Supreme Court Clears Way for Internet Sales Taxes

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I worked in retail electronics for most of the 80s, what Jim says is 100% true. The highest margins in consumer electronics were always car stereo, followed by audio, then personal electronics, followed by video, then white goods (appliances, washers/dryers, etc.) ....
I came into the industry in the mid-80's in the Midwest, moved to LA in 1987. One of my managers went into the store managers meetings once and was asked by the owner why he wasn't selling more NEC VCR's (with a digital chip). Jeff, the manager, then said, "What's the incentive? You have it on the floor marked below cost". The owner said, "Oops", went to the NEC VCR screen and gave a $100 cost adjustment. Jeff found it highly amusing.

In any case, depending on where one worked, the costs always "varied", especially if salespeople were on the "net profit" system. In any case, the early 90's real margins were about 25%-27% on the medium priced TV (26"-27" under $1,000), 30%-35% on the upscale models like Proton. Rear projection TV were 27%-30%, the higher one went on the sale price but there was a lot of temptation to drop your pants and make a deal. I once had a prominent entertainment agent call in asking if we could match Beverly Hills Stereo pricing. On a 50" Pioneer Elite (the best RPTV at the time), they were about $1,500 above the market but the agent was just coming off his client making millions from selling a syndicated sitcom and was seeking the best.

In audio, a high end receiver or amp was 50% but a salesperson might not always see it. Some sales managers would place a sizeable spiff on top of the commission, however. Speakers were 50% to 70% (American Acoustics was 80% on the their floor standing towers). CD players 20%-25%. Tape decks up to 40% on the mid-to-high end (but far below Nakamichi). The record cartridges were 75% profit.

Car stereos were 40%-50% and 70% on labor (back then, billed at about $35/hr). If you had a store brand, you were pushing that like crazy because commissions could hit 10% of the floor price without even knowing the real cost.

I never sold photo but one had to sell lenses and accessories to make a living there. Camcorders were ~ 22%-27%, rising along with the price, as usual.

Furniture, which I never sold either, was up to 70%. White goods were slim at 10%-15% but the retailers got the rebates from the manufacturers and mostly pocketed them. The salespeople often got spiffs.

A top salesperson in a hot store in the late 80's-early 90's could make above $60,000. An average for an experienced salesperson was around $30,000. The turnover in personnel was pretty high in LA though, much lower in the Midwest. The earning kept declining into the late-90's and a lot of pros exited the business. That was followed by the exits of the businesses themselves. AFAIK, of the retailers where I had worked in the 80's and the 90's, there is only one chain left standing and even they were sold to an outside investor.
 
PS. As publicly traded companies, the major photo/video manufacturers publish their profit margins along with their financials. They get as much as 50% on the bodies and 70% on glass. The smartphone OEM's also get double the cost on their product before it hits the retail shelves. There have been plenty of smartphone teardowns to have a fairly accurate ballpark figure. The cross-shippers that sell online and are often sued by the OEM's. If you check stores like Abe's of Main and Park Avenue - caveat emptor - you can find substantial discounts off B&H, Samy's, etc. and those are pretty close to the actual unit costs.

PPS. The manufacturing costs of a high end $5,000 audio amp are estimated at $500-$800. The latest iPhone that retails at $1.249 costs ~ $400-$450 to manufacture. If one then split the difference 50/50 between the manufacturer and the retailer, you see Apple with the similar 50% profit margin, with the retailer getting about $350-$400 or ~ 20%-25%.
 
My family ran a very successful retail business for decades- hardware, appliances, electronics, lawn & garden, TV repair and lawn mower/small engine repair. I was told by one of the guys that came in to take inventory for the 'floor plan' that we(this was in the 90's) were one of the largest stocking appliance dealers on the east coast. It really was amazing the amount of business that they did back then and something you had to see first hand to really believe. When I worked there(actually worked, I literally grew-up in there. There are pictures of me as a baby sleeping in the floor of the office in the original building), we ran two 2-man delivery trucks from open to close six days a week and before that they ran three trucks and usually could not get everything delivered. They are still open, but just a shell of what they once were, thanks to many things, including big box stores. Ironically, when Circuit City came to town it never really hurt the business(we outlived them). It was more The Home Depot and Lowe's in the mid 00's coupled with older clientele that had "traded" there since some were kids, "dying off" and a lot of younger people just naturally going to the big box stores. Anyway, the average profit margin/mark-up was 10%. My Grandfather never wanted to take advantage of anyone and treated everyone fairly and would help anyone he could. It was almost impossible to go anywhere to eat where people didn't know him. Even years after his death I would run into people and when they found out who I was would have a story to tell me of dealing with him at the store. Many with stories of how he helped them out when they were just getting on their feet as early adults and how they started their credit history there or how they bought their first refrigerator from him.


I also used to be friends with some jewelry store folks and THAT IS where the money is. Their mark-ups were usually AT LEAST 400%-500%.
 
