SME 20/3 review

[Puma Cat]

Originally Posted by cmalak

Ok so let's redo the math

£7,135 X $1.646 (exchange rate per £1) = $11,744 * 1.055 (5.5% import duty) = $12,390 landed cost
Retail price = $18,000

That translates into distributor/importor (Sumiko) and dealer mark-up of 45% which is pretty typical of dealer mark-ups in high end audio (less on lower price point equipment and higher on higher-priced equipment). I typically think about 35%-60% of retail price is wholesaler/dealer mark up depending on equipment/category.

But let's remember that the £7,135 is the UK retail price, which already includes dealer mark-up (I assume SME manages dealer support in the UK so no wholesale mark-up in the £7,135 price). So let's call it 35% dealer mark-up already built into the £7,135, so now if you adjust for that, then in the US, the importor + dealer mark-up becomes more like 120%+.

That is a bit excessive.

Caveat Emptor: The main assumption I am making is the 35% dealer mark-up in the UK. That may be off but I doubt it's off by much. Let's say SME will charge a higher wholesale price to international importers because they feel export markets can bear the higher price, let's call it a 20% markup only to international wholesale, so the wholesale price to US is £5,708, convert at $1.646/£1 and add 5.5% import duty, the adjusted landed cost will be $9,912, so the importer/distributor and dealer mark-up is more like 82%. Still a nice mark-up. Let's keep in mind, these are not high volume items, so the margins/mark-ups will be higher.

Thanks, Cyril, you did the calculation I was about to go back and do as well. I forgot about the fact that Sumiko would not be paying UK MSRP and VAT. The final markup of 82% kinda makes sense if each middleman between the mfr and customer (Sumiko as distributor and your local shop as retailer) each add a 40% mark up, which, from what I understand, is close to the industry standard for markup.

The point I was going to make it that it might be cheaper to fly over to the UK and buy an SME and cart it back.

Makes you wonder about the total markup for Koetsus, where you have three middlemen: the importer (Hiram Toto), the distributor (Pegasus AV), and the dealer.

[cmalak]

Originally Posted by Puma Cat

Thanks, Cyril, you did the calculation I was about to go back and do as well. I forgot about the fact that Sumiko would not be paying UK MSRP and VAT. The final markup of 82% kinda makes sense if each middleman between the mfr and customer (Sumiko as distributor and your local shop as retailer) each add a 40% mark up, which, from what I understand, is close to the industry standard for markup.

The point I was going to make it that it might be cheaper to fly over to the UK and buy an SME and cart it back.

Stephen...it would, except that you would neet to get the 110V power supply/motor controller and I am not sure UK retailers are allowed to sell that version from the UK (again as SME is trying to protect its distributors in the various geographic regions). Also not sure how easy it is to "cart" it back

[metaphacts]

Originally Posted by cmalak

Ok so let's redo the math

£7,135 X $1.646 (exchange rate per £1) = $11,744 * 1.055 (5.5% import duty) = $12,390 landed cost
Retail price = $18,000

That translates into distributor/importor (Sumiko) and dealer mark-up of 45% which is pretty typical of dealer mark-ups in high end audio (less on lower price point equipment and higher on higher-priced equipment). I typically think about 35%-60% of retail price is wholesaler/dealer mark up depending on equipment/category.

But let's remember that the £7,135 is the UK retail price, which already includes dealer mark-up (I assume SME manages dealer support in the UK so no wholesale mark-up in the £7,135 price). So let's call it 35% dealer mark-up already built into the £7,135, so now if you adjust for that, then in the US, the importor + dealer mark-up becomes more like 120%+.

That is a bit excessive.

Caveat Emptor: The main assumption I am making is the 35% dealer mark-up in the UK. That may be off but I doubt it's off by much. Let's say SME will charge a higher wholesale price to international importers because they feel export markets can bear the higher price, let's call it a 20% markup only to international wholesale, so the wholesale price to US is £5,708, convert at $1.646/£1 and add 5.5% import duty, the adjusted landed cost will be $9,912, so the importer/distributor and dealer mark-up is more like 82%. Still a nice mark-up. Let's keep in mind, these are not high volume items, so the margins/mark-ups will be higher.

Cyril, my biggest concern with all this is the mis-speculation that goes with a little bit of knowledge. Your numbers are off but within the very general realm of reality. Without hard real numbers you don't know what is excessive and what isn't, at least from a business operations standpoint. As a consumer, you don't need to know. It's your prerogative to call anything you please excessive.

I will be happy to run the numbers for you in a PM. FYI, we talk margin not mark-up. But using your markup model, the markup of a typical imported product would be marked up 150% over landed cost.

Item landed cost = $1
33% distributor margin (50% mark-up) = $1.50 dealer cost
40%-45% dealer margin (67%+ markup from dealer cost) = $2.50+ retail

Excessive? As I said, that's your call. If it is you would think people would be lining up to to make easy money opening brick and mortar hifi stores and hifi distribution companies. Any new hifi stores in your neighborhood?

Until companies embrace a global pricing structure, you will see substantial price difference between home market and export markets. Just know that global pricing, where it exists, adjusts the home market retail up to the exported retail level. The result is the home market now pays a higher price than they otherwise would. Most companies don't have the margin to price that way and stay competitive or aren't willing to limit their home market sales with artificially higher prices to level the global playing field.

