Thread: Is asking for discount pricing disgraceful?

Once you develop a relationship with your dealer, it's between you and them. If I got a better price on something, I certainly don't expect the same service as a retail price purchase.

jap.......I say be your own boss. Who cares what Al M or any other forum member over at WBF thinks about how a transaction should take place. He is free to behave as he sees fit and so are you. I always try to negotiate the best price I can whenever I make a purchase whether it's audio gear, automobiles, furniture, lawn equipment, services, or whatever. Am I always successful? Not always, but more often than not I manage to make purchases at a price that's less than full retail. You are always free to walk away from any purchase that doesn't please you. Of course a dealer is also free to refuse any offer that doesn't satisfy his requirements. It is definitely a two way street.

It is not disgraceful to save money and you should not be embarrassed to exercise your purchasing power in a manner beneficial to your assets. You can be certain there are plenty of price negotiations taking place between manufacturers and suppliers when raw materials, hard parts, and accessories are purchased to make their end product. There are negotiations between manufacturers and shippers for the lowest rates possible to get their products to retailers, and there are negotiations between retailers, distributors, and manufacturers for discounts. The manufacturers suggested retail price (MSRP) is a starting point and not necessarily an absolute when it comes to closing a deal. The key word is "suggested" retail price. I will take advantage of every discount opportunity available when I am shopping and so should you.

I have a unique perspective on this question. I was a consumer of high end audio equipment for over 35 years before becoming a dealer. To say that I was previously unaware (ignorant?) of the trials and tribulations of being a dealer would be an understatement.

Sitting on the other side of the desk gives one a unique perspective. I had previously assumed it was no big deal to ask, and certainly no big deal to get a nice discount. I mean, something is better than nothing, right? If we assume for a moment that the standard industry markup is X%, then asking for Y% should be no big deal. As an example, 30% and ask for 20% off. The dealer is still making 10%, so who cares? Again, something is better than nothing? Well….not so fast….

From the dealers perspective, they have invested tens of thousands if not hundreds of thousands of dollars in OBTAINING brands. You don’t think you can just call up good old McIntosh or ARC or whomever and say, “hey, I’m a nice guy, can I sell your product?” HA! What if you were to learn that the dealer must first get the OK from the manufacturer by going through an extensive background check, then second, buy at least $50,000 of “demo” gear (read: not to be sold for X number of years)? How many 10% deals must the dealer make to pay back that initial investment in the line?

Next, what about keeping a manufacturer? Do you think you just do the one buy in of $50,000 and everything is honky dory after that? HA! Think again. When manufacturers come out with new products, they EXPECT/INSIST/STRONGLY ENCOURAGE a dealer to buy that new product as a DEMO too! So the $50,000 easily turns into $100,000 over a number of years.

Next, let’s talk about customer support. If the dealer sells a product which requires a little more hand holding like a Devialet or a Lumin, do you think 10% is going to cover his/her time? It is not uncommon for me to be on the phone with a customer for 8, 10 or more hours over the initial 30 day period….especially with a product like Devialet.

I can just hear people now, “oh, I won’t need support!” HA! Trust me, the ones asking for the biggest discounts are the ones who WILL need the most support.

Next, dealers work closely with manufacturers and distributors and with few exceptions, discounting is HEAVILY discouraged. It’s a lose/lose/lose situation and manufacturers/distributors have plenty of real life examples.

Finally, let’s talk about a dealer selling against himself. Huh? What? What do you mean Mike? By discounting a product heavily, it encourages excessive flipping (yes, yes, this is the pot calling the kettle black, but it's still a fact). The dealer sells product A for $5000 (a 30% discount let’s say). Two months, hell, two weeks later its on Audiogon for $4800. The dealer has a pending sale which he loses to the guy who sees that great deal on Audiogon and buys it used instead.

I had an experienced dealer tell me one time, “I will never discount more than what I earn.” Meaning, if it’s a 30% line, he won’t give 15%. He may only give 10% or 12%, if anything at all.