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I remember Circuit City, Silo, Federated Group (I worked for Federated Group back in the day, high school days).......Use to get a 50% employee discount!
 
I remember Circuit City, Silo, Federated Group (I worked for Federated Group back in the day, high school days).......Use to get a 50% employee discount!
I bought a stereo system in 1990 off the distributor, as was then allowed by a (small, mid-high end) SoCal chain where I was working. Denon Class A/B 80 wpc receiver, Denon tape deck and Boston Acoustics floor standing speakers. All were 50% off the MAP (and I had won a Denon CD player for selling a certain amount of Denon product, so that was "free").
 
I won’t comment on specifics, but the real numbers are far more like what Run & Gun describes than what DLD does.

And when you look at one of those device tear-down analyses, they are talking about the cost of the parts. Not the cost to run the design factory where the product is developed, the software engineers who do all the programming, the factory workers employed to assemble and test the stuff, the costs to ship the product all around the world, then through customs & tariffs, then to distribution centers, then to retailers, the carrying costs for anyone to hold onto the stock anywhere through that process, the employees of the manufacturers in each region (like myself and the rest of Panasonic US), the costs for a distribution warehouse, the costs to run a reseller operation, and about 1000 other bits & pieces along the way. It ain’t all profit, there’s a lot involved.
 
I’ve thought about making products, but the infrastructure and cost of doing business, and the idea of competition, it would have to be a small miracle to make a sustainable profit. So, i just make my own stuff for me when i need. Mad respect for anyone in the product world.
 
Yous are confusing variable costs with the total, which include the fixed expenses/overhead, depreciation/amortization, R&D, any financial payments, advertising/promotion, etc. (and, yes, DLD went to college and, for several years, majored in accounting at one of the top accounting schools n the Midwest).

So, let's look at the Nikon financials released just a couple of days ago.

https://www.nikon.com/about/ir/ir_library/result/pdf/2019/19_4qf_c_e.pdf

Scroll down to page 18. Now, Nikon doesn't break this down by division (Imaging, Lithography, Health) but it nonetheless shows the basics.

Consolidated statement of Profit and Loss and Comprehensive Income.

In percentages.

Total revenues 100
Cost of sales (56.4)
Gross profit 43.6
-----------------

Selling, general, administrative, other expenses/income net (not provided but ...)

Operating profit 7.8%

Simple subtraction then makes the difference between gross and OP, (43.8-7.8) = 36%

Finance income - Finance Costs =/- other financials are virtually a wash, making Income/Profit Before Income Taxes the same ===> 7.8%

Income Taxes (not given in percentages but in totals of 21,422 from 56, 457 of the above, resulting in Profit for the Year of 4.9% (in the old days, it was called "net income")

After that, they go into hedges and other important to them and the financial analysts (but not to us) information.

Once again, the pertinent info is this - Nikon makes 43.6% profit on their product, before accounting for all other expenses, making roughly 8% of income before taxes as the ratio to total revenues.

These are not DLD numbers. And you don't need to have taken the Consolidation Accounting to understand the above .... but it don't hoit.
 
https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=1012

This gives an average profit margin in consumer electronics at the mid-high 50's percent level.

When I was working for chains with a "net profit" pay system, my best months were at around 30% - audio, video/camcorders only - and that's with padded costs (the store management kept the volume discounts benefits for themselves). In car stereo, margins were in the 40% and 50% range but there was some negotiating. Several chains where I had worked didn't even have prices posted (making the newbies completely disoriented).
 
PS. As publicly traded companies, the major photo/video manufacturers publish their profit margins along with their financials. They get as much as 50% on the bodies and 70% on glass. The smartphone OEM's also get double the cost on their product before it hits the retail shelves. There have been plenty of smartphone teardowns to have a fairly accurate ballpark figure. The cross-shippers that sell online and are often sued by the OEM's. If you check stores like Abe's of Main and Park Avenue - caveat emptor - you can find substantial discounts off B&H, Samy's, etc. and those are pretty close to the actual unit costs.

PPS. The manufacturing costs of a high end $5,000 audio amp are estimated at $500-$800. The latest iPhone that retails at $1.249 costs ~ $400-$450 to manufacture. If one then split the difference 50/50 between the manufacturer and the retailer, you see Apple with the similar 50% profit margin, with the retailer getting about $350-$400 or ~ 20%-25%.


As a cell dealer in Canada I can assure you that cell dealers don't make anywhere close to 20-25% margin on cell cell phones. It's between 3-5% on the device itself, not including any activation commissions. The carrier might be making those higher margins , but not the independent dealers. TV and Video products are 15-20% on the entry to mid tier products and 25% on the high end product. The idea is to hit your targets for volume rebates at the end of the year. I'm talking about consumer products at the dealer level, but I'm sure pro video is probably in that neighborhood.
 
