MSRP vs. street

[Russkull]

We're all familiar with the practice of gear MSRP's being higher than the actual selling price. But in the most recent BP issue, I did a double take at what I thought was the street price of the new MXR bass compressor: $320! Of course, when I looked it up, it's really "only" $190.

 

Which begs the question: why such a difference (40%+) and why is this common practice? I always assumed it was to give the sellers some leeway in pricing but that seems to be less of an issue with our research capability now.

 

Any of you in the industry have insight on this?

[kenfxj]

I always assumed it was so the retailers could show you how much money you were "saving" by buying from them.

 

Regular price $320.00

Our price $190.00

You save $130.00!!!

 

 

[Nicklab]

Generally speaking, you should NEVER pay MSRP for any piece of gear. MSRP is essentially DOUBLE the dealer cost. It is then up to the dealer to decide how much they are going to discount off of that MSRP price. A general rule of thumb is that most retailers will knock 30% off MSRP. It's not a one size fits all kind of formula though. I use one dealer who routinely gives a better discount off of MSRP. That dealer also does greater volume sales because of that kind of pricing.

[Russkull]

Generally speaking, you should NEVER pay MSRP for any piece of gear.

 

Definitely. Never have, never will.

 

I was more curious about the practice in general - why bother having an MSRP in the first place? Especially when everyone pretty much sells the item at a single street price. (Although Nicklab I think you're right that it gives the retailers pricing options).

[BargeOn]

The only time you'll see MSRP is when some company is giving away a bass as some kind of prize. Then you get "A $900 value. Yours for free!"

 

And by the way, if you win, you'll pay tax on MSRP, not street.

[Paul K]

 

And by the way, if you win, you'll pay tax on MSRP, not street.

 

Indeed. And a few years back some guy/gal won the Home and Garden sweepstakes house in some place they really didn't want to live. It was a grand deal, but the person who won ended up going bankrupt 'cause they were charged back real estate taxes in addition to the income taxes of the reported value of the home.

 

At least I think that's true. Hope it's not just a fable of some sort....

[Bob Gollihur]

As a bass shop owner I've seen a lot of the changes over the past fifteen years and am quite familiar with actual costs. What follows is my take/opinion from my vantage point. There isn't a committee of retailers that gets together to standardize anything, it's a free for all.

 

First, things have changed dramatically in the retail market. The old 50% off "list" or MSRP price for dealers is no longer the case and not an accurate rule of thumb.

 

MSRP (manufacturer's suggested retail price) is often equivalent to what "List" was. Retailers can pay anywhere from 50 to 65% (or even more, if they are low volume and have to buy from a distributor firm, or less, if they are an 800lb gorilla) for lower priced items. Higher priced items can break this rule and retailers may pay a higher percentage of list. Remember that retailers also have to pay shipping costs, which in today's world can be quite steep and add a significant $$ amount to their actual cost.

 

STREET is relatively a relatively new term. Magazines and other sources would usually write the list price, say $1000, and the product might sell for around $650-$750. We musicians caught on to this game and began to ignore list prices, and manufacturers began to also ignore that number relationship and lowered "list". Therefore, amp head A might show a $1000 list and amp head B showed a $850 list price, even though both ended up selling for about $700. Manufacturer B had a perceived advantage in comparative surveys, as being cheaper, even though that wasn't the case.

 

STREET PRICE seems to have been invented to show that actual cost a musician might pay at most stores, and again, lets that mfr show a lower price than list, a perceived advantage. It also helps the "sticker shock" factor IMHO, as prices have risen; why say a piece of gear costs $1000 when you'll probably get it for $750-$850??

 

MAP can also be equivalent to street price, and it has been a topic of controversy and legal challenges. It's actual effect is executed in many ways by manufacturers. It is most often the lowest price a manufacturer permits a retailer to advertise, and in some cases, the lowest price you should get for a given piece of gear. However, many mfrs don't care what you actually charge, in the clinch, as long as you don't advertise a lower price on-line, in a catalog, etc. It seems to have been developed to stop the "big box" stores from killing all the smaller stores. MF, for instance, can buy the products at a lower price, since they purchase in volume; think Walmart- they can say, cut the price or we just will favor a competitor's equivalent piece of gear. So your local guy may be only making $20 on a stomp box while MF is making closer to $40 -- but at least MAP can help you local guy be in the running to make the sale.

 

It is no secret that it is very rough for music and other small stores these days; I'm sure you've seen them close up in your area. The net has brought prices down and created new superstores. It won't be long before we'll have only two choices, Walmart for stores and Amazon for on-line purchases.

 

As a consumer, I don't look forward to that day.

 

[Paul K]

Another thing smacking the local guy is sales tax. Although I don't like paying taxes (and who does?), it's not a level playing field when one can order something from out of state and avoid the 8.12% ding.

[Russkull]

As a bass shop owner I've seen a lot of the changes over the past fifteen years and am quite familiar with actual costs. What follows is my take/opinion from my vantage point.

Thanks for taking the time, Bob. This was exactly the type of explanation I was looking for.

 

It is no secret that it is very rough for music and other small stores these days; I'm sure you've seen them close up in your area. The net has brought prices down and created new superstores. It won't be long before we'll have only two choices, Walmart for stores and Amazon for on-line purchases.

 

As a consumer, I don't look forward to that day.

Nor do I, especially since our family boycotts Amazon (story for another time) and WalMart doesn't have much of a musical instruments section.

 

I try to support my local small stores whenever possible, tax be darned. But, I don't bother shopping at one store who seems to try to take advantage of the newbies and uninformed. They charge MSRP on everything and don't bother making any kind of deal (at least, that has been my experience with them). I'm glad that way of doing business seems to be going extinct.

[Groove Mama]

Although I don't like paying taxes (and who does?), it's not a level playing field when one can order something from out of state and avoid the 8.12% ding.

It is now a level playing field in IL, at any rate. When I filed my state taxes this year, I had to go back and pay sales tax on all my 2010 online purchases, including Ruby, which I had bought from Bass Central. :-(

[rumpelstiltskin.]

technically that is law in michigan, too, but i don't know who follows it.

 

robb.

[Paul K]

I do try to support locals, etc... But sometimes it's real hard. Like, why are HDMI and Toslink cables more than 10 times more expensive than what they go for on evil-bay for? I expect to pay more locally, since they've got to pay for the brick and mortar stuff. But, really. Sometimes I just feel like I'm getting robbed. (Not robb'd.)

 

...and that law on sales tax. I follow it to the T, as I'm sure everyone else on this list does. Especially since you do know that Big Brother is watching you, don'cha'know. He's watching right now.

[Nicklab]

Thanks for the info Bob. The old model of traditional retail price structures seem to have been left in the dust by the MI dealers of the world. I can't say that I'm all that surprised to find out that the margins are that much tighter now given the current economic climate. Getting this kind of info from you makes me appreciate the few dealers I am giving my business that much more.

[jcadmus]

You're seeing more and more states rolling up the online sales tax revenue.

 

And sales tax is relatively small compared to shipping costs from many online retailers.