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#909118 - 02/04/05 09:45 AM Re: The taboo topic of piano pricing
us_soccer Offline
Full Member

Registered: 01/24/05
Posts: 39
Loc: Utica, NY
I see the point that dealers will make more profit off of some customers and less off of others, simply due to the fact that different people have a different willingness to pay. That willingness to pay for a consumer is affected by a number of things such as how informed he/she is, income level, necessity of buying a piano, flexibility in tastes for different brands, etc...
And different sellers have different willingness to accept bids from consumers -- this is a function of many things as well -- overhead costs, staffing costs, size of store, volume of sales in a year, etc...

Sellers engage in price discrimination because they can. The question of fairness is more of a judgment call -- depends on what you think "fair" really means.

However, my argument would be that, judgments of fairness aside, it _potentially_ may be in a _dealer's_ interest to be more forthcoming about prices, costs, etc.. and to have less "haggling" so that the dispersion of prices for same model/brand/no trade-ins/etc.. is less.
The reason is that this may build a sense of trust with customers that they won't feel "cheated" and this dealer may end up with much higher volume of sales, though potentially at the cost of lower margin per piano. I'm not saying this will be the case in _all_ markets (some small markets simply have too small of a volume of pianos selling each year), but in competitive ones, it may be the case.

The key is how much consumers value this level of "trust" and forthrightness. If there is a demand for this type of relationship, it will eventually come. So, maybe we will see a shift in how dealers deal with pricing/information.. but it may take a long time..

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#909119 - 02/04/05 09:47 AM Re: The taboo topic of piano pricing
JCS Offline
Full Member

Registered: 07/02/04
Posts: 75
Loc: Aurora, Colorado
Analysis Paralysis:

In the end the unit you buy is only worth what you are willing to pay and can afford and how willing the dealer is to make the deal.

Nice formula but not really necessary. I recommend putting more time and effort into negotiations than exacting these calculations.

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#909120 - 02/04/05 09:50 AM Re: The taboo topic of piano pricing
kenny Offline
7000 Post Club Member

Registered: 05/29/01
Posts: 7051
This goes without saying but I'll say it yet again.
Price isn't everything.

Selecting a good dealer who does good prep and has a good reputation and provides good after-sale support are all part of the equation.

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#909121 - 02/04/05 10:22 AM Re: The taboo topic of piano pricing
Piano Peddler Offline
Full Member

Registered: 09/28/04
Posts: 351
Barry:

Your comments on dealers needing to review their business model for survival in this rapidly-changing industry is very insightful. As a veteran of nearly 40 years in the retail and wholesale piano business, I have witnessed many once-successful dealers close their doors.

Incidentally, there are marketing firms that conduct "Going Out of Business" sale events for insolvent music retailers (just as in the furniture industry), and ironically net much higher gross profit margins than the typical dealer. Just like university sales, armory sales and other piano major events, discount pricing is often an illusion over what a saavy consumer can discover with a little more research.

Perhaps what we need to adapt our businesses to would be a model that seems to work for Saturn and Car Max; that is a "no haggle one-price" policy. Consumers can be assured that they will get the same price as anyone else, and it will never be lower than the first time they visit the dealership. Of course, it would be the dealer's goal to convince every prospective customer that his total package of fair competitive pricing, service and support is enough incentive for them to make a purchase decision. Once the customer leaves the store and goes to other piano stores, or gets on the Internet to research prices, the chances of them returning to the original dealer and making the purchase at the quoted price decrease significantly. If there is no urgency to buy at a special price, the consumer will tend to keep shopping until they find that exeptional deal.

One final note is that the retail prices in Larry Fines latest supplement are not up-to-date with the industry. Most piano manufacturers have increased their wholesale dealer pricing in the last few months. Some annouce the new prices at NAMM in January and use February 1 as a deadline to order at last year's prices. Nearly every European piano builder has had to adjust prices up significantly to offset the 35-40% decline of the US dollar versus the Eurodollar, just to keep pace. Ancott is a service for the piano industry that tracks wholesale and retail prices, and is updated every six months. Even that resource does not take into account the additional discounts and price incentives offered to larger dealers that are buying containers of imported pianos at a time, or committing to larger quantities (100+) per year from a supplier.

Bottom line is that if a dealer loses money on every sale, he will not be able to make it up in volume and will soon be out of business.
_________________________
Craig Smith
aka "Piano Peddler"
Veteran industry professional
and keyboard musician

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#909122 - 02/04/05 10:56 AM Re: The taboo topic of piano pricing
IgnorantHusband Offline
Full Member

Registered: 01/04/05
Posts: 310
Loc: Pacific Northwest
Definition of a 'Deal' An agreement, especially one that is mutually beneficial.

For the seller; He / She receives compensation that is satisfactory to sustaining / maintaining his business and more important making a reasonable living at the agreed price. Iíd be surprised someone would be in this business to lose money and subsidize another's Piano out of his pocket. If so, please let me know which dealer that might be.

For the buyer; He / She has acquired something they desire at a price they can afford (hopefully) and has tangible value commensurate with the agreed price.

We just finished a month plus long shopping for a high end Grand. I donít think the high end Piano buyer should be approaching their purchase like a car, or even a house. At least for us I donít see myself buying another Piano in my lifetime, unlike my Car and or home. For others if it is a stepping stone to another piano or just another purchase for a family member then they will have a different definition/criteria of what a ďDealĒ is.

