"Secrets" about the consumer audio business you may find interesting

[HorizonsEdge]

Do you need a pizza therapist? Tell us your opinion of pineapple pizza....then we will know if you need a referral to a Neapolitan Pizza school.

Pineapple on pizza is just wrong.

 

[Blumlein 88]

Pineapple on pizza is just wrong.

Well then you don't need an intervention. OTOH, boy is pineapple pizza really good!

 

[sergeauckland]

That has been what I've been told as well. OTOH, China factories do seem to have a problem with making near useless items if no one holds their feet to the fire. I think of some power supplies in Chinese gear I've looked at. If a device will see 1 watt or .95 watts, they will put a a 1 watt rated device in it. They do that all the way thru. Just basic rule of thumb would be to use a 2 watt device in that situation. Such an item will work, some of them surprisingly last some time. Most of them are not going to last very long. While using those with a simple rule of thumb safety factor will last a very long useful time. If the Chinese facility had a recognized name with value they would not stoop to this to make money. When they are insulated from that, they have no reason to do otherwise. It pains me that those selling this gear elsewhere don't do their homework, and see they don't mind selling such products.

Yet China can make some very good top level gear when the customer commissions it.

Exactly this. Subcontract manufacturing is so totally price-competitive that subcontractors, regardless of country, will meet the commissioners' specifications and no more. As Blumlein said above, if the device dissipates 0.95 watts, I watt rated components will be used unless the purchaser specifies otherwise, and pays the higher price.

Whether Chinese, Korean, Malaysian or whoever, with subcontracting you totally get what you pay for, or at least, what you specify (and pay for). If you want top quality, longevity, reliability, these factories are perfectly capable of producing it, but at a price that might render your brand uncompetitive if you're selling through an essentially commodity market like Amazon or other on-line retailers where there isn't a salesman to persuade a prospective buyer of the benefits. I also wonder whether all subcontractors are ethical and will actually use the higher rated components specified or is it necessary to do one's own QA before the goods are shipped.

I can totally understand the attitude of US or European brands that either move completely upmarket to support on-shore manufacturing, or if they want to remain in the mainstream market, set up their own factories in China, Malaysia etc so they can control quality.

S.

 

[fpitas]

That has been what I've been told as well. OTOH, China factories do seem to have a problem with making near useless items if no one holds their feet to the fire. I think of some power supplies in Chinese gear I've looked at. If a device will see 1 watt or .95 watts, they will put a a 1 watt rated device in it. They do that all the way thru. Just basic rule of thumb would be to use a 2 watt device in that situation. Such an item will work, some of them surprisingly last some time. Most of them are not going to last very long. While using those with a simple rule of thumb safety factor will last a very long useful time. If the Chinese facility had a recognized name with value they would not stoop to this to make money. When they are insulated from that, they have no reason to do otherwise. It pains me that those selling this gear elsewhere don't do their homework, and see they don't mind selling such products.

Yet China can make some very good top level gear when the customer commissions it.

Yes. you often do have to make sure what you're getting. And like the rest of life, you only get what you pay for.

 

[Russm535il]

Great post !

 

[KellenVancouver]

• The cost of building a consumer audio product is generally no more than 30% of retail. 30% COGS (cost of goods sold) is virtually a maximum for items sold at mainstream retailers.
  • Our company's COGS were higher than this, which was a problem. It didn't allow for us to recoup our costs, make enough money to pay our expenses (like salary, electric bill), and also leave something for the retailer. The rule of thumb for us in the US was retailers will ask for half of the retail price, or more. That leaves us to make our cut from the remaining half.

COGS could include shipping, marketing, testing, research, etc. But to focus just on manufacturing cost, I was at an outdoor sports apparel conference with a Vice President from Nike who said the cost of manufacturing a $100 pair of shoes was $5. That's it. Manufacturing was only 5% of retail cost for a pair of Nike shoes.

 

[Tim Link]

Good write up. I've worked for a couple tiny manufacturing companies and what you said matches my experiences. I struggled to understand why they were doing things certain ways. Over time it became clear to me why the slick features and low cost I've come to expect from mass produced products are just not possible to do profitably on a small scale. The cost of specialty items is very high. But that gives them a certain prestige as well. As a kid I noticed a paradox that the more perfectly some things were made, the lower they were valued because the precision and consistency betrayed an advanced technique of mass manufacturing, while hand made stuff had subtle imperfections that were a sort of proof of work.