At the end of the day, it may surprise some audiophiles to learn that there are actually two types of buyers. First, is the audiophile. They think they know everything and want the biggest discount. Second, is the very wealthy customer. They don’t know the difference between an amp and a DAC, but they love love love music, they want the best, they will pay for the best (and rarely ask for a discount), but they EXPECT world-class, white glove service. If something isn’t working, you’re racing to their house as fast as you can to get it fixed. Trust me.

So, what’s the solution? I think both the consumer and the dealer need to work together. Dealers have already been mostly forced out of a B&M situation due to squeezing margins and falling profit margins. At the end of the day, it’s all about relationships. Building a long term relationship between a dealer and a consumer is a win/win for everyone. I myself have tried to be creative. Providing free cables in lieu of a big discount as an example. Taking trades is another. Packaging components together is yet another.

So as long as there are consumers, there will continue to be expectations of a discount. We are all consumers. They are sellers, we are buyers and visa versa. We will all continue to negotiate the best price on whatever we buy - a car, appliances, etc. MSRP is the starting point. But a little perspective may aid in the understanding of the "other side".

Mike,

Great post! I agree, dealers are between a rock and a hard place. But for a guy like me paying full retail is just a non starter. I don't just "think" I won't need service, I know it. A lot of gear has passed through my listening room and never once did I ask a dealer for anything. I'm looking for someone to take my order and ship the product. That's it. Even when I've made a mistake and know it immediately, I consider that to be my problem. I sell it myself at a loss.

But I agree, people that want service need to pay a dealer for that service. I don't visit B&M dealers because I feel it would be dishonest to demo product at their store and then buy elsewhere at a discount. Everything I own was purchased blind. So I think there are customers like me that should get a deep discount because we truly won't need anything other than taking the order and then there's those people that truly need a full service dealer.

Originally Posted by audio.bill

What I think is at least unethical is using a local dealer to audition products, even sometimes taking them up on offers of extended in-home auditions, and then going ahead and purchasing the same item at a better price from another source.

Totally agree. Basically stealing a service.

Lots of good points made here but I especially agree with audio.bill and Jax that if you use a local dealer to demo gear extensively, then you shop for the best price on the interwebs, that is highly unethical (not to mention that buying from another dealer online in another state, when your local dealer is the local representative of the brand in question is typically not allowed by the manufacturer in question - enforcement is another issue).

Having said all that, I agree that negotiating a discount is between yourself and the dealer you are transacting with. With the exception of my speakers, I have bought all my other equipment from the same dealer and although I have not made a major audio purchase in the last 3-4 years, I intend to continue to deal exclusively with my local dealer because I have an established relationship with them and wish to continue to do so, and the only way I can contribute towards them being around is to purchase my gear from them (many of you already know who I primarily deal with here in the greater Boston area). I typically get a discount but it is not humongous and I am ok with that. The flip side is whenever I want to listen to a piece of gear, I can arrange to do so whenever I want. Call in advance and I have a room available to me with the demo gear and when possible I can also ask for the ancillary equipment/system I want to hear it with. I usually get 2-3 hours of listening time unfettered (no one comes in and bugs me). Home demos when possible are also not a problem. As another example of the service I receive, I recently moved and I called the turntable expert/setup guy at my local dealer a few days before moving and he came and disassembled my table and set it up at the shop and I will be able to go in over the next couple of weeks to listen to a few carts (as I tore off the stylus off my old cart and hadn't replaced the cartridge in the last couple of years) and when I am ready, I will have the new cart mounted and setup in my new place (which we moved to 10 days ago). All I had to do is make the request, and the answer was an unequivocal "no problem...it's done." I am willing to get a less aggressive discount and receive this kind of support. In my opinion, these guys do it right and they are a dying breed. They have lasted as long as they have even with the overhead of a bricks and mortar operation because they do deliver this level of service and have established a loyal customer base.

But as Mike said, it is becoming harder and harder to compete effectively and stay in business as online competitors discount more heavily and compete effectively for the incremental sale, and as customers use the web more effectively to compare prices and shop for the biggest discount. The proverbial rock and a hard place seems to be getting narrower and narrower for the traditional b&m high-end audio retailer.