Our experience:

Manufacture/Dealer A: We play all of their inventory and multiple models, ask many questions get much literature. We are told to decide and buy quickly since the value is excellent and a price increase is coming in January. What a fine investment this Piano is and it is worth every dollar of the listed prices. Rumor/belief is that this brand/delaer doesnít negotiate. Pianoís listed price is the sales price.

Manufacture/Dealer B: We play all of their inventory and multiple models, ask many questions get much literature. . The dealer has a posted sales price much lower then the ďlistedĒ price in Fineís book. In the ballpark of what was discussed in the very first post. It turns out the Piano is one of our finalists, we start some serious negotiating, get a additional reduction. It should be noted we have friend that just purchased this Piano from dealer at what some in this thread would consider a 'deal' off the 'listed' price. The friends felt like they got a great deal. Wow, list price x, my price y, a lot better then what I every got off on a car. Suffice to say we got a considerably lower price then that. This confirm's Kenny's and builds on NewPianoSeekerís post of highly variable pricing! I have no clue did the Dealer get more inventory at a cheaper cost, knew we were considering another Piano brand and was trying to make the sell to us with less profit knowing the only knob left to him was price/ better deal, he couldn't change the piano, who knows, but the difference in price was signficant $$$$$. In the end we didnít pick this Brand/Dealer because of the few dollars difference between what our friend paid and what it was offered to us. IE the great 'deal' was only a secondary factor in selecting a Piano. We picked another Brand/Dealer C simply it was the Piano we prefered. Price was per the 'Deal' definition.

Brand/Dealer C: We again played all of their inventory and multiple models, ask many questions got the literature. In the end we selected Brand C got what dealer claimed was the best deal he every gave. That was nice, but the bottom line we got the Piano we wanted at a price we were comfortable. Would I have liked a lower price, Yes. Was I satisfied I got a reasonable prices, Yes. Thus, the deal was done. \:D


Charles

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#909123 - 02/04/05 10:57 AM Re: The taboo topic of piano pricing
NewPianoSeeker Offline
Full Member

Registered: 01/07/05
Posts: 84
Loc: Gainesville, FL
Kenny, I totally agree that price isnít everything and that the other things that you listed also have value. Itís up to each person what they are worth to them. I personally didnít place a lot of value on them when I bought a piano, but thatís just me. I may be influenced by the less than stellar opinion that I came away with from my local dealers. The piano tech that inspected the used piano that I bought didnít have great things to say about the store, but recommended the piano after he inspected it. I rely on my local piano tech once I leave the store.

JCS, ďanalysis paralysisĒ is an occupational hazard that I deal with as an engineer \:\) Thatís why I was pleased to discover some pretty simple rules for looking at a deal being offered and deciding if it was reasonable. These rules are just meant to be a general guideline to determine if the price is in the ball park of where it should be. Rarely a day goes by on this forum when someone doesnít ask whether a price theyíre being offered is reasonable. Most of them would have been at least helped by using these rules.

Even though I consider myself an accomplished haggler, I would much rather go into negotiations with a ball park idea of what is reasonable. I haggle to get a fair price, not to beat the dealer down to a margin they canít live on.

Piano Peddler, you raise some excellent points. Itís been interesting to see that only Saturn has adopted the fixed pricing for new cars. You do a good job of pointing out the fixed price pitfall of having someone else undercut you with a ďspecialĒ price. You may not be able to tell it from my posts, but I donít think that I have all the answers ;\) Itís a very tough problem! Weíve all seen the ďbuy before midnightĒ deals used to rush people into a sale. Itís used because itís effective. Youíre point on the rapid changes in wholesale prices is well taken, especially with the falling dollar.

Again, the pricing rules that I proposed are just to get you started. Other factors like additional services being offered, recent wholesale price fluctuations, and the condition of the piano (in the case of used pianos) must be taken into consideration.

Barry -- self-appointed crusader for transparency in piano pricing

P.S.: Mary Anna warned me that this forum will draw you in even after you think you're done. She was right! My 14 year old son was reading over my shoulder last night and announced that this forum was "just instant messaging for old people!" Kids... can't live with them.
_________________________
No piano industry affiliation.
Not burdened by a wealth of facts to color my opinions.

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#909124 - 02/04/05 01:02 PM Re: The taboo topic of piano pricing
Steve Cohen Online   content
Yikes! 10000 Post Club Member

Registered: 05/26/01
Posts: 10528
Loc: Maryland/DC/No. VA
Crusader Barry, (as opposed to Crusader Rabbit for those old enough to remember) \:D :

How would "transparency" work? Would dealers post their actual wholesale cost, or the published wholesale costs? How would they be transparent about their costs, as percentages or $$?

For example, how would the dealer be transparent with the cost of say rent or payroll as their part of margin on a particular sale?

Another question: We often buy large quantities of pianos to get a better price from the manufacturer/distributor. Our hope is that the savings will outweight the interest on the money. How would these kinds of factors be made transparent?

I think that the theory of transparency sounds good, for both the shopper and the dealer. In practice however, it is very complex. How would it work?
_________________________
Piano Industry Consultant- http://www.linkedin.com/pub/steve-cohen/6/b92/b80

Consultant & Contributing Editor - Acoustic & Digital Piano Buyer

Jasons Music
Maryland/DC/No. VA
Since 1937.

www.jasonsmusic.com
My postings, unless stated otherwise, are my personal opinions, not those of my clients.