As a cell dealer in Canada I can assure you that cell dealers don't make anywhere close to 20-25% margin on cell cell phones. It's between 3-5% on the device itself, not including any activation commissions. The carrier might be making those higher margins , but not the independent dealers. TV and Video products are 15-20% on the entry to mid tier products and 25% on the high end product. The idea is to hit your targets for volume rebates at the end of the year. I'm talking about consumer products at the dealer level, but I'm sure pro video is probably in that neighborhood.
The big money in cell phones is service. Back in the mid-90's in SoCal, we sold Motorola flip-phones for as much as $150 below cost in order to get the $300 commission check on a $100/mo Standard Plan or higher via the old LA Cellular. The companies - depending on when they got into the game - also received 5%-10% commissions on the actual phone service bills. Add paging - own billing at $3-5$ profit per number per month - and a lot of cell/paging store owners became millionaires within a few years. By the late 90's, the commission checks fell but the total sales grew.
 
The big money in cell phones is service. Back in the mid-90's in SoCal, we sold Motorola flip-phones for as much as $150 below cost in order to get the $300 commission check on a $100/mo Standard Plan or higher via the old LA Cellular. The companies - depending on when they got into the game - also received 5%-10% commissions on the actual phone service bills. Add paging - own billing at $3-5$ profit per number per month - and a lot of cell/paging store owners became millionaires within a few years. By the late 90's, the commission checks fell but the total sales grew.

Ah, the 90’s
 
Yous are confusing variable costs with the total, which include the fixed expenses/overhead, depreciation/amortization, R&D, any financial payments, advertising/promotion, etc. (and, yes, DLD went to college and, for several years, majored in accounting at one of the top accounting schools n the Midwest)

Income Taxes (n
These are not DLD numberst
That is super helpful! Thank you!
 
Yous are confusing variable costs with the total, which include the fixed expenses/overhead, depreciation/amortization, R&D, any financial payments, advertising/promotion, etc. (and, yes, DLD went to college and, for several years, majored in accounting at one of the top accounting schools n the Midwest).

So, let's look at the Nikon financials released just a couple of days ago.

https://www.nikon.com/about/ir/ir_library/result/pdf/2019/19_4qf_c_e.pdf

Scroll down to page 18. Now, Nikon doesn't break this down by division (Imaging, Lithography, Health) but it nonetheless shows the basics.

Consolidated statement of Profit and Loss and Comprehensive Income.

In percentages.

Total revenues 100
Cost of sales (56.4)
Gross profit 43.6
-----------------

Selling, general, administrative, other expenses/income net (not provided but ...)

Operating profit 7.8%

Simple subtraction then makes the difference between gross and OP, (43.8-7.8) = 36%

Finance income - Finance Costs =/- other financials are virtually a wash, making Income/Profit Before Income Taxes the same ===> 7.8%

Income Taxes (not given in percentages but in totals of 21,422 from 56, 457 of the above, resulting in Profit for the Year of 4.9% (in the old days, it was called "net income")

After that, they go into hedges and other important to them and the financial analysts (but not to us) information.

Once again, the pertinent info is this - Nikon makes 43.6% profit on their product, before accounting for all other expenses, making roughly 8% of income before taxes as the ratio to total revenues.

These are not DLD numbers. And you don't need to have taken the Consolidation Accounting to understand the above .... but it don't hoit.

I’m not sure who the “you” is that you (DLD) is referring to here. I will state that while I don’t know how much it cost to physically manufacture a given product by our factory, I do know what the factory “charges” the US company and then what we sell it to the distributor for, what the distributor sells it to the reseller for, and lastly what resellers sell to consumers for. It’s my job to know this. And I can tell you that resellers are not making these huge margins that some people are stating here. Not even close.
 
Well, Panasonic is a publicly held company. Let's see the financials of its imaging division.

Side note - Abe's of Maine has GH5s at $1,779.
 
Side note - Abe's of Maine has GH5s at $1,779.
That internet companies no longer have an advantage over brick and mortar companies I think is a good thing, it's only fair, governments should not favor one over the other.

But there is still the issue with companies harassing retail to charge 'recommended' prices. The Panasonic GH5 was a good example, the price in Asia and Europe was lower at introduction time and also there was a package deal with a lens. But not in the US. The same with Panasonic lenses, they are cheaper in Asia. It's probably the same for the other brands.
 
Buy the camera from a gray market seller and it may show up missing pieces or even nonfunctional. And then don’t come crying to us about it, if you buy gray market there’s no warranty to honor and we may even refuse to service it at all. Our policies are the same as many other companies.
 
Well, Panasonic is a publicly held company. Let's see the financials of its imaging division.

Side note - Abe's of Maine has GH5s at $1,779.


Hahaha. Yeah, no.

I have no idea what is published information and what isn’t, but you’re welcome to search for it. I’m certainly not going to provide it.
 
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