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boutique and non boutique cab markup.

Discussion in 'Amps and Cabs [BG]' started by Crockettnj, Feb 14, 2006.


  1. Crockettnj

    Crockettnj

    Sep 2, 2005
    North NJ
    Thinking hypothetically here. no alterior motives either. i also want to say i FULLY support capitalism, free market, and supply and demand. enough prefacing.

    I am curious, what is the production cost vs wholesale cost vs a reallistic street price on a mass produced cab compared to boutique cabs.

    of course economy of scale reduces cost of components greatly, as does the varying quality of components. mass production techniques certainly reduces overal cost as well.

    that being said, i wonder if the ratio of what it cost to build vs what it cost distributors vs what the typical retail price (not msrp) are similar.


    in short, what's it cost peavey to make a cab loaded with eminences, and what do they wholesale it for. next, whats it cost epifani to make a cab, and whats it wholesale for?

    curious.
     
  2. shurly all 3 costs will go up on boutique cabs as they use higher quality components and because of the sheer amount of 'normal' cabs produced the unit cost must be pretty low.
    dan
     
  3. Crockettnj

    Crockettnj

    Sep 2, 2005
    North NJ

    no doubt. I agree. with a semicustom boutique you pay for quality, care of manufacture, experience, style, and customer service. no question about it. Certainly worth every dime most every time. i am not questioning that.

    my question remains.
     
  4. Chasarms

    Chasarms Casual Observer

    May 24, 2001
    Bettendorf, IA USA
    In almost every retail environment in the world, MSRP is about 2-2.5x that of wholesale cost. And, what we see with music stuff is a discount resulting in a street price of 30-35% range off MSRP. So an item with a $999 MSRP will street around $650-700.

    Actual production cost is a little more of a moving target. It's really just the profit margain of the company, since everything from the cost of the driver to the electric bill to the lady that answers the phone is really part of the production costs.

    That being said, what know is the boutique companies are more commonly privately owned, whereas the bigger companies are publicly held or under the umbrella of a publicly held corporation.

    In almost every case, publicly held companies are forced to maintain higher profit margains and to grow those margains annually to protect shareholder value. If they can't raise wholesale prices, they cut manufacturing costs through a change of process or materials.

    In the case of a privately-held company, the margain is simply whatever the owner is willing to accept and is able to live on.

    That being said, I would expect the gap between wholesale pricing and actual cost of manufacturing, as a percentage, is less with the boutique stuff than it is with the mass produced stuff. Since they sell much less, the overall cash flow is certainly lower as well.
     
  5. chaosMK

    chaosMK

    May 26, 2005
    Albuquerque, NM
    Hi-fi into an old tube amp
    Mass produced stuff like Ampeg has to be marked up quite a bit. A lot of that stuff sits on the floor for a long time, and it can't be cheap to operate a place like GC, or advertise as much as they do.
     
  6. alexclaber

    alexclaber Commercial User

    Jun 19, 2001
    Brighton, UK
    Director - Barefaced Ltd
    Look at the design, components and build quality of an Acme cab and compare it to any other cab on the market and you'll see a big difference between what you pay and what you get.

    But none of the boutique makers are making much money really, and the improvement in bass cabs over the past decade has been huge, for which we should be thankful!

    Alex
     
  7. Crockettnj

    Crockettnj

    Sep 2, 2005
    North NJ
    so we are talking perhaps $400 wholesale cost (parts, labor, and support chain/rent, etc) retailing for $1000 and then selling for a street price of maybe 700?

    If so, how many cabs do would a small time pro / boutique builder have to sell in order to make a nice living from it? assuming 300 profit per cab (imo a very generous assumption!? not all cabs are north of a grand. even bouitique cabs) theyd have to sell maybe 2 cabs a day to keep even a small operation (3 employees, plus rent/utilites) afloat and funditonal. thats a lot fo cabs for a small operation... no?


    and...

    isnt that sad? i woudl expect the opposite. Or at least hope for it. I'd love to think that the little guys who are innovating and designing for the bassist woudl get at least a proportional share of proft from the overall industry. Seems, from what you are saying, it may not be so.

    further evidence they do it for hte love of it (ok, and maybe a little ego / pride too!!). or, i/we could be wrong in some assumptions, and maybe Jim Berg etc are driving feraris and vacationing in the mediteranian!??!? !

    thanks for your input. this aspect of it, while quite foreign, intrigues me.
     