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#909125 - 02/04/05 02:04 PM Re: The taboo topic of piano pricing
NewPianoSeeker Offline
Full Member

Registered: 01/07/05
Posts: 84
Loc: Gainesville, FL
Good question, Steve! I didnít make it clear that my quest is a move TOWARDS transparency. I donít mean that each dealer should post their business ledger in the front window. I mean that dealers should move away from trying to hide the wholesale costs from the customer because it builds distrust. The other part of transparency is educating the customer on why an average markup of 43% is reasonable.

If a dealer is able to lower their overhead through volume purchasing, lower rent, or other methods then more power to them. This means that they can make higher profits at the same selling price as other dealers or can lower their price to bring in more customers. Thatís the free market at work!

On the other hand, Iíve read posts on this forum saying that a dealer with higher overhead should charge their customers more so that the dealer can still make a reasonable profit. It may sound harsh, but nobody has the right to stay in business. It has to make economic sense. If a dealer is charging more than a competitor for the same piano then they need to offer more. It may be through additional or better services. It may be that the value in the customer dealing with someone that they know and trust. Or it may be the convenience of not having to travel to another city. Ultimately, itís the customer who decides if they value what is being offered. Many small stores are closing when Wal-Mart moves in. The small stores may offer much better service, but too many customers are saying that they like Wal-Mart by where they spend their money.

In case you havenít figured it out already, Iím not normal ;\) I have a much higher ďrisk toleranceĒ than most people when it comes to piano buying. Most people probably think that Iím crazy to buy a piano site-unseen. My feeling is that the piano technician is much better qualified to say whether the piano is good than I am. I know that there is the issue of each piano being slightly different in touch and sound, even within the same brand. Iím willing to take what I feel is a relatively minor risk that the piano would not be acceptable even after our technician has prepped it. With the deal that I got, I can afford to have quite a bit of work done. On the off chance that Iím still not happy, I could turn around and sell it for little or nor loss. The dealer that sold me the piano was able to bring in a gray market piano and turn it around quickly for a profit, so he was happy. I got a great piano at a great price, so Iím happy. This is a very different business model than most piano dealers use, but it worked for us.

Iím not trying to convert people to my way of piano buying. Iím just making the point that different customers have different things that they value. Dealers who are going to stay in business will need to figure out how to either satisfy a broad array of customer types or will identify a niche market that they can service. I think that dealers should seriously consider expanding their used piano sales. I think that they could make more money this way and the customer could get a better piano for less.

I swear that Iím not normally this long winded! My writing style has often been described as ďterseĒ. These long posts just seem to pour out.

Barry

P.S.: Steve, I've changed my avatar to reflect my new thinking. I see that you're still a poker player \:\)
_________________________
No piano industry affiliation.
Not burdened by a wealth of facts to color my opinions.

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#909126 - 02/04/05 02:15 PM Re: The taboo topic of piano pricing
Steve Cohen Online   content
Yikes! 10000 Post Club Member

Registered: 05/26/01
Posts: 10528
Loc: Maryland/DC/No. VA
No. Not a poker player at all.

An ex-professional magician with a specialty in sleight of hand with cards.

Back to the thread...

Crusading for transparency without a methodology is fruitless.

If you owned my business how would you present your pricing? (If you need more info to answer, I'll try to accomodate you.)
_________________________
Piano Industry Consultant- http://www.linkedin.com/pub/steve-cohen/6/b92/b80

Consultant & Contributing Editor - Acoustic & Digital Piano Buyer

Jasons Music
Maryland/DC/No. VA
Since 1937.

www.jasonsmusic.com
My postings, unless stated otherwise, are my personal opinions, not those of my clients.

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#909127 - 02/04/05 02:36 PM Re: The taboo topic of piano pricing
seebechstein Offline
1000 Post Club Member

Registered: 11/23/04
Posts: 1085
Loc: houston
 Quote:
Originally posted by FranklySpeaking:
Seebechstein,
I think we must have shopped in some of the same stores! \:D [/b]
Surely we have. I have found myself quietly identifying with previous posts of yours.

I'm not sure that store margins are what is responsible for the confusion amongst shoppers. I think the fundamental problem is inherent in the piano shopping process itself: that some pianos are junk, some are marginal, and some are fantastic, so you see prices from $1,500 to $150,000 and while you stand there scratching yourself in bewilderment the sales weasel is loading all of this contradictive baloney on you. You leave the store not knowing what to believe.

TO ANYONE WHO TRIES TO SELL PIANOS: The more and the longer you talk, the less I trust you and the less likely I am to buy a piano from you. Let the pianos themselves do the talking.

Would open wholesale invoicing published by piano manufacturers really help consumers in buying a piano, if the dealer has to add 40% to cover his expenses? You'll never get a piano from the dealer near his invoice price, so it's pointless to know what it is.

I would guess that it would save a lot of money to fill out a web form on the manufacturer's website and pay the wholesale dealer price to have a piano shipped directly from the builder and dropped on your curb in a crate. You could hire a mover to put it in your house and you could hire a tech to regulate and tune it. Why would this business model fail for the consumer and the builder? Are piano transactions too complex that we must get the value added from a dealer?

