How many components does ARC sell per year

[ariess]

I am interested to get a ballpark (to within a factor of 2 or so) idea of how many Reference level
components ARC sells per year. I looked up online and found that ARC has annual sales of $5-10 million per year. Let's assume the higher end.

Here are some assumptions: I'll assume that 75% of the sales $$$ comes from the Ref line. I'll also assume they sell many more of the lower cost items (e.g. Ref 75) than the higher cost items (e.g. Ref 750). So I'll assume the average Ref component is $15k where the average includes the rare $30k piece with the more common $10-15k piece.

So $7.5 million/$15k =500 total Ref units per year. I'd guess these are evenly divided among about 8 models (Ref 75,150,5SE,2,CD 9, Ref DAC and two I am forgetting). So that would be ~40 of each kind per year. It could be as low as half that or maybe a few times that depending on popularity. I'd guess the much higher cost Ref units have sales of maybe 4-20 per year.

I am surprised at how low this all is.

Do any parts of this estimate seem way off?

[Truemaineiac]

Are you factoring in the retail cost or the wholesale price?

Sent from my iPad using A.Aficionado

[BillK]

Probably off by 2x.

One additional factor is the age of a model and it's popularity, so for example there are probably more Ref 5 SE and Ref 2 SEs being sold right now than most anything else. This is why there's often a two to three week delay between when you order a product and you receive it; most high-end companies make their products to order rather than have a bunch sitting on a shelf (once again, except for really popular products, so I could see ARC stocking an extra Ref 5 SE and Ref 2 SE or two.) For example, I know Ayre also builds product as they get orders and not before.

This is also why when they replace say the Ref 110 with the Ref 150, there's no need to have a fire sale on excess Ref 110s; there are none.

Note also that ARC's price to dealers is likely around 50% of MSRP, so when a Ref 5 SE is sold, ARC is only seeing about $6500.

[RoninAudio]

The dealer cost in the USA for ARC gear is 35-40%. Then the dealer has to pay shipping. So that leaves a working margin on about 30%

[BlueFox]

If ARC states they sell $10 million a year then that is what they sell. Dealer cost, markup, etc. is not relevant.

The real question to me is how do you sell $5 to $10 million a year? Doesn't anybody keep track? Or is this just a private company giving an average over some period of time?

[antipop]

Seeing the recent news with the annual sales of Fine Group and Focal, I'm not surprised at all by the low number. This is really a very small niche.

For example, Naim had circa £18 million of sales in 2010.

[cmalak]

Originally Posted by BlueFox

If ARC states they sell $10 million a year then that is what they sell. Dealer cost, markup, etc. is not relevant. The real question to me is how do you sell $5 to $10 million a year? Doesn't anybody keep track? Or is this just a private company giving an average over some period of time?

Wow...ummm that is not even remotely correct! Dealer mark-up has everything to do with it if you are trying to estimate the volume of sales in units from ARC's estimated annual sales. ARC when it sells a Ref 5SE for example which retails for $13K is booking how much in terms of $ sales on that unit? Or think about it this way...who is ARC's customer the end user/buyer who is purchasing a new unit @ let's call it $13K - 10/15% for assumed typical dealer discount?

No ARC is selling the Ref 5SE to a dealer who is typically buying at 40-60% of retail price. So let's keep it simple and say he's buying at 50% of retail than on a $13K Ref 5 SE, ARC is booking $6.5K in sales on that unit. So to estimate the unit sales ARC is making, you have to back out the dealer mark up otherwise you would be underestimating by a factor of 2x at least if we assume the 50% off retail (or flip it and call it 100% dealer mark up) is in ball park.

As for your question as to why there is such a wide range on estimated sales and isn't someone keeping track? Of course someone is keeping track at ARC and Fine Sounds Group but these are private companies and are not prone to divulging their financial information, so any statistics on their sales in public or on the web are simply estimates/guesses or perhaps ball park figures quoted from past interviews where an executive might have given an indication of sales.

Hope this helps.

[cmalak]

Originally Posted by ariess

I am interested to get a ballpark (to within a factor of 2 or so) idea of how many Reference level components ARC sells per year. I looked up online and found that ARC has annual sales of $5-10 million per year. Let's assume the higher end. Here are some assumptions: I'll assume that 75% of the sales $$$ comes from the Ref line. I'll also assume they sell many more of the lower cost items (e.g. Ref 75) than the higher cost items (e.g. Ref 750). So I'll assume the average Ref component is $15k where the average includes the rare $30k piece with the more common $10-15k piece. So $7.5 million/$15k =500 total Ref units per year. I'd guess these are evenly divided among about 8 models (Ref 75,150,5SE,2,CD 9, Ref DAC and two I am forgetting). So that would be ~40 of each kind per year. It could be as low as half that or maybe a few times that depending on popularity. I'd guess the much higher cost Ref units have sales of maybe 4-20 per year. I am surprised at how low this all is. Do any parts of this estimate seem way off?

As has been said you need to back out dealer markup to get at ARC's realized price so your off by at least a factor of 2x and prolly a lot more because I am not sure I agree they get the bulk of their unit sales from Reference series components (maybe Ref series components represent greater than 50% of dollar revenues but that's because they sell at a premium price). I would argue volume of unit sales in non-ref series components are much higher.

But to your ultimate point which Georges has already alluded to, yes these are small companies dealing with relatively small unit sales given niche nature of this industry. Just ask yourself of all the people you know (family, friends, coworkers, etc...), what percent of them dabble in this hobby (Bose does not count )?

[psi310398]

Originally Posted by cmalak

Just ask yourself of all the people you know (family, friends, coworkers, etc...), what percent of them dabble in this hobby (Bose does not count )?

cmalak,

Exactly. But then ask how many are inveterate box-swappers? .

I buy a new washing machine once every fifteen years. I think I've bought twelve amps in the last ten, five CDPs, three servers, seven TTs, umpteen tonearms and carts and let's not get to interconnects...

If I'm typical of a percentage of hifi enthusiasts, it certainly goes some way to explaining how so many small volume manufacturers survive.

Peter

Edit: I hope my other half is not reading this...

[BillK]

This calculus gets even more interesting the higher up the food chain you go. For example, Boulder has sales of their six figure amps in the double digits.

Then there are our friends at Spectral, which Keith Johnson has said more than once he runs more like a hobby than a business (they explicitly do not advertise nor do they submit equipment for review.)

For example Stereophile mentioned this in their announcement of Spectral's SDR-4000SL in 2011:

"Fryer, who cut short his graduate studies in psychology to found Spectral Audio in 1977, when he was 23, noted that his company's marketing style is decidedly low-key. No wonder: demand for Spectral products is so high, and production so limited, that only 900 units of the SDR-4000SL's predecessor, were manufactured between 2003 and 2011. Samples of the SDR-4000SL have yet to reach most of the company's dealers in the US and abroad, but I was told that already the waiting list for it exceeds the initial production run."