Why is there no price competition in the hi-fi business?

[James]

If you discount you sell more, which requires increased resource so the profit margin drops more than the discount would suggest.

It’s a balance that’s difficult to strike especially today when dealers that employ skilled staff and have premises are trading against internet box shifters.

You'll rarely see internet sellers pitch their prices below RRP for the very reason that someone else might pitch a lower price. If the latter is conveniently 'out of stock' you're stuck with an invitation to treat at a price where you simply give away some or most of your margin. There's no guarantee you'll sell more products either.

Lego sells shiploads of plastic bricks and sets. They don't discount their online prices either. Retail stores can do as they please, yet people buy directly from Lego online. Same deal with Apple products, as Rodrat points out.

 

[flutteringwow]

When you see the RRP, ignore it. Someone somewhere will give you a discount. Find those dealers, and then use them everytime you purchase.

The 'licensing' agreements dealers have with the manufacturers or distributers essentially means they can't undercut on prices, publicly anyway...

I've bought most of kit new, and some at even close to 50% discount.

 

[Tony L]

As I understand it the price-fixing that came in during the BADA years of the ‘80s and has stayed ever since was down to kit being sold as a “service” not a simple sealed box. There was a loophole somewhere as you weren’t just buying a ‘Linn/Naim system’ or whatever, but having one installed in your home by the dealer. Prior to this hi-fi was hugely competitive with different dealers aggressively competing on price in the same way we still see in the musical instrument marketplace etc. A quick look through a ‘70s hi-fi mag shows a huge amount of discounting with most shops showing the RRP and their discounted price. No idea what the current situation is, but it certainly seems easier to find discounts on some brands than on others.

 

[Sue Pertwee-Tyr]

If you discount you sell more, which requires increased resource so the profit margin drops more than the discount would suggest.

It’s a balance that’s difficult to strike especially today when dealers that employ skilled staff and have premises are trading against internet box shifters.

In a finite, specialist market there's no guarantee that you sell more if you discount, either. And certainly there's a real risk that any increased sales at lower margin translates into lower overall profit in the year, if the increase in sales doesn't compensate for the discount given. Given the nature of the hifi business, and the less than universal demand for the product, that has to be a very real scenario in dealers' minds.

 

[Strictly Stereo]

As I understand it the price-fixing that came in during the BADA years of the ‘80s and has stayed ever since was down to kit being sold as a “service” not a simple sealed box. There was a loophole somewhere as you weren’t just buying a ‘Linn/Naim system’ or whatever, but having one installed in your home by the dealer. Prior to this hi-fi was hugely competitive with different dealers aggressively competing on price in the same way we still see in the musical instrument marketplace etc. A quick look through a ‘70s hi-fi mag shows a huge amount of discounting with most shops showing the RRP and their discounted price. No idea what the current situation is, but it certainly seems easier to find discounts on some brands than on others.

I was at school in the '80s and have no idea what went on then, but nowadays price fixing is illegal. The law is quite clear. If there is a loophole somewhere then I am certainly not aware of it.

 

[Sue Pertwee-Tyr]

I think it's most likely, as has been mentioned, down to the Ts and Cs of the dealership contract that the dealer will adhere to the manufacturer's minimum advertised price policy. That's entirely lawful, and doesn't restrict the dealer from actually offering a discount for a specific sale, at their discretion.

 

[amazement]

It’s just business really, the price has a start, where it goes is down to the buyer and seller.

 

[Gervais Cote]

FWIW : in my area, dealers usually can give good deals on hi-fi gears but typically, the selling price of their interconnect and speakers cables are totally insane. My two cents.

 

[James]

In a finite, specialist market there's no guarantee that you sell more if you discount, either. And certainly there's a real risk that any increased sales at lower margin translates into lower overall profit in the year, if the increase in sales doesn't compensate for the discount given. Given the nature of the hifi business, and the less than universal demand for the product, that has to be a very real scenario in dealers' minds.

Wot I said.

 

[manicatel]

If you went to a supermarket, filled up the trolley, got to the checkout & it came to £68, would you then ask the check out assistant if he could do it for £55 instead?

 

[wacko]

You might get discounts on some products but a replacement stylus is probably the most unlikely: you need it and they have it. No choice.

 

[Darren L]

If you went to a supermarket, filled up the trolley, got to the checkout & it came to £68, would you then ask the check out assistant if he could do it for £55 instead?