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#909128 - 02/04/05 03:01 PM Re: The taboo topic of piano pricing
MaryAnna Offline
Full Member

Registered: 10/03/04
Posts: 400
Loc: Florida
Hmmm. Let's think about what price transparency means.

When I go to Wal-mart and buy a carton of laundry detergent...no, let's make it a little better analogy..when I go to Wal-mart and buy an electronic keyboard, there is a price marked on it and I pay it. I do not know how much the instrument cost Wal-mart. I do not know the overhead costs associated with making my purchase possible. I do not care.

For a low-priced item, I might just buy it without worrying whether K-Mart has priced it 5% lower. For one of Wal-mart's more expensive keyboards, I will probably spend a little bit in gas to compare prices at a couple of other places. Then I will buy the keyboard and take it home.

No wonder people freak out over paying thousands of dollars for an item that is, for all practical purposes, offered for sale without a price. (And don't tell me that the MSRP is more than theoretical, except for the very few uninformed folk who pay it.) A piano costs whatever you're willing to pay for it, if that price meets the seller's needs on that particular day. In a week, the seller's needs may be different. There are other items sold this way--cars and houses come to mind--but it is not a situation conducive to making either party happy. How many people look forward with happy anticipation to buying a car? I think a large purchase like that doesn't have to come with the sick feeling that you probably paid more than your neighbor for the same product.

I don't know whether the Saturn approach of flat prices with no negotiation would work for pianos, but I'd sure prefer to deal that way. Pressure from the internet may be forcing such a change in the marketplace, but nationwide flat pricing will surely force small smaller dealers in weaker marketplaces out of businesses unless they are able to clearly communicate why it is valuable for a customer to deal with them.

I like small businesspeople and I don't want to see them go. Doing business as usual in an evolving marketplace will send any firm the way of the dodo, so I hope a profitable new business model can be found. It can be done. This thread proves to me that I paid thousands more than Barry for essentially the same piano, but I'm okay with that. It was a fair price, given my preference for local service and my neurotic need to play my piano before I bought it. ;\)

Mary Anna
http://www.maryannaevans.com
_________________________
Mary Anna Evans
Author of the Faye Longchamp mysteries
http://www.maryannaevans.com
Blogging at maryannaevans@blogspot.com

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#909129 - 02/04/05 03:05 PM Re: The taboo topic of piano pricing
Steve Cohen Online   content
Yikes! 10000 Post Club Member

Registered: 05/26/01
Posts: 10528
Loc: Maryland/DC/No. VA
 Quote:
Originally posted by seebechstein:
 Quote:
Originally posted by FranklySpeaking:
Seebechstein,
I think we must have shopped in some of the same stores! \:D [/b]
Surely we have. I have found myself quietly identifying with previous posts of yours.

I'm not sure that store margins are what is responsible for the confusion amongst shoppers. I think the fundamental problem is inherent in the piano shopping process itself: that some pianos are junk, some are marginal, and some are fantastic, so you see prices from $1,500 to $150,000 and while you stand there scratching yourself in bewilderment the sales weasel is loading all of this contradictive baloney on you. You leave the store not knowing what to believe.

TO ANYONE WHO TRIES TO SELL PIANOS: The more and the longer you talk, the less I trust you and the less likely I am to buy a piano from you. Let the pianos themselves do the talking.

Would open wholesale invoicing published by piano manufacturers really help consumers in buying a piano, if the dealer has to add 40% to cover his expenses? You'll never get a piano from the dealer near his invoice price, so it's pointless to know what it is.

I would guess that it would save a lot of money to fill out a web form on the manufacturer's website and pay the wholesale dealer price to have a piano shipped directly from the builder and dropped on your curb in a crate. You could hire a mover to put it in your house and you could hire a tech to regulate and tune it. Why would this business model fail for the consumer and the builder? Are piano transactions too complex that we must get the value added from a dealer? [/b]
The reason it would fail is obvious. Where would a typical shopper be able to evaluate the piano before purchase? After all, no dealerships would stock a product that they cannot sell at a profit.
_________________________
Piano Industry Consultant- http://www.linkedin.com/pub/steve-cohen/6/b92/b80

Consultant & Contributing Editor - Acoustic & Digital Piano Buyer

Jasons Music
Maryland/DC/No. VA
Since 1937.

www.jasonsmusic.com
My postings, unless stated otherwise, are my personal opinions, not those of my clients.

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#909130 - 02/04/05 03:14 PM Re: The taboo topic of piano pricing
Norbert Offline
Yikes! 10000 Post Club Member

Registered: 07/03/01
Posts: 14263
Loc: Surrey, B.C.
Customer's peace of mind - and I think this is what this is all about - doesn't come so much from the knowledge of what we dealers have paid for our stock - but rather the assurance of *fairness of price* by which we sell such product in the end.

That's why I am always willing to show some recent sales invoices for same or similiar pianos to my customers - when asked about it.

This way we don't have big deviations and - *unfairness* in pricing.

As opposed to the "BIG SALE" advertisers.

Somebody before[/b] such *sale* has obviously paid too much...... :rolleyes:

norbert
_________________________
www.heritagepianos.com
Greater Vancouver B.C. piano dealers for : C.Sauter, Estonia, Brodmann, Ritmuller
604-951-8642

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#909131 - 02/04/05 03:20 PM Re: The taboo topic of piano pricing
NewPianoSeeker Offline
Full Member

Registered: 01/07/05
Posts: 84
Loc: Gainesville, FL
Mary Anna: I really hope you were serious that my piano deal hasnít tempered your joy with your piano. We engineers have to stick together! You have a great piano thatís a little newer with a known history.

