Paradigm price fixing (1 Viewer)

[Samuel Des]

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[Bhagi Katbamna]

I own a custom installation business. I don't deal with Internet buyers or shoppers. What we do is worth the price of admission and the level of service and support we provide is far beyond that of any retailer.

You offer a service that includes(I presume) installation, set-up, decoration, control etc.. of hometheaters. All the initial poster wants is a pair or multiple speakers(not any type of service from the retailer). The nature of the consumer retail business as pointed out before is such that most retailers do discount. And yes, consumers do have a God-given right to find the lowest price possible.

 

[Chas_T]

Hey Bill,

Chas thinks that selling at list price is likened to highway robbery. Does he have any idea how much of the margin is eaten up by overhead? Not likely.

I was once given the numbers by a major brick and mortar dealer here in the northeast. It was over a year ago and those essential life blood elements escape me right now. However, the sales rep was more then willing to discount my Paradigm's at a nice rate.
You are correct, I don't know YOUR business plan, overhead costs and ROI. Perhaps you could post your financials for us to examine??
However, I do have a business management degree and have worked in the financial field for many years. Each business is unique in nature depending on product lines, overhead and taxes which cut into profits which sustain any company, large or small. I DO understand your situation.
You describe your business as a "I own a custom installation business," but personally I do not need to pay your price for service and support.
I've been able to purchase components in a non-custom install system as I am able to take care of my own needs myself. Granted, you may be doing professional installs which would dwarf my mid-hifi system, which consists of Paradgim, Sherbourn, Modial, Anthem, etc. With that independence in mind, I would never pay full retail as you write is necessary for your business to remain viable.
Everyone has different needs and your custom market share is contingent upon full retail price. That's fine. However, my best guess is living in the VA area, your market share is also based in a high income area where people can/will be more then willing to pay those prices for your services and expertise.
Most of the people on this site I would estimate have the ability to choose and install components in their own systems and it is expected you would receive flames as you write. I wish you much success in your future plans.
Charles

 

[Aaron Smithski]

Bill,

When I said "that is up to the buyer", I was referring to the buyer being the market in general. If the seller sets the price of his product too high, the buyer will let him know by not purchasing. If the seller is not selling his wares, he will either have to lower his price or go out of business. So, to a large extent the seller's price IS dictated by the buyer.

That being said, I totally agree with you, if the potential buyer is not happy with a dealer's price then he can go elsewhere! No sense complaining about it! Most quality products will fetch a price that is close to the MSRP, so I understand if the Paradigm dealer chooses to not discount as he has a fine product. I will just move on and find one that will!

If you can sell your products at list price, more power to you!

I am not sure I believe the 8% net profit figure. I have a friend that owns a few stores and can assure you that he does quite a bit better than 8% net! Yes, it is a very competitive business in which a number of dealers fail, but there is much money to be made.

Aaron

 

[Adil M]

8% after MSRP... someone needs to rethink their business practices... or are you deducting the service you're going to give to your customer and his kids and his kids...

 

[Susana Anderton]

The truth is that most companies in this business operate at an after tax profit of about 8% after all expenses are paid IF they sell at full list price.

There are plenty of BMW's parked in front of this store (NOT customer cars), so they don't seem to be doing too badly making "only 8% profit".

 

[Chas_T]

Sandra:

There are plenty of BMW's parked in front of this store (NOT customer cars), so they don't seem to be doing too badly making "only 8% profit".

I had a similar experience at a Phila. high end shop where there were reserved parking spots for the owners or sales rep's Boxters', Audi's, Benz's and so on and so forth. Think they paid retail for those cool cars??
However, maybe they were business deductions????

 

[Bill Lucas]

"Why did Kamikaze pilots wear helmets?"
I should know since I appear to represent the kamikaze pilot in this thread.
I presume those that are questioning my profit quotes can do math reasonably well. You can, after all, figure out 20% off. Hey, I was due a flame myself for what I've been getting. LOL!
If the company does 3 million, after EVERYONE including the owner gets paid AND all taxes, overhead and expenses are paid there would then be about 8% left. That's $240,000 left in the company. Last time I checked, that was how net profit was determined. So, is it possible that the owner and a couple of key employees could drive nice cars? I'd think so.
Susana,
Service is when the projector goes down on New Year's Eve and you drive out with a loaner projector so the clients party can go on as planned. It has nothing to do with your markup theory. Are there retailers with bad policies? Yep. Are there retailers with good policies? Yes also. Apparently you have the former in your area.
Chas,
You are correct about incomes in my area. We are signifcantly above national averages. BTW, I'll post my financials the day you post your personal financial information.

 

[Susana Anderton]

It has nothing to do with your markup theory.

I think it has everything to do with my theory, though it may not apply to all dealers. If some dealers go that "extra mile" (as you may very well do) then that has to be paid for somewhere, usally upfront with the original purchase. But some dealers (like my local one) sell at that same "snob" price without giving you anything for it. They act like they are doing you a favor. Paradigm's policies enables these thieves.

 

[Bill Lucas]

Susana,

A salary of 2 million out of 3 million in sales? Are you IN any kind of business? Do you believe that THAT much money could be paid to one individual in such a business without the business going directly into bankruptcy? If you believe your numbers are even vaguely close to the mark then you know absolutely nothing about running a business or the costs associated with running a business. Talk about your "get real"!!

As to the service that we provide, our clients pay for and expect a level of service that is above and beyond that of most companies. By doing what we feel is the right thing we are (we feel) justly rewarded for our actions.