Hardly a fair comparison, firstly the check out assistant is not going to have the authority to grant a discount and if it happened the be the owner or manager surely they would point out the wide range of already discounted items throughout the store and hardly fair to compare a trolley of groceries to a piece of audio equipment. You will also find that if you buy your meat from the local butcher, veg and fruit from the local greengrocers, bread from the local bakery, etc that these shops do offer a little discount, if it's £5.18 at the butchers counter he'll ask for a fiver, more of a gesture than a discount , but appreciated. This happens in small rural towns and villages IME but you may find the same thing in the markets in the larger towns and cities.

 

[david ellwood]

When you see the RRP, ignore it. Someone somewhere will give you a discount. Find those dealers, and then use them everytime you purchase.

The 'licensing' agreements dealers have with the manufacturers or distributers essentially means they can't undercut on prices, publicly anyway...

I've bought most of kit new, and some at even close to 50% discount.

To maximise the potential discount ensure all your demonstrations are conducted at the dealer that doesn’t discount so when you decide on what you want the discounting dealer has the minimum effort in shifting the box.

 

[manicatel]

Hardly a fair comparison, firstly the check out assistant is not going to have the authority to grant a discount and if it happened the be the owner or manager surely they would point out the wide range of already discounted items throughout the store and hardly fair to compare a trolley of groceries to a piece of audio equipment. You will also find that if you buy your meat from the local butcher, veg and fruit from the local greengrocers, bread from the local bakery, etc that these shops do offer a little discount, if it's £5.18 at the butchers counter he'll ask for a fiver, more of a gesture than a discount , but appreciated. This happens in small rural towns and villages IME but you may find the same thing in the markets in the larger towns and cities.

Point taken, but the analogy was a crude way of asking why it is that in some shops a discount is expected, whilst other types of shopping no one would expect to haggle. But I guess you knew that already.

 

[Darren L]

Point taken, but the analogy was a crude way of asking why it is that in some shops a discount is expected, whilst other types of shopping no one would expect to haggle. But I guess you knew that already.

Probably due to the amounts of money involved, so when your buying a bag of crisps you pay the asking price but when you go to buy a car I would have thought most people would try to negotiate a favourable discount or deal, whether Hifi dealers and retailers do I guess comes down to the individual transaction.

 

[Woodface]

I don't understand the hostility to businesses making money & earning a living. It strikes me that there are a number of dealers who do a great job & offer excellent service but they are not charities.

 

[Arkless Electronics]

Speaking as a dealer, I would say that it makes no difference. A and B are the same thing. What you agree with the dealer is between you and the dealer, but remember that dealers compete on the level and quality of service they provide, as well as on price. If you value the service then you will be prepared to pay a bit extra for it.

To pick up on your example, there are a couple of other things to consider. I am sure that there are some dealers who do not offer fitting at all. Also, the level of fitting service is not the same across all dealers. When I fit your cartridge for you, that involves a laser level and an oscilloscope, amongst other tools. I am pretty sure that is not typical.

I use two oscilloscopes when fitting a cart! One at each side holds them at just the right height

 

[notevenclose]

To maximise the potential discount ensure all your demonstrations are conducted at the dealer that doesn’t discount so when you decide on what you want the discounting dealer has the minimum effort in shifting the box.

I'm hoping that's tongue in cheek and you're not actually that cynical.

 

[david ellwood]

Ive seen it done countless times. A customer would come in and spend five hours in the dem room drinking free coffee and listening to every option.

Then we'd find out from other dealers that said customer had been ringing around for 'Best Price' on what they had decided to buy.

We even had one cheeky arse that having bought said item elsewhere then proceeded to bring it to us for repair when it went wrong.

Heavy discounts are normally a big clue that an item is terrible and should be avoided, good kit sells on its own merit for decent money.

 

[audiopile]

Re: David Ellwood's post:
Decades ago I had the following conversation with the factory rep from Conrad-Johnson : We had been a C-J dealer for a decade or so at that point in time . "We're getting really tired of demonstrating your stuff and loaning units out for weekend home auditions and then they drive up to B.... in W.... (a town of about 40000 80 miles up the road) and take his standard offer "Whatever those guys offer -I'll beat it by 5% and pay the shipping". C-J rep thought about it for a min and replied -"B..... sells a LOT of Conrad-Johnson for us." I really liked C-J equipment - but my boss and I kicked this around and couldn't think of a reason to have it in his store -so he dropped the line. I can't speak to profit margins on boutique cabling -I left the hi-fi biz before that became anything even close to what it is today-but profit margins on home electronics aren't anywhere near what they were in the late 60's-70's -this includes carts n styli. Plus sweetners for a relatively large order like free freight or extended terms (financing) now require such large orders that few surviving audio dealers are able to take advantage of them. I always worked for small dealers with sound room demo facilities and never was ashamed of my trade - but I damm well KNEW my job was to make those stores a PROFIT.