Steve: My avatar goes on imaginary crusades, so my crusade for something as nebulous as transparency seemed appropriate ;\) Youíre right that Iíve been preaching the wonders of price transparency without give a lot of thought to exactly how it would be implemented.

In the case of this forum, I was thinking that dealers and consumers should feel free to talk about wholesale prices, overhead, services, and markups. I saw a number of cases where dealers would fall back on the ďwhatever the dealer and customer agree on is fairĒ smoke screen. Iíve started using my magic wand of a $15 electronic copy of the annual supplement to The Piano Book and the ďListPrice / 2 * 1.43Ē formula to respond to questions on this forum as to whether theyíre getting a fair deal.

Your question of how Iíd implement it in your store if I were you left me temporarily speechless. But now Iíve recovered ;\) Iíll try to work through it using the car dealer model. When car buying, I go to Edmunds.com. It gives you the invoice price, MSRP, and price typically paid for that car in my region. This gives me a good starting place as a customer. While I have been advocating the publishing of wholesale piano prices and educating the reason for a 43% markup, I admit that it may be a mistake to do it in your store. It may be too hard to educate a customer who has never run a business on why this markup is reasonable.

Maybe a good compromise is to move away from the method that most stores use of showing you the list price that is double wholesale and telling you that the 25% discount off the list price is a great deal. Instead, Iíd like to see stores give realistic list prices and spend their time getting the customer comfortable with the piano options. While the ďbuy before midnightĒ sales tactic may gain the store some sales, I think that more sales are lost because of the distrust that it creates.

Even if my theory of which method will generate the most sales and profits, I donít think there is much choice. If I could figure out the piano pricing system in a few weeks, I donít think that it is going to be long before itís common knowledge.

Seebechstein raises an interesting question about why not move towards a business model where we all order directly from the manufacturer at wholesale prices and cut out the middle man. There are a couple of issues here. First, we would have to pay more than wholesale in order to cover things like shipping and because we wouldnít get any volume discounts. But, it would still be cheaper than the 43% markup.

The big flaw in this business model is that it would be hard to order a piano if youíve never played any of their models. In my case, there were no Yamaha C7s being sold in town. I got around this problem with my piano by playing Mary Annaís C7, but not everyone will be so lucky as to find a gracious fellow pianist. What would happen in the short run is that people would play the pianos at their local store, decide what they like, and then order directly from the dealer. The Internet has allowed this to happen for many other products. The problem with this business model is that the local dealer would quickly be driven out of business.

I wonít be surprised if we move towards a piano business model where the smaller stores close and people travel to large cities where they only have one of each model on their showroom floors. Since this is such a large and infrequent purchase, many customers would be willing to do this to save money. Iím definitely not saying that this is a good way to go because it means the death of many good piano stores. Iím just saying that I could see things evolving this way, especially taking the shrinking piano market into account.

If anyone has a business model with a brighter outcome, Iíd be interested to hear it.

Barry -- prognosticator for piano business models (my next avatar is going to be Nostradamus)
_________________________
No piano industry affiliation.
Not burdened by a wealth of facts to color my opinions.

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#909132 - 02/04/05 04:35 PM Re: The taboo topic of piano pricing
Steve Cohen Online   content
Yikes! 10000 Post Club Member

Registered: 05/26/01
Posts: 10528
Loc: Maryland/DC/No. VA
Barry,

First, you really know how to hurt an industry, and you prove that a little knowledge is a dangerous thing!!! Multiplying wholesale cost by 1.43 yields a ~30% margin. You are confusing markup, which is not generally used in this industry, and MARGIN. The average MARGIN in this industry is 43%. This means that 57% of the selling price is cost + fgt. And 43% is ďgross profitĒ. If you are looking for a ďmultiplierĒ it is about 1.75.

Second, as I point out in my 2nd post on this thread, the wholesale cost paid by dealers varies quite significantly. So what do you base the multiplier on?

Third, you are right in that ďIt may be too hard to educate a customer who has never run a business on why this markup is reasonable.Ē If this is so, may I assume that upon reflection you are giving up the crusade? ;\)

Fourth, you state ďMaybe a good compromise is to move away from the method that most stores use of showing you the list price that is double wholesale and telling you that the 25% discount off the list price is a great deal.Ē Say a piano costs $1000. At double wholesale ($2000) less 25% is a selling price of $1500Öa 33% margin. Not the ripoff that you imply but bankruptcy for most dealers! \:\) Here you show that those who do not really comprehend this industry can do a disservice in advising on price.

You go on to say ďIf I could figure out the piano pricing system in a few weeks, I donít think that it is going to be long before itís common knowledge.Ē

Please do not take offense, but this really proves my point. You are obviously a sharp, well-educated individual, significantly well versed in math. Until now, you believed that you figured out piano pricing in only a few weeks. You are very far from understanding the system. How do you expect dealers to explain this to the typical shopper?

Quite a few posters on the Piano Forum also believe that they understand pricing. Some do, some do not, yet all advise and comment as if they comprehended it completely. Mistaken assumptions, like those you made are common.