 

[kemmler3D]

Whether Chinese, Korean, Malaysian or whoever, with subcontracting you totally get what you pay for, or at least, what you specify (and pay for). If you want top quality, longevity, reliability, these factories are perfectly capable of producing it, but at a price that might render your brand uncompetitive if you're selling through an essentially commodity market like Amazon or other on-line retailers where there isn't a salesman to persuade a prospective buyer of the benefits.

S.

Absolutely true. Chinese contract manufacturers (and probably everywhere, I just don't have direct experience) will make exactly what you ask & pay for. EXACTLY. They are almost clever in how little they will assume about what you want. Say you don't specify the buttons are to be the same color as the housing via CAD or otherwise, well, they might be a different color because that color was cheaper, and you learn your lesson. You get NOTHING you don't ask and pay for. If you don't ask for them to come in individual boxes, you'll get a sack full of amplifiers inside a master carton. (not quite, but almost.)

COGS could include shipping, marketing, testing, research, etc. But to focus just on manufacturing cost, I was at an outdoor sports apparel conference with a Vice President from Nike who said the cost of manufacturing a $100 pair of shoes was $5. That's it. Manufacturing was only 5% of retail cost for a pair of Nike shoes.

This isn't correct, COGS refers to direct costs of the product itself, typically parts, labor, packaging. Marketing and R&D are specifically excluded from COGS calculations in business in general. I would definitely believe a 20:1 Retail:COGS for shoes though. Possibly excluding shipping and labor, but not definitely.

I think shipping is one area some businesses will be imprecise in defining COGS - we typically talked about 'landed cost' (i.e. what it cost to make and get it into our warehouse in the US) and would use that interchangeably with COGS. In some businesses that could be considered incorrect.

 

[kemmler3D]

Pineapple on pizza is just wrong.

I like pineapple on pizza and even had some really good Hawaiian pizza in Hawaii. It was great!

I don't get the hate. People love pineapple + pork in any other context but as soon as you put it on a pizza, everyone loses their minds. And I'm generally a pizza snob, too. It was a normal pizza topping in my household growing up, maybe that's the reason I can handle it...

 

[MattHooper]

I like pineapple on pizza and even had some really good Hawaiian pizza in Hawaii. It was great!

I don't get the hate. People love pineapple + pork in any other context but as soon as you put it on a pizza, everyone loses their minds. And I'm generally a pizza snob, too. It was a normal pizza topping in my household growing up, maybe that's the reason I can handle it...

Yep. The sweet and savory is a classic pairing. Unless you are some total pizza snob where only traditional Neapolitan pizza is "real pizza," pizza itself has become so varied it's silly to draw the arbitrary line on one topping. (In high school a pal introduced me to pineapple topping on spaghetti/bolognese sauce.
That's terrific too once in a while).

But then again I like anchovies on pizza too... and ketchup on my hot dog

 

[dlaloum]

Yep. The sweet and savory is a classic pairing. Unless you are some total pizza snob where only traditional Neapolitan pizza is "real pizza," pizza itself has become so varied it's silly to draw the arbitrary line on one topping. (In high school a pal introduced me to pineapple topping on spaghetti/bolognese sauce.
That's terrific too once in a while).

But then again I like anchovies on pizza too... and ketchup on my hot dog

Tomato's, are both sweet and sour (at least good ones!) - so in overall terms of flavour profiles, we are not that far apart between tomato and pineapple!

 

[Hiten]

Wowzer. I've never been asked that question. Total global units and national units of stereo integrated amplifier sales is a unknown.

Only figures I found is NAD3020. Net information says it sold Half million unit in first three years. So basically around 150,000 unit per year. Exact figure is not important. But this is just for one model and one brand. Total sales of all brands would have been more than million per year.
Just wanted to compare with modern stereo amplifier sales. I doubt it would be million units. Low demands results in lowering in prices so profit margins may not be that much is what I feel. Just thinking out loud. I am no economist though. But popularity and comparative sales of chinese amps are an example.
regards.

 

[caught gesture]

You must realize, and I don’t like to get into politics, that this vanity is direct from competition and competition stems from capitalism ideology. Furthermore individualism, part of the divide and conquer strategy, further increases competition.

