What products have exorbitant profit margins

Truth and calculation - the invisible basic ideas

Back then - we still calculated in DM
They didn't even talk about 50 DM anymore, there were "hundreds"

by Gert Redlich in March 2017 - It is undisputed throughout the economy, companies and traders want, (should,) and must earn money. It is also undisputed that the German tax office prescribes an entrepreneur or a company by law that the purpose of a trade, no matter how small or how big, is the purpose of the (literal !!) "pursuit of profit".

And that’s the one - as often denounced by certain political or ideologically influenced social groups - "Greed for profit" from its own legislature, and we are (or were) all of us, mandatory.

If you deny - during a tax audit, for example - that you are not aiming for a "profit", the tax office will simply close the shop for you.

If your - fictitious and artificially stupid - comment - "not wanting to make a profit" - is accompanied by a second tax officer as a witness, it can even be criminally very tight and, above all, quite expensive. So watch out and take a closer look at what's going on.

so it wasn't that much
Contemporary witnesses in my editorial office

In the last few years from around 2010 I spoke to many ex-editors of audio and hi-fi magazines, as well as long-term importers such as Herrmann Hoffmann, former area sales managers and retired owners of hi-fi studios.

Many of the people I spoke to are meanwhile in a "restless" state such as Karl Breh, former editor-in-chief of Hifi-Stereophonie and later also of Stereoplay, others have already passed away like Wolfgang Mattiolius, our name was "Mr. Thorens", later he was "Mr. Tandberg".

I have interviews lasting several hours from almost all of them and voice recordings are stored, which only now - but only in the sum of the statements - lead to illuminating and conclusive findings.

The ratio 1:10 was roughly the ratio of material and manufacturing costs to the end customer price. It was not entirely clear from the discussions to what extent the share of development costs was included in production costs. In this comparison it was also not clear whether the (then) value added tax was taken into account or not.

This "calculation" 1:10 comes from an insider at the original loudspeaker manufacturer ARCUS Berlin, but can be applied to almost all global loudspeaker manufacturers. As always, there are exceptions. Max Grundig, for example, is one of these exceptions. There at Max Grundig, professional and tough calculations have always been made. But the astonishingly low prices of the entire XSM series (for example the active XSM 3000 boxes for just under DM 800) came not only from Grundig's own chassis and housing production, but also from the Max Grundig's own philosophy from the planned ones , accumulated and then also streaked enormous numbers.

So in a 3-way box - for example the Arcus TM 60 - for DM 500 per piece (supposedly even only 700 DM per pair) there are only parts for DM 50, so

  1. the 3 chassis,
  2. the crossover,
  3. the complete case veneered in real wood,
  4. the connection panel and
  5. the front frame together
  6. the covering and of course
  7. the assembly of the box including
  8. Packaging.

If the 350.- per piece were to be correct, it would even be only 35.- DM as the so-called "cost price".

Of course there were arguments as to why that was so. For almost all foreign products there was an export agent commissioned by the manufacturer in the country of origin and an importer in the destination country. Everyone wanted something from the lucrative cake. Herrmann Hoffman from Audio Intl. can tell whole stories about it. Boxes that cost $ 99 in stores in the USA were on our shelves for DM 799. The advertising that the manufacturer himself made in the USA should or had to be done by the local representative, the importer, here. And that was not a little in terms of the financial expenditure - advertisements, brochures and trade fairs.
And so German (manufacturer) newcomers oriented themselves to the high US prices on the German market and were able to calculate very generously.
And when the first Italian sports cars in front of the ARCUS company generated jealous looks in front of the door, the proof was virtually provided - it works.

Do you still know the product? BOSE 901

"The seller is the biggest brake on our product on the way to the customer" - once said a successful sales manager (of a large American manufacturer here in Germany). So you had to lure and lure the hi-fi vendors.