The main problem in comprehending the system is understanding that wholesale costs vary greatly, as do overhead expenses. They vary based on the size of the dealership, the labor costs, rents, sales volume, pre- and post-sale services, etc.

You called this subject ďtabooĒ. It is not. It is simply a very complicated situation and even worse, UNDERSTANDING IT DOESNíT LEAD TO A ďFAIRĒ PRICE unless you know all the costs of the particular dealership.

I wish it were simpler, but it is not.

Also, I want to thank you for your tone and perspective in this thread. It may sound as if I am berating you. I hope you do not take it that way.

You are a gentleman and a scholar...just not of the piano industry! NOW PUT DOWN THAT LANCE!!! ;\)
_________________________
Piano Industry Consultant- http://www.linkedin.com/pub/steve-cohen/6/b92/b80

Consultant & Contributing Editor - Acoustic & Digital Piano Buyer

Jasons Music
Maryland/DC/No. VA
Since 1937.

www.jasonsmusic.com
My postings, unless stated otherwise, are my personal opinions, not those of my clients.

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#909133 - 02/04/05 08:36 PM Re: The taboo topic of piano pricing
NewPianoSeeker Offline
Full Member

Registered: 01/07/05
Posts: 84
Loc: Gainesville, FL
Steve: Iíll discuss your points one at a time. But before I do, Iíd like to say that I realize that I may be way off base on all of this. The rules that Iíve proposed are a working theory. This means that they are open to refinement or refutal.

Point #1: Youíre right that I screwed up switching back and forth between margin and markup. I find markup over wholesale a lot easier to think about. Is the use of margin another example of piano dealers using obfuscation? \:\) The average price paid is a 75% markup over wholesale. A fair price is a 67% markup. A good price is a 43% markup over wholesale. A great price is a 25% markup over wholesale.

Point #2: Yes, the wholesale price varies in time and space. Again, these rules are only meant to be used as a first level of screening to determine whether a price that youíre being given is reasonable. This is not meant to be the final word. Other factors need to be taken into consideration.

Point #3: No, I havenít given up the crusade, but I am refining it. I was surprised and pleased to hear that Norbert actually shows invoices to some customers. Using the car dealer model again, I think that piano dealers should show categories for their expenses. Car dealers show ďdestinationĒ or delivery fees. Piano dealers use the same technique of categorizing the various items that dealers pay in order to help the customer understand the markup.

Point #4: I didnít say that a 75% markup was ďa rip offĒ. According to your numbers, itís average for the industry. My point was that it isnít the great deal that it is purported to be. My local Yamaha dealer had a price of $31,000 on his C3. He told us that this was well below MSRP. A week later he called to say that they were having a great, limited time offer of 20% off!

I donít claim to have anything approaching full understanding of the piano industry. Almost all of the information in my ďrulesĒ came from several sources that are knowledgeable about the industry. My contribution was verifying that the used pricing guidelines from The Piano Book closely fit used piano prices for several models when using the 67% markup as a starting point and that more expensive pianos appear to reach a pricing plateau at a younger age than less expensive pianos.

I disagree with your implication that a fair price is tied to a particular dealershipís expenses. This follows the business model that I think is outdated -- that each dealer should have a local monopoly which allows them to charge prices high enough to stay in business. Some dealers have expenses that are just too high to allow them to offer the customer a good price. It may or may not be their fault. Maybe their market is too small, so their low turnover increases the interest paid on their inventory. Maybe they are carrying too many pianos. Maybe their location is too expensive. Whatever the cause, the customer should be able to decide whether they are willing to pay the extra price that this dealer charges or whether they are willing to travel to get a better deal.

While Iím good with math and analyses, I realize that there is a lot that I donít know about the piano industry. I really wouldnít have a problem admitting that Iím way off base with my pricing rules or my proposed piano business models. However, the feedback that Iíve gotten from you and others is that both of them could use some refinement and that they arenít the final word. But I havenít heard anything that invalidates them.

While I donít want to see other piano buyers get fleeced, my goal is not to help them beat down the dealers. I honestly believe that the piano industry is clinging to an outdated business model that is hurting everyone by creating mistrust and driving people away from pianos. Donít fear an informed consumer.

Barry -- purveyor of free advice thatís worth twice what you paid for it
_________________________
No piano industry affiliation.
Not burdened by a wealth of facts to color my opinions.

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#909134 - 02/05/05 02:10 AM Re: The taboo topic of piano pricing
MaryAnna Offline
Full Member

Registered: 10/03/04
Posts: 400
Loc: Florida
Gentlemen, I think all this talk of markups and margins and dealer overhead is obfuscating the point. I don't think the details of a dealer's finances are any of my business. I just want them to tell me what the dang piano will cost me and let me decide whether I want to pay it. Period. And I want the price he/she tells me to be the same price my next-door neighbor gets tomorrow.

The current haggling system fosters a "duel" mentality, where the customer is trying to wangle a piano for less than the guy who just bought one, and the dealer is hoping to fool the customer into paying more than necessary. Pardon me for descending into a moment of sexism, but it seems that men sometimes enjoy these battles. They make me tired and a little queasy. And don't get me started on car or piano dealers who try to charge me more because they think the little lady is emotionally attached to the pretty blue car or the shiny black piano.

