But with effect pedals, you are practically paying for a metal box made by a robot. You see where I'm coming from?
Maybe, but how much did the robots cost?
It's simple economics. If anyone from a one-man outfit through to a multi-national corporate has an idea to sell an effects pedal here is what they have to do.
First they've got to do some market research to find out whether anybody will actually buy this thing when they're done. A one man outfit might just ask around a bit, a multi-national may employ a team of market researchers. Either way, it takes time and money. Even for a one-man operation, he can't do any other work while asking around to see if the idea will fly, so it's still costing him money. The wonder pedal is still an idea at this stage so you can't sell it to pay for this market research - all you can do is jot down how much you've spent and promise to pay yourself back once the wonder pedal is flying off the shelves.
Then you've got to design it, build a prototype to see if it works, test it, shake the bugs out so that all the units you sell stay with satisfied customers and don't come flying back as returns (which will mean all of your outlay is wasted). Again, it takes time and money, the only difference between a one-man outfit and multinational is how long it takes and the number of people you need to work on it. Oh yes, and remember, however big you are, you and any other people you employ to do this have to eat while you're doing all this...so you'll have to use your savings to pay yourself (or your investment capital to pay all of your workers if you're one of the big guys) while all this is happening. Oh yes, and you'll need to make sure that there is a suitable place to work, that it's heated and that it's got light and power, oh...and you might need the tools to develop it with, anything from a laptop to a network of computer workstations with the appropriate software...all of this needs to be paid for. But...you haven't sold anything yet, so all you can do is jot down how much this is all costing and promise to pay yourself back when the pedal is flying off the shelves.
Then you need to start building them, so you have to spend time sourcing all the components, and buying in all the components, and the tools you'll need to produce them efficiently (ouch, those robots are real expensive to buy and program aren't they), then you've got to find a big enough space to start production and do all the production engineering you need to do to make sure that these things can be built efficiently and safely, and put in the quality control to make sure that they're going to be reliable and good value for money. A one man outfit might have to put aside some workshop space, a multinational might need to negotiate production space somewhere in China.
At the same time you're doing this, you've got to get busy taking pictures of the end product, drawing up spec sheets and adverts, getting busy on the webpage...and all this production engineering and marketing and advertising takes time and money. But....you haven't sold any units yet, so all you can do is jot down how much and promise to pay yourself back when the units are flying off the shelves.
The day finally arives when you've got enough units to sell. The one man guy finds he's got to put gas in the car to schlep them down to the local mom and pop music store, and he's then got to run around persuading enough mom and pop stores to sell them (or spend time getting busy selling them on-line). The multinational has to have a team of salespeople and admin staff selling them into GC or wherever. So all this takes time and money and you've still got to eat, and all the multinational's people still have to be paid (not just their salaries either, all their pension funds and contributions to healthcare and the amount of money that it costs to provide and maintain the real estate they need to work in, even the gas and phone bills that your sales guys use up). But...you still haven't sold anything yet so all you can do is jot down....
Then you've got all your orders and you've got to pay postage to mail them out, or if you're a multinational, you've got to pay for a huge ship to fetch container loads of them from China and a fleet of trucks to distribute them to where they need to be, and of course all the transport companies want their cut (even Joe who's helping our one man outfit wants a few dollars, a few beers for his gas and his time).
But hurrah...you've finally got your product on the shelves. But you still haven't sold any so all you can do....
OK, so lets count up how much this has cost us so far. Wow! It's taken 6 months from start to finish and it's cost a lot more than we thought. Being sensible about this we need to make sure that we're going to make more money out of this venture than we would have done if we'd just put all this money into a savings account, sat back with our feet up and watched the interest accumulate...oh yes and allowing for inflation this same amount of money money was worth a few percentage points more 6 month ago than it is now so we'll need to allow for that (not so important for our one-man guy, but significant for the multinational who've spent millions so far).
Oh dang, the Mom and Pop store want their cut too... oh well, stick another 50% on. Back in multinational land the GC buyers are screwing your margins to the floor so that they can discount heavily so you'r only making pennies per unit..
Now, let's take all that money, everyones slice of the pie, add it all up and add everyones profit percentage and that is the money you've got to get back from your wonder product. How many are you going to sell Millions? and Hundred? Ok so lets take the money we've invested and divide it buy the number of units we're selling...Oh wow! That's a whole lot more than $20....who would have thought it for a metal box built by robots