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Klarinet Archive - Posting 001630.txt from 1998/04

From: "Kevin Fay" <kevinfay@-----.com>
Subj: [kl] Re: [klarinet] Retail vs warehouse
Date: Tue, 28 Apr 1998 15:24:47 -0400

You've made my point, Lee.

There are indeed different prices available for buyers at different
levels in the distribution chain. For buyers in the same level--i.e.,
retail--they can all get the same price terms. Lower price for higher
volume is available to anyone who places an order. In addition, anyone
can get the cash discount by paying cash--usually by getting their
inventory financing from a bank and not the manufacturer.

I'm terribly sorry if people have taken my observations the wrong way.
I do NOT believe--and am NOT saying--that the small retailer is in any
way unethical by charging a higher price; as Bill has correctly pointed
out, they have to in order to make any profit. What I have said--and
maintain--is that the economics involved militate against the small
retailer.

A buyer is equally not unethical in seeking the lowest price. Why
should I take the time to ensure that the party I'm buying from paid the
highest possible price?

I would be surprised if there are many stand-alone music stores 20 years
from now. What we'll see, I think, are larger chains that will have the
buying power to compete with the "discount houses." This is the ability
to purchase everything--retail floor space, money (lower borrowing
cost), advertising, as well as instruments.

My familiarity in retail operations is centered in the video store and
auto parts industries, both of which have moved from the mom-and-pop
model to the large chain model within the last 20 years. Because the
economics are the same, there is no reason to expect the music store
industry to be any different.

kjf

----Original Message Follows----
Date: Mon, 27 Apr 1998 21:21:21
From: Lee Hickling <hickling@-----.Net>
Subject: Re: [klarinet] Retail vs warehouse

>From: "Kevin Fay" <kevinfay@-----.com>
>To: klarinet@-----.us
>Subject: Retail v. Warehouse
>
>I do not believe that your friend is lying--I do know, however, that he
>is somewhat misinformed.
>While many manufacturers do offer special models for large retailers,
>thus being able to offer a lower price on them, branded items MUST have
>the same price to all competitors at the same level of distribution.

Go to any music store where you know the proprietor. Ask him to show you
the price lists from instrument manufacturers, and explain the volume
discounts that result in a two-tier wholesale price schedule. Then there
is
a second discount for cash, usually 6 percent. The big guys have the
cash
flow to pay cash. They can wind up paying more than 40 percent less than
the small independent music store operatore, enabling them to make a
profit
with retail prices that are lower than the little guys pay at wholesale.

After my first reply in this thread, I looked at the price lists on
student
grade band instruments last Saturday, and asked several questions to be
sure I had it right. The foregoing paragraph is supported by the
irrefutable numbers, right there in the cold print. Check it out for
yourself.

Lee Hickling <hickling@-----.net>

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