Originally Posted by Geardaddy

It has to be conducted in good taste and with sensitivity

well said Geardaddy

Mike has made a point that cuts to the bone about what I talked about before, and that's the relationship between a gear flipper and a dealer. Dealers can't afford to be in competition with their customers or friends. And don't think for a second that the distributors and OEMs won't notice that lots of gear sold by a certain dealer comes up for sale quickly on the used market at heavily discounted prices.

Hey Al, do you pay full MSRP for your cars too?

I'm not a gear flipper, but I can see it another way. If a gear flipper and a dealer have some relationship how do we know what financial transaction is taking place between this flipper and the dealer. I say that the majority of gear flippers are paying list or pretty much close to it if they get a discount for their gear and really whats the big deal if they sell it. The dealer and the manufacturer each received their money for the sell of a product, and the dealer in most cases orders a replacement.

On this site, lets just say some members flip gear about as quick as I fill my boat up with gas.

Discounts, when we purchase a car we hunt for discounts, and there is even sites like for example True Car that give you a ballpark on what is fair and what is an oversell by a dealer. I look at this the same for audio equipment, TV's, appliances boats etc.. The relationship one builds between a dealer of anything be it, audio, cars etc.. has always been in my experience about the dealers drive for repeat business. If they walk the mile to ensure your getting the best price and that includes a discount and can back up that price with service, I will more than likely be a repeat customer.

Al...your logic is mystifying. Any transaction between buyer and seller is subject to a negotiation that both parties can enter into willingly or unwillingly. If a buyer requests a discount and the seller does not feel he can accommodate said customer than that request is denied and said customer can then decide whether he/she still wants to purchase the item under consideration at the asking price. There is no fair or unfair. A dealer is in business to make money. Yes. But dealer also has the ability to ascertain under what conditions it makes financial sense for he/she to discount a product (.i.e., forego on full mark-up) if it will generate a sale that is still profitable for the dealer. Your point of view seems at best naive and "fairness" doesn't enter into the equation. You seem to think that a dealer is being coerced into selling at a price they don't want when a customer asks for a discount, whereas the reality is the dealer can say no. Dealers who need to discount less aggressively to cover higher b&m over head costs need to figure out how to deliver more value-added services to be able to sustain premium pricing. That is their chsllenge vs. pure online retailers who don't have the same overhead costs and are therefore able to discount more aggressively.

Originally Posted by CPP

I'm not a gear flipper, but I can see it another way. If a gear flipper and a dealer have some relationship how do we know what financial transaction is taking place between this flipper and the dealer. I say that the majority of gear flippers are paying list or pretty much close to it if they get a discount for their gear and really whats the big deal if they sell it. The dealer and the manufacturer each received their money for the sell of a product, and the dealer in most cases orders a replacement.

On this site, lets just say some members flip gear about as quick as I fill my boat up with gas.

Discounts, when we purchase a car we hunt for discounts, and there is even sites like for example True Car that give you a ballpark on what is fair and what is an oversell by a dealer. I look at this the same for audio equipment, TV's, appliances boats etc.. The relationship one builds between a dealer of anything be it, audio, cars etc.. has always been in my experience about the dealers drive for repeat business. If they walk the mile to ensure your getting the best price and that includes a discount and can back up that price with service, I will more than likely be a repeat customer.

If the majority of gear flippers are really paying close to list price and then flipping the gear a week or two later at a huge loss, that means the majority of gear flippers have large piles of cash they are burning through. The "big deal" if they sell their new gear at a hefty discount from the list price is that it potentially hurts the dealers they bought it from. Dealers are essentially competing against their customers in the marketplace and they are devaluing the gear dealers are trying to sell. I thought Mike made that pretty clear in his post.

Welcome Erik!

Asking for a discount price in HiFi is not disgraceful imho. It all depends at the amount of discount you ask for.
I never mention an amount.
I ask my dealers " what could be your best price ? ".
Everyone knows that the MSRP does not mean a lot.

Here's a question: does sticking hard to MSRP ever make sense?

