Dealer margins are down for some and at their highest levels to date for others.
There’s plenty of pressure on margins right now, but there’s also some favorable trends to boost the bottom line.
On the minus side, some suppliers are raising dealer costs on products at a greater rate than the amount they raise the products’ minimum advertised price –MAP. So the dealer margins take a hit.
Then take 5 to 15 percent off margins for increased labor fees for employees to keep up with inflation and the long hours required during the pandemic.
Whittle margins down yet again for rising costs of shop goods (wire), and for extra freight fees, and it really adds up.
Among leading mid-sized chains, one merchant said his margins were down to 25 percent from 40 percent. But others said they’ve been able to raise prices and labor rates to keep up with the increases.
On the plus side, there’s fewer Internet discounters so dealers are free to charge above MAP and still remain competitive.
Buy-in deals on air shipping radios into the US can now cost as much as $70 for a single high end radio, depending on the supplier and the radio model. Some retailers pass those charges on to the consumer. Some don’t pass on the full amount.
As one dealer said, “Air freight erosion is taking place on a number of levels. We’re doing the $70 deal. It cuts into our margins, but not having the goods is worse. The choice is nearly impossible.”
Performance Auto Sound, WA has countered by keeping prices above MAP.
Foss Audio, WA said margins are actually better because “the Internet bottom feeders are gone,” according to Ed Weber. “The guys with two or three units to sell from their basement have disappeared because they can’t get product.”
“We’ve raised our labor prices so that we could compensate our employees more. And yes, prices have increased for sure, but we don’t have the really low Internet pricing, so we’ve eliminated our biggest downward price pressure. We’re able to sell the product for more and still be competitive. I’d say our margins are better than before,” said Weber.
Todd Hays of Columbus Car Audio, OH said gross margins have improved by 2 percentage points. “We’ve increased our selling price points, even above MAP, especially on source units. Most of the time, that’s to cover additional charges for air freight.”
Columbus Car Audio raised labor rates several months ago by about 20 percent and is looking at increasing them again. “Today I was ordering some shop supply type product for the bay and I’m starting to see huge increases again in that category. Spool wire that was $61 a few months ago is now $91,” Hays said.
