What You're Paying For: A candid look at the costs behind a Sigberg Audio product

[sigbergaudio]

I've been quite transparent about our development process here on ASR, and it has been very rewarding. I've decided to share a bit about the cost and effort that goes into the product, and why the price tag ends up where it does.

I'm curious to hear if this type of insight is interesting, and hopefully it also helps build trust in our still young brand.

From the introduction of the article:
"Great sound doesn’t come from branding, esoteric materials or high gloss finish - it comes from engineering. But if the money isn't spent on 12 layers of lacquer, where does it go?

If you’re anything like me, you’ve probably looked at a €20,000 speaker and wondered: “What am I actually paying for here?”

I’ve written this article to give you a rare look behind the curtain - into the parts, the work, and the thinking that go into building high-performance loudspeakers. If you’re spending serious money on sound, you should know where it’s going."

The full article:

What You're Paying For: A candid look at the costs behind a Sigberg Audio product

At Sigberg Audio, we’ve always believed that great sound doesn’t come from branding, esoteric materials or high gloss finish - it comes from engineering. If you’re anything like me, you’ve probably looked at a €20,000 speaker and wondered: “What am I actually paying for here?” I’ve written this...

www.sigbergaudio.com

 

[kemmler3D]

Thanks for posting this! As you note a lot of people will try to tally up parts cost, ignore everything else, and declare something is overpriced. So it helps to share some perspective on what it takes to run an actual business.

For those taking notes at home who want some hard numbers, I can share a few from the lower end of the market... Retailers take a bigger cut than you probably realize. In the range of 50% is common for physical stores and online marketplaces tend to take 15-20%+.

So this is why DTC brands like Sigberg can offer stronger value, they keep a much bigger chunk of the price, which can then go into R&D or parts. The trade-off is as a DTC brand you have to do most of the sales and marketing yourself. So their placements in dealerships can be viewed as a marketing expense, if I had to guess they probably roughly break even on those units.

The LOWEST physical retailer margin I ever heard of was 15%, and that's at Costco, where they are so efficient they figured out how to get customers to take their recycling away for them. Everyone else, and I mean everyone, takes more.

I can't say if Sigberg is looking at the same numbers I saw when I was in the industry, just sharing anecdotes from the 'consumer' end of the market as a point of reference.

 

[Soniclife]

As you note a lot of people will try to tally up parts cost, ignore everything else, and declare something is overpriced. So it helps to share some perspective on what it takes to run an actual business.

And sadly I don't expect that to change, even with good explanations like this.

 

[sigbergaudio]

@kemmler3D Yes, and as I'm sure you are aware, for many countries it's very common with distributors as well. So that means you don't only have the retailer/detailer you purchase from as a consumer, there's an additional importer that imports to the country (and then sells to the retailers), and they of course want money too.

50% is still the common expectation for many dealers. In fairness, the retailers/dealers who take 50%, often sell things at a discount, so they don't always get that full 50%. But that doesn't change much for the manufacturer.

 

[sigbergaudio]

It's also a good point that as a Direct To Consumer Manufacturer you now have to do most of the work that the distributor and/or retailer did, which means local advertising, all the sales work, support and warranty, etc.

So while it's more effective, you can't just reduce the price with the full margin difference, as that margin obviously wasn't pure profit for the distributor/dealer. They did add value that now has to be provided directly by the manufacturer.

 

[Audionaut]

"What you don’t see is the process:

Numerous prototypes, both in CAD and physical form
Driver research, testing and selection
Custom packaging and logistics
Acoustical and visual cabinet design
Endless hours of listening sessions across genres, setups and rooms
Hundreds of iterations of crossover design and DSP tuning.

From first idea to production"

That is absolutely correct.

On the other hand, you describe my hobby quite accurately, so I continue to take the steps mentioned above independently.