a well known hi fi chain. He and his colleagues work hard, he puts in long hours and although he makes a solid living, he is not rich. One aspect we might have forgotten is that in order to invest in, and develop, the business he has needed a loan from the bank, and they charge him interest, so that must be added to his costs. He needs to make what might look like a fairly big mark up on the items he sells to cover all his overheads including these interest payments. Furthermore, he takes a risk with his money, as anytime his business may collapse no matter how hard he works, so he needs a risk premium too. I don't feel sorry for him, but I don't envy him either.
As for the true value of hi-fi, they say that a cynic is someone who knows the price of everything, and the value of nothing......
This is a fascinating discussion, which I have followed with interest. I have a close friend who owns two branches of a well known hi fi chain. He and his colleagues work hard, he puts in long hours and although he makes a solid living, he is not rich. One aspect we might have forgotten is that in order to invest in, and develop, the business he has needed a loan from the bank, and they charge him interest, so that must be added to his costs. He needs to make what might look like a fairly big mark up on the items he sells to cover all his overheads including these interest payments. Furthermore, he takes a risk with his money, as anytime his business may collapse no matter how hard he works, so he needs a risk premium too. I don't feel sorry for him, but I don't envy him either.
As for the true value of hi-fi, they say that a cynic is someone who knows the price of everything, and the value of nothing......
Messiah
Well-known member
Andrew Everard:
2 Much less than the price of the finished item, but then how much is a BMW worth if you take it from the showroom and recycle it for scrap?
I think this is as close to an actual answer you are gonna get unless a manufacturer posts the actual component costs. I suspect the components used in any given item are relatively cheap and would not cost much to manufacture.
PJPro has been building various items recently. He may be better able than most to give you a satisfactory answer.
2 Much less than the price of the finished item, but then how much is a BMW worth if you take it from the showroom and recycle it for scrap?
I think this is as close to an actual answer you are gonna get unless a manufacturer posts the actual component costs. I suspect the components used in any given item are relatively cheap and would not cost much to manufacture.
PJPro has been building various items recently. He may be better able than most to give you a satisfactory answer.
idc
Well-known member
Messiah:...... unless a manufacturer posts the actual component costs.....
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
Messiah
Well-known member
idc:
Messiah:...... unless a manufacturer posts the actual component costs.....
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
True bit I think the OP is trying to break down how much it would cost just in terms of component cost. I know there are many factors that go into determining the final selling price.
For example, I was in Harrods the other day and saw a dog bed in there made from Acrylic and it cost £1800! It was literally 2 sheets of acrylic, 1 curved into a C shape and another piece used as a shelf. Now it retailed for £1800 but the acrylic sheets probably cost about £20.
Messiah:...... unless a manufacturer posts the actual component costs.....
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
True bit I think the OP is trying to break down how much it would cost just in terms of component cost. I know there are many factors that go into determining the final selling price.
For example, I was in Harrods the other day and saw a dog bed in there made from Acrylic and it cost £1800! It was literally 2 sheets of acrylic, 1 curved into a C shape and another piece used as a shelf. Now it retailed for £1800 but the acrylic sheets probably cost about £20.
idc
Well-known member
Messiah:idc:
Messiah:...... unless a manufacturer posts the actual component costs.....
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
True bit I think the OP is trying to break down how much it would cost just in terms of component cost......
I was remembering back to a few threads about the rising cost of hifi and how that was partly down to the drop in the value of the pound, the rise in oil prices etc.
As a number of people have pointed out, this thread is not going to get serious answers as manufacturers are unlikely going to disclose costs etc and there are too many variables.
You would not even get a true answer if you pulled apart a CDP and then tried to find the cost of each component.
I accept that you will know all of that as you are the Messiah. Have you also got a seat in the Lords now you have a crest? Should we be calling you the Duke of Messiah?
Messiah:...... unless a manufacturer posts the actual component costs.....
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
True bit I think the OP is trying to break down how much it would cost just in terms of component cost......
I was remembering back to a few threads about the rising cost of hifi and how that was partly down to the drop in the value of the pound, the rise in oil prices etc.
As a number of people have pointed out, this thread is not going to get serious answers as manufacturers are unlikely going to disclose costs etc and there are too many variables.
You would not even get a true answer if you pulled apart a CDP and then tried to find the cost of each component.
I accept that you will know all of that as you are the Messiah. Have you also got a seat in the Lords now you have a crest? Should we be calling you the Duke of Messiah?
Messiah:idc:
Messiah:...... unless a manufacturer posts the actual component costs.....
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
True bit I think the OP is trying to break down how much it would cost just in terms of component cost. I know there are many factors that go into determining the final selling price.
For example, I was in Harrods the other day and saw a dog bed in there made from a Acrylic and it cost £1800! It was literally 2 sheets of acrylic, 1 curved into a C shape and another piece used as a shelf. Now it retailed for £1800 but the acrylic sheets probably cost about £20.
That'll be the cost of the 'Designer' then! Amongst other things.
A strong brand allows you to charge a premium too. Think Tetley Tea. An old friend of mine used to be a tea taster, and the blend for Sainsbury's Red Label was more expensive to produce than the Tetley blend but I bet you can guess the more expensive in the shops.
Messiah:...... unless a manufacturer posts the actual component costs.....
Please remember that the price of componenets can go up as well as down. As can R&D costs, taxes, squirrels, wages and things that go boing.
True bit I think the OP is trying to break down how much it would cost just in terms of component cost. I know there are many factors that go into determining the final selling price.
For example, I was in Harrods the other day and saw a dog bed in there made from a Acrylic and it cost £1800! It was literally 2 sheets of acrylic, 1 curved into a C shape and another piece used as a shelf. Now it retailed for £1800 but the acrylic sheets probably cost about £20.
That'll be the cost of the 'Designer' then! Amongst other things.
A strong brand allows you to charge a premium too. Think Tetley Tea. An old friend of mine used to be a tea taster, and the blend for Sainsbury's Red Label was more expensive to produce than the Tetley blend but I bet you can guess the more expensive in the shops.
Messiah
Well-known member
idc:
I accept that you will know all of that as you are the Messiah. Have you also got a seat in the Lords now you have a crest? Should we be calling you the Duke of Messiah?
'Just' Messiah will be fine. Don't won't people to believe I think too highly of myself!
It is my family crest.....and JD's...
I accept that you will know all of that as you are the Messiah. Have you also got a seat in the Lords now you have a crest? Should we be calling you the Duke of Messiah?
'Just' Messiah will be fine. Don't won't people to believe I think too highly of myself!
It is my family crest.....and JD's...
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