The free or permanently employed salespeople were given "motivation" special commissions for the boxes sold by a certain manufacturer (s). In return, the hi-fi studio (or the "Boxenschieber" - that is the discount pick-up market) got over 50% discount on the RRP, the supposedly "non-binding" sales price.

But even here they were tricked for what it was worth. At that time there were dealer price lists, with this 50% or even 60% discount from the end customer price (including VAT) being advertised in large and bold letters, but then - in the very last line at the very end - the VAT on the purchase price. (between 11 to 15%) but hit it again. - Whatever the case, the "consultant" or seller in the hi-fi shop got his bonus of 5% or 8% or even 10% of the shop price and that worked out pretty well at the end of the month. So fair, neutral advice when buying a box? Absolutely no news.

The company ARCUS as a German manufacturer also worked in Germany with sales representatives or so-called (independent) area sales managers. One of them was the then hi-fi distributor Michael Gießen, who also imported the OHM loudspeaker products from the USA. This activity also had to be included in the calculation.

If the distribution was a one-man show, the freight and storage costs were still added. With loudspeakers you needed a lot of space when a whole container of loudspeakers arrived from overseas.

In this golden period from 1971 onwards, as a manufacturer you could really earn a golden nose - if you paid close attention and avoided gross mistakes. In my experience and my previous knowledge, however, only very few manufacturers have survived the next 10 years. With the onset of market saturation from around 1979/1980, competition was merciless and not always fair.

I had already explained it on the BOSE website, the marketing people at BOSE in the USA were clever strategists. Both in the USA and around the world, BOSE had (end customer) prices firmly under control and thus also had complete full control over the margins of the individual sales levels.

And if you take a look at the BOSE 901 - really all series - you are always amazed at the 1:20 concept, not just 1:10 as mentioned in the title above.

Another example very similar to the BOSE 901 is the large JBL Ti 250which was originally available in the supposedly elite hi-fi studios for around DM 6,500 to 6,990 each. Later, the sales price for both the original 250Ti and a slightly emaciated Ti 250 Jubilee slipped to less than DM 2000.- each. That should give everyone something to think about.

The membrane of the OHM F

The development of the Ohm F (or the Ohm A) as an ingenious all-round radiator with the mechanically physical crossover - as an electric broadband radiator without a crossover, for example - that was not trivial and certainly tedious and expensive.

The development of the almost inertia-free Air-Motion Transformer
von Oskar Heil was definitely not easy either. The very first Infinity electrostatic - the Servostatic 1 - must have had a lot of scrap with burned foils.

The same was also true for the development of the ion tweeter from the Otto Braun hi-fi studio was not trivial and was never reflected in the sales of the small Saarbrücken company. The development of good-sounding high and mid-range horns was also time-consuming in the beginning. The extremely powerful bass chassis of the large stage loudspeakers also involved a great deal of development work with regard to highly efficient, stable, yet resilient voice coils, which had to be paid for.

But here we are in a completely different price region anyway. Here you could still have an understanding of a lavish calculation, only small series - if at all - have been built. There are said to have been fewer than 200 systems from the Infinity Servostatic 1.

The initial exaggerations resolved on their own. The manufacturers could not withstand the competitive pressure with this extreme price-quality ratio. The loudspeakers got considerably better in the 1990s and the material also became considerably more expensive and the price-performance ratio soon reached a realistic level.

A lot of important companies said goodbye around 1980 to the end of the 1980s - such as BRAUN-Hifi, SABA, WEGA and also DUAL. There were also companies like ITT / SEL that produced gigantic quantities of good chassis and suddenly also made good-sounding OEM (noname) boxes in the low-cost range from this material and offered them at amazing prices through department stores, chains and wholesale markets.

The loudspeaker manufacturers established by then, such as Magnat, HECO and CANTON, had to significantly lower their prices in the mass range (or get considerably better), because the hi-fi magazines had already found out that it was on the market amazing and inexpensive qualities gave.