Food for thought: $1400 Triton 7 speakers. Lugging speakers over to the customers, unboxing them, setting them up, etc. With such a small $ margin already, why would a dealer bother discounting?

Which brings me to another, what I'll call, market approach. One of the things that a dealer has to look at is their target market. There are dealers that sell lower priced products, such as Golden Ear, Integra, Yamaha, Boston Acoustics, Definitive Technology, etc. Then on the flip side are dealers that sell more higher priced gear such as McIntosh, ARC, Magico, Wilson, etc.

The challenge for the lower priced product dealer is the margins are smaller in terms of dollars, making it difficult to give any kind of discount at all - especially when you factor in B&M costs - but, on the plus side, the market potential is bigger. The challenge for the dealer dealing in higher priced items is that there is a larger margin dollar, but the potential buyer market is smaller.

What I found in my research in speaking with over a dozen different dealers was that the lower priced item buyer was much more of a customer service challenge. They wanted the biggest percentage discount and they were more likely to shop your price. All of them indicated there was still a lot of time spent "hand holding". Also, their loyalty was also not as strong. These of course are general statements, but through the experience of these dealers, what they had experienced more often than not. On the flip side, the customer purchasing higher priced gear has a higher level of expectation of service - any time or day. Contrast buying $1400 speakers with $200,000 speakers. How many trips will each dealer make back to the customers to ensure the speakers are placed properly, etc. There is only so much money in a $1400 speaker sale to justify time and trips. Experienced dealers, manufacturers and distributors have all said "don't discount too much, if at all, because there will be after sales service required."

At the end of the day, I strive to provide the best service I can, but my point is back to an understanding of "the other side" and margin dollars, rather than percentages.

Originally Posted by puroagave

I think we need to define what a B&M dealer is: its one that leases commercial space, has a salaried staff, pays workman's comp, etc.

then there's the guy that sells out of his house, this is probably not his primary source of income or has a spouse that's the bread winner and their 'overhead' is ridiculously low. what should that 'dealer' expect as a reasonable margin on their sales?

Great question. My answer would be that the B&M stores can't discount....or very very little if they do. The cost of overhead is too steep. Rent, electricity, cleaning, labor, taxes, etc. But what they can do is provide top top top notch service in return and take trades which they can then show on the floor. The OTHER big things B&M stores could focus on for success is only target brands that resale to B&M stores only: ARC, Mc, Wilson, PrimaLuna (yes, this one was a shocker for me too), etc. It's also easier for a B&M to hold a monthly "wine & cheese" gathering in their store for potential new customers.

These are just some of the competitive advantages B&M stores have as I see it.

Originally Posted by Mike

Great question. My answer would be that the B&M stores can't discount....or very very little if they do. The cost of overhead is too steep. Rent, electricity, cleaning, labor, taxes, etc. But what they can do is provide top top top notch service in return and take trades which they can then show on the floor. The OTHER big things B&M stores could focus on for success is only target brands that resale to B&M stores only: ARC, Mc, Wilson, PrimaLuna (yes, this one was a shocker for me too), etc. It's also easier for a B&M to hold a monthly "wine & cheese" gathering in their store for potential new customers.

These are just some of the competitive advantages B&M stores have as I see it.

Mike B&M stores do discount, remember BEST BUY & their Magnolia outlets. Holiday sales, end of year closeouts but of course we are only talking about audio equipment that cost a years paycheck to some.
DEFINITION of 'Brick And Mortar'

A traditional "street-side" business that deals with its customers face to face in an office or store that the business owns or rents. The local grocery store and the corner bank are examples of "brick and mortar" companies. Brick and mortar businesses can find it difficult to compete with web-based businesses because the latter usually have lower operating costs and greater flexibility. It is increasingly common for brick and mortar companies to also have an online presence. For example, some brick and mortar grocery stores, such as the national Safeway chain, allow customers to shop for groceries online and have them delivered to their doorstep in as little as a few hours.

