Current research on retail shows an average mark up from retailer to consumer at just over 30%. This is in line with AI items at least as stores can run pocket unadvertised sales at 10-20% and still retain a profit.
Historically, yes. As inflation has been sustained and significant, these margins are shrinking even as prices climb.
Given an item like a Hydra 32 has MAP pricing of $429, that means the cost to the retailer is around $330 per unit. Current research also shows that the typical mark up from wholesaler (AI) to the retailer is at a 50% average currently on electronics. Given that rate, it would place the cost to AI from the Manufacturer at about $220.51. Obviously there is about a 20% mark up from the actual factory floor to the wholesaler, but that is not a profit margin I really care about. But again, what the heck do I know?
I don't agree with these numbers at the scales we are talking and I think that is part of the where your misunderstanding is coming from.
Wholesale is typically 5% to 20% over production and materials costs, based on quantity at scale. The Scale is the key here. What we are discussing here is low volume small jobber type business so much higher (for many reasons but mostly inconvenience of small runs).
Wholesale to Retailer is not 50%. No clue where you picked that up. Source? Computer/electronics wholesale is 5% to 15% based on volume (among other things).
I can't disclose actual pricing or brand but I can tell you that my wholesale price on a major brand of Television ranges from 5% to 29% off of MAP with the average somewhere closer to 15%. I can also tell you that my pricing is not any different than a guy doing 100x my volume. Best Buy does get a bit better price based on their footprint, but my wholesale cost is still cheaper than their sale
If I can walk into a Walmart right now and walk out with a 32" HD Smart TV for under $100, based on the same averages the cost from manufacturer to the wholesaler is about $50.
This is where I think your biggest misunderstanding appears to be.
That is not comparable do to simple economies of scale. Unit production is in the literal millions of products with the cost (overhead, materials, everything) is shared over dozens of models, products and years. Samsung had a 529 Million dollar profit. Sounds like a lot, but that is from the sale of MILLIONS of tvs, electronic devices, printer, scanners, computers, appliances, batteries, solar equipment, capital leasing and everything else under the sun. Margin per item is minuscule and OFTEN at a significant loss and overhead is huge.
One example above.
Samsung can't stop producing TVs, it is a core business segment, so if they lose $200 unit, they lose $200 a unit and make it up elsewhere. They can't up their price as it would prevent them from being competitive in that segment.
Likewise, giant retailers also work on volume and have far lower margins where cost is also distributed over giant infrastructures. They (retailers) can and do sell items like 32" TVs at a $100 loss to promote like goods sales (called a loss leader) and keep CASH flowing. In fact, they can and do take a loss on many items and sometimes entire vertical segments just to keep people in stores and compete with online and other retail. You will note that most of the major retailers have gone out of business due to unsustainable losses. Best Buy is floundering, Sears, K-Mart, Circuit City, Radio Shack, JC Penny, Bed Bath and Beyond, etc.
You cant compare ANY of that to what we are talking about here. We are discussing SMALL (very small) business. You can't compare that to large multinational enterprise manufacturing and retail. Margins are nowhere near comparable at any level from raw materials to manufacturing costs or wholesale price models.
One cannot reasonably argue that a Hydra costs more to make.
You most certainly can when you consider the extremely vast differences in scale.
Early in this discussion we touched on what it takes to run a small manufacturing to retail business (or any business for that matter). You are focussed on the "manufacturing cost" based on what you can see and hold in your hands and relating that to what you think the raw materials cost. You are ignoring the rest of the associated costs which are actually the bulk of the retail price.
For the retail cost to be $330 based on prior calculations, that means there is a mark up from AI as a wholesaler to the LFS retailer of roughly 660%. While that is great for AI, that is price gouging the customers. Again, playing with numbers here. Lets again go with that $50 cost to the wholesaler and apply only a 200% mark up, the actual cost to consumer would be roughly $130. Hell at a 300% mark up our cost would still be under $200. The inflated mark up impacts the mark up from retailer to consumer.
Those numbers are not even in the ballpark because your prior calculations are way off based on manufacturing assumptions that are not remotely realistic.
I suggest (honestly) examining some large kickstarter programs. You will get an idea of what low volume R&D and jobber manufacturing costs and understand that 90 some precent fail due to lack of funds to finish. What may be 3 cents worth of plastic from a barge turns into a $10 injection molded piece but even then the tooling may cost $10,000 to design, and $10,000 to store at the factory for production runs every 6 months, etc. So the plastic shell for your widget is $26 bucks even though it is 3 cents worth of raw plastic.
A circuit board may have 40 components on it. Sony buys those components for pennies each because they buy millions of components. Your jobber factory buys them per job and what Sony spent 4 cents on costs you 40 cents. It adds up quickly.
Samsung ships TVs by the cargo ship load. Your Jobber in China by the partial container. You pay exponentially more shipping than they do.
LG prints boxes in house or orders them 100K at a time for 11 cents each at volume. You have your boxes designed and printed by a jobber and they are $5 each if you buy 5000 of them, but you only need 2500 of them, but the cost for 2500 is $7 each.
But again, what the heck do I know?
I think, in the kindest manner, your understanding of this topic is lacking.
This is not a personal or an attack. It is just a discussion. High prices suck, but as I stated many pages ago, the profits are not what some of you think they are. In fact, many of these companies are likely struggling to stay afloat.
Have a nice evening.