  8. BurningSkies

    BurningSkies CRAZY BALDHEAD

    Feb 20, 2005
    Seweracuse, NY
    None of the guys builing those small production high end cabs are getting rich quick. The economy of scale isn't high enough, and the specialty bass market isn't big enough for that to happen. When you look at a the small guys, the production cost (equipment, trial & error, etc) that goes with building and the time put dwarfs any chance of big profits. Keep in mind the effort and cost of customer support ain't small. Guys who sell mostly online or by phone also have shipping and the damage that goes with FEDEX and UPS. That ammounts to faulty drivers, broken cabs and hardware.

    Also, forget about having benefits, healthcare etc. with these small shops. I would think that's why there are quite a few small luthiers in places like Canada these days...
     
  9. Interceptor

    Interceptor Supporting Member

    Mar 29, 2005
    Madison, WI
    In my day job, I buy television and motion picture equipment. The low volume guys selling the cutting edge stuff are very expensive. They have to be. Small volume manufacturing has to distribute design and tooling costs against the volume they are producing. Profitable manufacturers are there next year - it is not cool when you can't get something fixed.

    This all has me curious. What are our demographics as bass players? As an example; how many new cabinets will be sold this year, and how many are designer grade?

    My suspicion is that the upper end constructors are barely surviving.
     
  10. BbbyBld

    BbbyBld

    Oct 13, 2005
    Meridian, MS
    Well, I don't handle the business stuff, but here's how I understand it:

    Wholesale is roughly twice the manufacturing cost depending on the product. MSRP is anywhere from 1.75 to 2 times wholesale. Worst case, take a Peavey MSRP and divide it by 4 and thats the manufacturing cost (parts and labor). But...

    That does not include upfront development costs (paying me) or tooling. In the end, Peavey probably makes anywhere from 30 to 50% profit depending on the product. Bass gear does not sell well. Everybody wants to be a guitar player. Profit on bass gear is probably on the low end for us.

    Many times boutique builders use more expensive components, but that doesn't mean they are better. More often, they use the same components as major manufacturers from an electronics standpoint.

    Peavey is privately owned and it's one of the largest.
     
  11. fdeck

    fdeck Supporting Member Commercial User

    Mar 20, 2004
    Madison WI
    HPF Technology LLC
    I think a person would have to combine it with some other business, and do whatever possible to minimize overhead. It helps to have a spouse with health care benefits if living in the US. These are issues faced by anybody who wants to start up a small business.

    Marketing can be expensive. Showing a product at NAMM is not a cheap proposition.

    There are some other costs that are easy to overlook because they are subtle. For example, inventory. If you want to use a custom driver, you may have to buy 1000 pieces, meaning that you are committed to $1M sales. Hmmm... maybe that's why the industry is pushing 2x10, 4x10, 8x10, 10x10, and so forth :eyebrow: If these guys want to get into electronics, or sell in Europe, then there are regulatory approvals that can cost money. Why is inventory costly? It is a risk, and it ties up your money.

    But the gear industry has to be like the music industry, right? A few big names make lots of money, and the rest of us take whatever we can. If people were rational about musical instruments, there would be just a handful of serious makers worldwide, like with cars. Fortunately, we are not, and it is the subjectivity of our business that allows small artisan shops exist at all.
     
  12. If I remember correctly, Bill Fitzmaurice made a comment some time back about a big company needing to price a cab at 5x cost, to make a profit.

    His point was in reference to why commercial cab makers don't produce bass horns: too labor intensive which runs the selling price up beyond reach after a 5x cost uplift.
     
  13. billfitzmaurice

    billfitzmaurice Commercial User

    Sep 15, 2004
    New Hampshire
    Owner, Bill Fitzmaurice Loudspeaker Design
    That's about right. Most very expensive cabs don't have any more parts costs than other cabs half the price or less, it's labor that makes them expensive. Anything more labor intensive than a simple box that can be assembled in less than an hour is going to cost you.