I enjoy B&M audio stores, or the ones that are left. Some are so snooty they act like your going to steel something, unless you drove up in a $70k car. The ones I visit which are under 60 miles from the house, are personable, knowledgeable, do home installation if needed and they carry acceptable product lines including those items for thrifty audio types and both will offer a discount if your a regular. Cheese and wine and/or good ale helps after closing. I think getting a discount all depends on the buyers attitude as well as the sellers attitude.

This is an interesting topic and to some extent similar to discussions I have had on multiple occasions with my primary dealer. I no longer discuss what I have paid for any product with anyone, not even my closest audio friends who often shop at the same store. (Note: I made one mistake about ~10 years ago that could have cost me two relationships, so I am adamant on this point now).

I don't believe that discussing actual discounts or dealer margins has any place in these forums. ( In that vein I am hoping someone edits one of the previous posts in this thread). My dealer and also now a friend and I often debate the issues sites such as this, AA and WBF have on the industry. My position is that Audiogon let the genie out of the bottle and it will never be put back. IMO the secondary market sets the price point that consumers base what is a fair price to pay for gear.

I value the service provided by the two B&M stores I frequent in my area. I can audition any piece of gear they have in stock in my own home. My commitment to them is that I will never abuse this benefit my taking home a piece of gear I have no intention of considering for purchase. They also know that I will not shop around for a better price. In the end both of parties must be comfortable with whatever deal is on the table. There are a couple of people here who know that I had the opportunity to acquire one of my current pieces of gear at a significantly better price than I ended up negotiating with my dealer.

Originally Posted by FlexibleAudio

Regarding the two highlighted statements above, I must say I don't understand this line of reasoning either. I must be a crass old goat.

It seams to me we are all big kids and this is just business. In business if you screw some one don't expect future access to the services of that someone. The dealer universe has full authority to weigh every proposal as a unique commercial opportunity and either agree or not. No one is holding a gun to their head. At the same time if a consumer uses the dealer's time and resources and then buys the product from another party based on price, the dealer has every right to make a commercial decision the next time that party shows up at his store to throw him out on his ear or play the game again.

As I said above in Post 38, if a consumer uses the dealer for anything more than taking an order they should agree to the terms of the transaction upfront and honor those terms if they expect to use such services again.

Now, that all said, I believe there are some dealers that will go out of their way to make a customer feel as if they are committing a federal offense for asking about a discount as a means of combating the practice. This too is well within the dealers commercial prerogative, but I simply react to it for what it is.....a business tactic. I would never allow such a thing to impact me personally or emotionally.

Paul-It pains me to say this, but I agree with you. I have never paid full list price for any audio gear I have bought over the last 40 years. I also don't expect to pay anywhere close to MSRP for an automobile. With few exceptions, audio dealers have high margins to work with and they can knock off some money from the list price. This sort of reminds me when I was being trained to sell cars many years ago and the manager who was training me was freaking hilarious. We started all deals at full MSRP and negotiated down from there. My manager told me that some people will get offended when you start off at MSRP. He said to expect some customers will tell you that only an idiot pays MSRP for a car and they will ask you if you think they are an idiot. He said to tell them no, but if you were, I sure wouldn't have wanted to miss you!

Originally Posted by FlexibleAudio

Regarding the two highlighted statements above, I must say I don't understand this line of reasoning either. I must be a crass old goat.

.

Just because someone has a pretty good idea what the margins are on various products doesn't mean they have to share that information across the forums. As Mike pointed out in his earlier lengthly post many individuals don't understand what those margins have to cover. They think that is XX% profit. On top of that you will have individuals who pay MSRP and will feel ripped off by someone posting they shopped 3 dealers then got a great discount from one of them. He then gets pissed at the dealer when he was happy when he walked out the door.

I have saved 10's of thousands negotiating , audio gear. The dealers all seemed happy taking payment. Business is business. I have seen dealers selling new equipment on audiogon as used, to just move more gear and make something less than full retail. It's generally not in limited supply.
We are living in a Circus.

PS
Even Best Buy's Magnolia offers deals on their high end line, by throwing equipment in, that translates into a nice discount. Which surprised me!