There is a special wrinkle to piano sales that no one has mentioned: the trade-in. This is also a problematic part of car sales. Even if every Pearl River dealer in the country has the same prices on the same pianos and sticks to them, somebody has to decide how much that trade is worth. So if we hammer out a workable, fair approach to piano pricing here in this thread (a daunting prospect), people will still be forced to haggle over exactly how much the trade-in is worth. Unless someone establishes a depreciation model similar to Barry's for used pianos, but taking into account that the dealer needs to sell the trade at a profit.

You know, when I go to an electronics store and make a large purchase like a computer or a home entertainment system, I shop around. Then I buy at the store with the best price for the system and warranty that I want, and I come home and enjoy my purchase. I have the information I needed to make my decision intelligently.

When someone buys a piano, the experience is tainted by the fear that they paid too much. Nobody wants to be a schmuck. I think dealers need to really consider whether that is how they want their customers to feel. Good will is an asset that even accountants recognize and put a value on.

Mary Anna
http://www.maryannaevans.com
_________________________
Mary Anna Evans
Author of the Faye Longchamp mysteries
http://www.maryannaevans.com
Blogging at maryannaevans@blogspot.com

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#909135 - 02/05/05 02:26 AM Re: The taboo topic of piano pricing
JPM Offline
1000 Post Club Member

Registered: 02/24/03
Posts: 1010
Loc: NM, GE & Wash. DC
Barry, thanks for sharing your analysis with the group. I think it provides a useful method to help consumers determine a "fair" price for a piano, based on make, size and age.

I also believe transparent pricing would help eleviate buyers' concerns and decrease their frustration with today's pricing schemes.

Steve, buyers are not concerned about certain components of a dealer's overhead (rent, labor, insurance, utilities, interest, etc.). Obviously, dealers are concerned about these costs and they certainly figure into the selling price a dealer considers to be "fair". Education may help but I doubt it will have a major impact on people's buying decision.

Buyers are concerned about the piano's quality and price, the dealer's value added (piano prep), and their confidence in the dealer/manufacturer (will they stand behind their product?). And maybe shipping/handling (buyers understand it and are used to paying it).

Mary Anna's comment is right on the mark: "I just want them to tell me what the dang piano will cost me and let me decide whether I want to pay it. Period. And I want the price he/she tells me to be the same price my next-door neighbor gets tomorrow." Unfortunately, I don't think we'll see it happening anytime soon.

Barry, the one thing I'll comment on about your method is that we don't know how good the data is. What we see on PW, PianoMart, Ebay, etc. are Asking Prices. We don't know the actual Sales Price for used pianos (and never will). Maybe you already factored that unknown in your method and I missed it.

JP

PS: It's nice to be able to discuss a contentious topic here yet maintain a civil tone.
_________________________
"Piano music should only be written for the Bechstein."
-- Claude Debussy

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#909136 - 02/05/05 07:58 AM Re: The taboo topic of piano pricing
Steve Cohen Online   content
Yikes! 10000 Post Club Member

Registered: 05/26/01
Posts: 10528
Loc: Maryland/DC/No. VA
Great posts! Particularly MaryAnna's. I think she really addresses the real issues.

Barry, The confusion in percentages isn't from the piano industry side. We consistantly use margins, not markup or multipliers. The main % is that the average sale is made with a 57% cost of goods sold (incl. fgt.) and a 43% gross profit margin to cover all the expenses of the dealership as well as a return on the owners investment (Net Profit). Let's avoid confusion and stick to the standard accounting method in our discussions.

Barry, I still think your evolving model shows promise, but MaryAnna's comments really reflect the opinions of the majority of shoppers. However, there are many shoppers who WANT to get into the nitty-gritty and your model could be quite useful. If we all evolve this to refinement, it may make it to the FAQ page on PW.

Another topic has been mentioned but not explored: the seeming "monopoly" in which a particular brand is only represented by one dealership in each market. This is NOT a ploy to maintain prices.

Let me use a fictious median market called Small City (SC). I'm thinking like Cinncinati, Reno, Albany, Nashville, etc. If I were to ask the regulars here to list the brands they think should be available in the local SC market, it would likely look something like this (in no particular order):

Yamaha
Kawai
Samick/K&C
Young Chang/Pramberger
Steinway
Boston
Mason & Hamlin
Petrof
Estonia
Nordiska
Pearl River
Schimmel
Chas. Walter
a few other Chinese low-end brands

A market the size of SC cannot support more than about 5-6 storefronts, usually 3-4 dealerships each carrying no more than 3-4 lines. As you can see it doesn't leave much room for duplication. Why would a dealership choose a brand carried by another when they can choose another brand and sing its praises?
_________________________
Piano Industry Consultant- http://www.linkedin.com/pub/steve-cohen/6/b92/b80

Consultant & Contributing Editor - Acoustic & Digital Piano Buyer

Jasons Music
Maryland/DC/No. VA
Since 1937.

www.jasonsmusic.com
My postings, unless stated otherwise, are my personal opinions, not those of my clients.

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#909137 - 02/05/05 12:44 PM Re: The taboo topic of piano pricing
NewPianoSeeker Offline
Full Member

Registered: 01/07/05
Posts: 84
Loc: Gainesville, FL
Mary Anna, I agree with you that it would be better if the dealers would just set their prices and let us decide if we like it or not. Unfortunately most big ticket items (cars, boats, houses) donít work that way. However, the sharing of knowledge, primarily due to the Internet, has greatly shrunk the range of prices that people pay. Car prices used to commonly to vary $7K for the same car depending on the customer. Now itís down to $1-2K. My hope is that the sharing of knowledge will cause the same thing to happen to pianos.