As I said, if you want more detail PM me

[Puma Cat]

Originally Posted by cmalak

Stephen...it would, except that you would neet to get the 110V power supply/motor controller and I am not sure UK retailers are allowed to sell that version from the UK (again as SME is trying to protect its distributors in the various geographic regions). Also not sure how easy it is to "cart" it back

Hi Cyrll,
I was aware one would need the 110V power supply; but you could order that from an SME dealer in the U.S.

Not that I personally would do this; it was just a thought exercise.

[cmalak]

Originally Posted by metaphacts

Cyril, my biggest concern with all this is the mis-speculation that goes with a little bit of knowledge. Your numbers are off but within the very general realm of reality. Without hard real numbers you don't know what is excessive and what isn't, at least from a business operations standpoint. As a consumer, you don't need to know. It's your prerogative to call anything you please excessive.

I will be happy to run the numbers for you in a PM. FYI, we talk margin not mark-up. But using your markup model, the markup of a typical imported product would be marked up 150% over landed cost.

Item landed cost = $1
33% distributor margin (50% mark-up) = $1.50 dealer cost
40%-45% dealer margin (67%+ markup from dealer cost) = $2.50+ retail

Excessive? As I said, that's your call. If it is you would think people would be lining up to to make easy money opening brick and mortar hifi stores and hifi distribution companies. Any new hifi stores in your neighborhood?

Until companies embrace a global pricing structure, you will see substantial price difference between home market and export markets. Just know that global pricing, where it exists, adjusts the home market retail up to the exported retail level. The result is the home market now pays a higher price than they otherwise would. Most companies don't have the margin to price that way and stay competitive or aren't willing to limit their home market sales with artificially higher prices to level the global playing field.

As I said, if you want more detail PM me

Bill...you are absolutely correct in correcting my use of mark-up vs. margin. I should not have said excessive. It is what it is. You are correct in saying that excess profts would attract new entrants (and drive those profit margins downs as a result by the way). That is clearly not happening . The market bears what the market bears Bill. I get that. Each consumer makes his purchasing decision within the context of what he perceives the value proposition to be in a particular product at its particular price point, especially as compared to competing products. I am not trying to call SME's pricing "excessive." I used that term in comparison to what I think of domestic dealer margins in the 40%-60% range. But as you say, there is an added layer of cost with imported products, so its not a fair comparison to make. Also, Bill, I recognize that we are not talking about high volume items, and by that fact alone the built-in margins will have to be higher to cover operating/overhead costs (I believe I mentioned that in my post). Again, I should not have used the term "excessive" (poor use of words), I was just trying to break down the cost as best I could to understand the retail price here. That's all. No harm no foul I hope

[Rafale]

The implementation of the deck in situ is essential, it is not enough to buy the product, 99 % of the customers will need the technical support to extract the maximum of this F1 deck, this point is crucial, set-up is the key......for my part I am ready to pay the price so that a TT of this level is perfectly implemented, no compromise.... it would be some more of lost time and money

[metaphacts]

Originally Posted by cmalak

Bill...you are absolutely correct in correcting my use of mark-up vs. margin. I should not have said excessive. It is what it is. You are correct in saying that excess profts would attract new entrants (and drive those profit margins downs as a result by the way). That is clearly not happening . The market bears what the market bears Bill. I get that. Each consumer makes his purchasing decision within the context of what he perceives the value proposition to be in a particular product at its particular price point, especially as compared to competing products. I am not trying to call SME's pricing "excessive." I used that term in comparison to what I think of domestic dealer margins in the 40%-60% range. But as you say, there is an added layer of cost with imported products, so its not a fair comparison to make. Also, Bill, I recognize that we are not talking about high volume items, and by that fact alone the built-in margins will have to be higher to cover operating/overhead costs (I believe I mentioned that in my post). Again, I should not have used the term "excessive" (poor use of words), I was just trying to break down the cost as best I could to understand the retail price here. That's all. No harm no foul I hope

Cyril we're on the same page. That's why I offered the PM and why I outlined what global pricing would mean.

Thank you for realizing the emotional nature that the term excessive can convey. The numbers are the numbers. Costs are costs. Yes the third level yields the price difference. The value judgment, as always, is in the view of the buyer.

[enatai252]

Just ordered the 20/3 with V arm. Replacing a 20/2 with IV.vi arm which I have owned for 9 years. Will put my 1 yr old Lyra Titan i on the arm. Phono stage will be ASR Basis Ex 2010. This is the study system


Thanks to Sumiko for carrying this in stock. Should be up and running next week.

As an aside....since Rafale mentions it...the other table i am getting is Linn LP12SE with Radikal. All parts but trampolin are in...hopefully both come home next week. Akiva get pole position on the arm...and phono will be ARC Ref 2 SE...which shipped on Tuesday. This will go in Sasha/ref250/KX-R system

[cmalak]

enatai252...congrats on the new tt and the overall system

[metaphacts]

Originally Posted by enatai252

Just ordered the 20/3 with V arm. Replacing a 20/2 with IV.vi arm which I have owned for 9 years. Will put my 1 yr old Lyra Titan i on the arm. Phono stage will be ASR Basis Ex 2010. This is the study system


Thanks to Sumiko for carrying this in stock. Should be up and running next week.

As an aside....since Rafale mentions it...the other table i am getting is Linn LP12SE with Radikal. All parts but trampolin are in...hopefully both come home next week. Akiva get pole position on the arm...and phono will be ARC Ref 2 SE...which shipped on Tuesday. This will go in Sasha/ref250/KX-R system

Congrats!! Hope your dealer will be installing the table for you. There are a few tricks for the SMEV that allow it do do things the IV.Vi can't.