I’d like to correct this statement as it is not how capitalism is actually working. What we see is that as the capitalist system has developed, we have less and less competition (and also less and less drive for innovation) because industrial sectors become dominated by fewer and fewer corporations. The large corporations buy up the smaller companies. This stifles competition with the few large corporations generally working, if not directly, to not undermine each other when it comes to pricing their products. It has become far from an idea of a free market but instead a heavily manipulated market.

Here is an article which describes why large corporations are bad for innovation. We can also see that R&D budgets get smaller in relation to turnover and profit the larger a market leader becomes in any field. It’s more important to reward shareholders than spend money on researching something that might fail (or be the next massive success). We as consumers just get the same product tinkered with or repackaged.

 

[NADKEF listener]

Biggest change, the past decade, is that the traditional mathematical relation between cost price and retail price has been totally replaced by maximalization of the retail price based on the customer's price sensitivity. Example is booking.com. They know your profile and therefore offer first the hotels that match your historic price range. Not the ones based on the best quality/price ratio.

 

[MacCali]

I’d like to correct this statement as it is not how capitalism is actually working. What we see is that as the capitalist system has developed, we have less and less competition (and also less and less drive for innovation) because industrial sectors become dominated by fewer and fewer corporations. The large corporations buy up the smaller companies. This stifles competition with the few large corporations generally working, if not directly, to not undermine each other when it comes to pricing their products. It has become far from an idea of a free market but instead a heavily manipulated market.

Here is an article which describes why large corporations are bad for innovation. We can also see that R&D budgets get smaller in relation to turnover and profit the larger a market leader becomes in any field. It’s more important to reward shareholders than spend money on researching something that might fail (or be the next massive success). We as consumers just get the same product tinkered with or repackaged.

You are very accurate on your statement. I would just like to add that my comments are on the macro scale, as in person to person, and I would say yours is on a micro since corporation’s do not outnumber people.

Also my statement would probably be more applicable to a few years post Gen X. I am in that era and I say this because we are the ones most definitely really targeted by this and live by it. I for one do not partake in any of that even though I make a good living. The group prior to this I would generally say doesn’t solely do things for others.

We even know Janis Joplin wanted a Mercedes Benz.

But indeed we have rules or had rules in place to avoid what you are talking about, however everyone is trying to find that loophole. Clearly they have and pay to keep it open so that they can continue to capitalize.

But I am sure you get my point, creating unity would stop all these things from happening because society as a whole would stand up against it. That’s why even with audio, whether you’re objective or subjective give people the right to choose if it’s right or wrong and enjoy the music together.

 

[MacCali]

Biggest change, the past decade, is that the traditional mathematical relation between cost price and retail price has been totally replaced by maximalization of the retail price based on the customer's price sensitivity. Example is booking.com. They know your profile and therefore offer first the hotels that match your historic price range. Not the ones based on the best quality/price ratio.

Technology definitely works against you man, it’s a two way street it can help or hurt.

Look at blockbuster and all that bs, if you experienced it. It got replaced by Redbox lol

These smartphones have really got into your personal life on a whole new level. You can’t even use anything without agreeing to the terms, and those terms generally open up a gateway for things they shouldn’t know about you or exploitation.

I’ve had a similar experience with hotels tonight, the app, as you did with bookings

 

[mglobe]

I like pineapple on pizza and even had some really good Hawaiian pizza in Hawaii. It was great!

I don't get the hate. People love pineapple + pork in any other context but as soon as you put it on a pizza, everyone loses their minds. And I'm generally a pizza snob, too. It was a normal pizza topping in my household growing up, maybe that's the reason I can handle it...

When I'm with a group of people ordering pizza I always make sure we get at least one Hawaiian pizza so there are less people that I have to share it with.

 

[MacCali]

When I'm with a group of people ordering pizza I always make sure we get at least one Hawaiian pizza so there are less people that I have to share it with.

That’s not a pizza man jk I’m not getting into this debate, just wanted to stir the pot

@kemmler3D I would throw in a crazy combo and strange is pineapple and olives, and is actually very good even though some may assume it would be odd

 

[mglobe]

That’s not a pizza man jk I’m not getting into this debate, just wanted to stir the pot

@kemmler3D I would throw in a crazy combo and strange is pineapple and olives, and is actually very good even though some may assume it would be odd

Actually I agree with you. But I like it, and the less people I have to share with, the better.

 

[caught gesture]

Pizza heresy. Blasphemers!