I think that the used market in general and trade-ins in particular is a good place for piano dealers to make money. Car dealers make considerably more on their used cars then their new cars. There is value to most of us in trading in our pianos. First, it is much more convenient than trying to sell our piano and dealing with the hassle. If you sell it too quickly then you donít have a piano for a while. If you sell it too slowly then you have 2 pianos at once. Second, we save money on taxes by trading in the piano. Third, the dealer should be able to sell it for more than a private seller because people are more comfortable buying from a dealer and because many dealers offer warranties on use pianos. Because of the value to the customer of trading in the piano, the dealer should be able to take a trade-in and sell it for a nice profit. There are dealers who try to convince the customer that their piano is worthless, which is dishonest. But in most cases, the trade-in creates a win-win situation where the customer is given a reasonable price and the dealer makes a tidy profit.

JP, you are correct that my analyses were based on the asking price rather than the final price. The negotiated final price would be slightly lower.

Just to make sure that everyone is clear on the purpose of the proposed pricing rule, Iíll say it a little different way. Maybe ďprice screening toolĒ would be a better name than ďpricing ruleĒ. The purpose of the rules is to allow the piano customer a quick method of assessing whether the price they are being offered appears to be in the ballpark of where it should be. If the price is well above what the rule says is a reasonable price then youíll want to discuss it with the seller. As a number of people have pointed out, there may be good reasons for the higher price including extra services offered by the dealer or recent increases in wholesale prices. Some brands just may sell for higher margins. A recent post on Steinways said that they are really discounted below list.

Steve, it was unfair of me to say that the use of margins is a ploy to obfuscate pricing. While piano dealers are used to thinking that way, I find it a lot easier to think about markup over wholesale. I liked your ďSCĒ example. To give you a real world example, Mary Anna and I live in Gainesville, FL. Itís primarily a university town and has a population of 150,000. I would think that a university town would have a higher percentage of piano players than a typical city, but we have 2 dealers in town. One sells Yamahas and Pearl Rivers. They have a pretty good inventory. The other sells only Kawais. They have 3 pianos in their store. I agree with you that there is no good reason to have an overlap of brands.

Several posts on this forum have said that it is not illegal, but that it is immoral to not send customers to their local store when they go to stores in other markets. Also, Yamaha and Kawai do not allow dealers to give prices over the phone. Posts have also stated that local dealers should be able to charge high enough markups to keep them in business. This is the ďmini-monopolyĒ that I was referring to. It may be that Gainesville is just too small a market to support new piano dealers. Most of us only buy a piano every 20 or 30 years. I would be willing to travel a few hours to a larger city with more options and lower prices. I hate to see a good piano store close down, but it just may not make economic sense.

I think that itís time for me to sheath my lance and get down off my high horse. ;\) I have shared my screening tools for evaluating piano pricing because I want to help others navigate the confusing world of piano pricing. Others are welcome to use them, improve them, refute them, or ignore them. Iíve encouraged dealers to examine their business models because I want you to do well and I think that the current model is not going to work well in the future.

Iíve really enjoyed interacting with all of you who decided to join in on this thread. I appreciate the way that the piano pros out there have allowed to voice my opinion, even though it is admittedly based on my very limited knowledge of the piano business. At the end of the day, it is your business and you need to decide what is best for you. Special thanks go out to Steve Cohen who has disagreed with some of my theories, but always replied in a thoughtful and respectful way, even when I needed ďschoolingĒ.

With that, Iíll return to my real world crusade to improve water quality in our streams and lakes. The next time you here from me will probably be my ďnew arrivalĒ post when our piano is delivered. Iíll try to resist the urge to come out of piano price crusading retirement, but there are no guarantees. \:\)

Barry -- retired piano pricing crusader
_________________________
No piano industry affiliation.
Not burdened by a wealth of facts to color my opinions.

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#909138 - 02/05/05 02:40 PM Re: The taboo topic of piano pricing
Steve Cohen Online   content
Yikes! 10000 Post Club Member

Registered: 05/26/01
Posts: 10528
Loc: Maryland/DC/No. VA
Barry, thannks for the discussion. It was a great thread.

BTW, in most states you do not save taxes with a trade. Sales tax is calculated on the sale price before trade.

Again, a pleasure jousting with you.
_________________________
Piano Industry Consultant- http://www.linkedin.com/pub/steve-cohen/6/b92/b80

Consultant & Contributing Editor - Acoustic & Digital Piano Buyer

Jasons Music
Maryland/DC/No. VA
Since 1937.

www.jasonsmusic.com
My postings, unless stated otherwise, are my personal opinions, not those of my clients.

Top
#909139 - 02/06/05 02:53 AM Re: The taboo topic of piano pricing
JPM Offline
1000 Post Club Member

Registered: 02/24/03
Posts: 1010
Loc: NM, GE & Wash. DC
Thanks Barry. This has been one of the best threads we've had on PF in a long time! I've learned some new things. Thanks to Steve too.

This thread contains FAQ quality information.

JP
_________________________
"Piano music should only be written for the Bechstein."
-- Claude Debussy

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