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elitefx
join:2011-02-14
London, ON

2 edits

elitefx to Teddy Boom

Member

to Teddy Boom

Re: Cable modem costs in Canada...

said by Teddy Boom:

The retail markup at discount computer stores maxes out at 15-20%. The ISPs selling Docsis 3 at $100 are getting a little more, maybe 30-40%.

The manufacturing cost of a Docsis 3 modem is probably higher than $25 before factoring in the distribution channels (shipping and markups).

Well, I've had an independent retailer tell me he paid $25 for a $100 part and if you Google "retail 300% markup" you see it's a common practice. Take the AMD HD7970 - $619 at release, $379 now and the retailer still makes a profit. IMHO It's a racket. Always has been.

I mean, when you open up a modem, what could possibly be worth $100 inside?

Maybe you're right. Maybe it's not the retailer but somebody is hauling in the bucks. Buy a mattress set and get a 48" LED TV Free? Somebody is getting something for nothing.
mediajedi
join:2011-12-23
Toronto, ON

mediajedi

Member

I've worked in manufacturing, distribution/wholesale, and retail in both the computer and pro video industries and I wish this "300% at retail" mark-up existed. In all honestly if a product (like a cable modem) cost the manufacturer $25 to make they would probably sell it to a distributor or wholesaler for roughly $50-$60. They would in turn sell it to the retailer for $75-$85, would would then sell it at $100.

The manufacturer usually makes most of the profit. They need to cover not just the cost to build the product, but the cost of development, support, certifications, and other misc costs.

Most retailers in Canada strive to secure themselves a %20 profit margin (most don't even get that high).

In the case of a product where the price has gone down dramatically it usually means the retailer is now purchasing the product from the wholesaler (or direct sometimes) at a lower price. Sometimes the wholesaler or manufacturer will give money back to the retailer in order to facilitate this lower price.

Niche products like super high end video cards may have a higher profit margin across the board but no retailer is making %300 on most computer equipment.

Cables and accessories are usually a little higher margin.

Teddy Boom
k kudos Received
Premium Member
join:2007-01-29
Toronto, ON

Teddy Boom to elitefx

Premium Member

to elitefx
said by elitefx:

Well, I've had an independent retailer tell me he paid $25 for a $100 part and if you Google "retail 300% markup" you see it's a common practice. Take the AMD HD7970 - $619 at release, $379 now and the retailer still makes a profit. IMHO It's a racket. Always has been.

Retail in general is nothing like the computer parts business in particular. Growing up, I was always told that the average retail markup is 100%. However, once you start looking at specific sectors, you'll find vast variation. The markup on clothes is often 1000%. The retail markup on that AMD CPU though, 15%.

Quoting the price range over the life of the product is completely pointless. There are a hundred different factors influencing that pricing (recouped development costs, manufacturing process refinements, changing market conditions). Irrespective of why the price changes, it certainly has nothing whatsoever to do with markup at the retail level.

As for where the money goes.. I'd guess at $10+ for the CPU, another ~$10 for the RF section, another $10+ for the other electronics (RAM, flash, PCB, other board level parts), and another ~$10 for the plastic box, cardboard box, power adapter and network cable. Call it a little under $40 in manufacturing costs. Then give the manufacturer $10 profit, and the distribution channel another $10 in costs/profits.

But hey, if you know where I can buy DCM476 for less than $50, I'm all ears. I could sell thousands of them
Teddy Boom

2 edits

Teddy Boom to mediajedi

Premium Member

to mediajedi
said by mediajedi:

Cables and accessories are usually a little higher margin.

Ya, it is worth distinguishing that. Lots of accessory stuff is 300% margin markup. That comes from the same store, but it is a completely different business.

elitefx
join:2011-02-14
London, ON

elitefx

Member

Well, thanks guys. Just thought I'd throw it out there and see what the real deal was.............

random
@teksavvy.com

random to elitefx

Anon

to elitefx
Apple being one of the most profitable "lifestyle accessory" electronic manufacturer and they don't even make 300% margin on their iCrap.

There are all kinds of "teardown BOM" analysis on consumer electronics that shows the price estimate and they show you an idea of what the profit margin is instead of your baseless speculation.

e.g. iPad mini here: »www.isuppli.com/Teardown ··· als.aspx
Cost breakdown with detailed component values: »www.isuppli.com/Publishi ··· ipad.jpg

Retail: $329, Bill of Material + manufacturing: $198. The difference is made up of profit, distribution, marketing, business overheads etc.