 

[Chas_T]

BTW, I'll post my financials the day you post your personal financial information.

Naw, I would not want to make you feel bad Bill.

 

[Jeff Kohn]

Does anyone get a discount when they buy something at McDonalds? Do you haggle over the price of nails or lumber at Home Depot? I fail to understand why people think it is their God given right to get a discount off of list price on stereo equipment. The dealer is under no obligation to give a discount nor do they need to give a reason as to why they don't discount. The consumer on the other hand has the right to not make the purchase. That's it.

Your restaurant example is a bad one, because the pricing at franchised restaurants can and often does vary from location to the next. The customer may not haggle on pricing, but business owner will set the pricing at an appropriate level to make a profit. That pricing can vary because a restaurant in a prime location in downtown LA for example, is going to have much higher overhead than a restaurant in an out of the way location.

So the notion that one MSRP should globally apply to all stereo dealers is a bit absurd. The fact is, many dealers are able to discount off of MSRP without losing money. Besides, if I know for a fact that a dealer is flat-out lying to me when he's says Paradigm won't let him discount, then what else is he going to lie to me about?

 

[Cooper_B]

Whoops, guess I started a fire.

Bill: You're right about capitalism; I should have said hostility to "competition." While I don't mind someone maximizing profit, I do have a problem with

a) actively enforcing price fixing (which he claimed to do) and
b) deceitfully intimidating the customer (which he was actually doing).

He even went as far as to tell me not to tell others that I got his demo speakers for $100 off retail.. like he was afraid of getting in trouble. If a dealer simply doesn't want to come down from retail, that's fine, just don't lie to me.


Chris: I went to a place called "Audio Communications," which does car audio and home theater. Probably wasn't the best place to go.

-Cooper

 

[Rutledge]

A audio/video specialty store can clearly give 20% off on audio products and stay in business.
If video are a large portion of their sales they probably could not stay in business very long with 20% discounts.

If a paradigm speaker cost the dealer $200 and retailed for
$400 and there was a 20% discount the dealer would make $120. He could survive on that.
I have purposely not include sales commissions or shipping costs in that example.

If a Sony DVD player cost him $200 and retailed for $320 and he gave a 20% discount he would make $56.

If he paid his salesman a 2% commission that would subtract another $5.12. If it cost $15.00 to ship, the dealer would make less than $36 on the DVD player.

As you can see there is a big difference in profit with audio vs. video.

 

[Bill Lucas]

Cooper,
Agreed. I'd like to emphasize that no manufacturer tells us what price to sell their product. If I were a retailer I would not have a problem with giving a discount to a solid client. However, if someone walked in off the street with no history as a client and a stack of Internet prices demanding that I meet the price or they'd walk I would let them walk in a heartbeat. As Rutledge stated, the discount opportunity would also depend on the product. There are things I make more on and would be willing to discount (if I were a ratailer) and there are things that I wouldn't discount for anyone. Regards.
Chas,
Oh, I don't think you'd make me feel bad at all.

 

[Chas_T]

Oh, I don't think you'd make me feel bad at all.

As I suspected. Those full MSRP's have their advantage's don't they??

 

[Matt Jesty]

Paradigm limits authorized retailers geographically so they don't compete, and they don't allow any internet sales. This manipulation goes against the spirit of capitalism.
++++++++++++++++++++++++++++++++++++++++++++++++++ +++++
That is Paradigm's way of supporting it's dealer network and it is your right to choose another speaker line to show your dissatisfaction just like many Hi-fi dealers show their dissatisfaction for manufacturers that don't shut down grey-marketing, the retailers drop that line. This discussion will continue as more retailers seek protected lines so they don't feel they are being used for audio demonstrations by people who WILL NEVER pay the price they have listed on the signs. As has been said before, "It's AUDIO ,YOU HAVE TO HEAR IT!"

 

[Matt Jesty]

Paradigm limits authorized retailers geographically so they don't compete, and they don't allow any internet sales. This manipulation goes against the spirit of capitalism.
++++++++++++++++++++++++++++++++++++++++++++++++++ +++++
That is Paradigm's way of supporting it's dealer network and it is your right to choose another speaker line to show your dissatisfaction just like many Hi-fi dealers show their dissatisfaction for manufacturers that don't shut down grey-marketing, the retailers drop that line. This discussion will continue as more retailers seek protected lines so they don't feel they are being used for audio demonstrations by people who WILL NEVER pay the price they have listed on the signs. As has been said before, "It's AUDIO ,YOU HAVE TO HEAR IT!"

 

[Bill Lucas]

Chas,

If I weren't in business to make money I wouldn't be in business. Passion for what you do makes the business very enjoyable but it is profits that put food on the table.

 

[Mike OConnell]

"If I weren't in business to make money I wouldn't be in business. Passion for what you do makes the business very enjoyable but it is profits that put food on the table."

Bill - Well Said. In business there is one goal... to make a profit. If you don't make a profit you will not survive.

That being said - if the dealer that is being duscussed here would have been in my town, I would have walked out the second he lied to me. That dealer has every right to charge whatever he wants for to equipment, but don't tell an outright lie and say that Paradigm does not allow sales below MSRP.

In any business if you want to make a friend and a customer for life - be honest, even when you make a mistake.

Bill, you sound like a very reputable business man - I would be willing to bet that if you discover that you had made an error in a custom installation that you would be better off letting the client know up front and working out a solution with that customer than not saying anything and getting caught. Chances are it was a mistake - that is human. Making the mistake is usually not the problem, how you handle the solution to the error in the business world is what keeps clients.

Mike