I’ve commented in this blog before about the marketing structure of the piano industry and how much the average piano price is inflated by factors independent of the manufacturing process. To quote from a previous post,
“The cost of a Stuart piano accurately reflects production, not marketing, advertising or retailing costs.”
I should know. I bought one. I, like others of my ilk, paid the full price for the piano. It was not discounted in any way. So it was of interest when I came across a discussion of piano pricing on the Pianoworld fora over the last couple of days. I think that readers will have some idea of my overall view on these fora from previous posts. Particularly when it comes to discussion of high-end pianos like the Stuart, the overall signal-to-noise ratio is generally very low. This is basically due to the number of people who have a specific axe to grind about particular brands, and also the number of professional dealers and technicians who have their own commercial imperatives when it comes to speaking their mind in a public forum, no matter how knowledgeable and informative they may be in matters of a more general nature. Even so, there was one post which I thought clearly enunciated a number of relevant factors, and I quote (OK, selectively but not detrimentally) here.
“It is been a widely recognised industry standard for decades that piano stores need to average somewhere around 40% gross margin to survive and grow.” This may even be conservative, particularly when it comes to high-end pianos, which ‘move’ much more slowly and erratically than what might be called the ‘lower-end’ brands. Any attempt to substantially discount these high-end pianos essentially means that the dealer is subsidising these and therefore cannibalising his higher profit stock, which raises the question as to why he or she has those high end stock in the first place.
“There is a very strident and vocal contingent in PW that would love nothing better than to drive every piano dealer from the planet. They believe it is their charge to make sure that every sale of a new piano goes down at as close to wholesale cost (or below) as possible. To them a retailer making a profit is an obscenity.” This, to me, is rather a jaundiced view, but it does illustrate the opposite end of the scale, namely who needs the middleman? What is the purpose of having one, and what value do they add?
Well, it’s not so much that as what the public expects from them.
• Highly visible and convenient (often freeway) locations
• Acres of pianos to select from
• Multiple units of the same model and finish to select from
• All instrument in perfect tune and preparation
• Back up stock to be delivered “in the box.”
• Proper and conducive acoustic environments
• Donations of free recital space or free loaned instruments for recitals and concerts.
• The freedom to come in a play for hours on end, even pounding tunings askew.
• Educational opportunities on site
• Displays of sheet music, books, and software
• Extended evening, weekend, and even holiday hours
• Clever and frequently updated websites
• Yellow page ads
• Print ads in major papers, radio, and even local TV
• Free tuning(s) post delivery
• Free delivery (even same day)
… all of which of course costs money. The problem is that potential piano buyers expect the same service features as other retail goods, for example, cars. The first four points above can relate to this and many other industries as well as the music industry.
Even worse is the pricing structure offered by some manufacturers, which not unnaturally give the dealer a better deal for more pianos. An example is:
“Here is an example of prices for a 6' grand:
(prices have been altered slightly to protect company). These prices are almost a year old.
Retail: $27,100
Wholesale: $13,540
Consortium: $9,024
So you can see the retail price is nearly 3 times the dealer price. This allows dealers to mark the piano up 100% and still sell it for what appears to be 1/3rd off retail.”
So the actual production cost of many of these pianos may be as low as (or lower than) 50% of the retail cost. Take into account transport, tuning, advertising, promotions etc and you will begin to understand that the total cost of providing a piano to the door of the purchaser by the dealer is considerably higher (double or more in many cases) than the wholesale cost ex factory.
What would happen if Stuart pianos were sold via this structure?
• What impression does discounting a high-end piano (of whichever brand) have on the brand image? Not a positive one, certainly.
• What effect does it have on the resale value? Not a positive one, certainly.
Now of course, high-end pianos may not attract the same percentages, but the principle still holds.
“It seems like the same old game: Jack the price way up so you can give a great discount and still make money. It's always telling that as you start going up the chain of piano quality, the discounts get smaller.”
Has anyone noticed that the ‘street price’ of much music gear is invariably much lower thn the RRP? Hmmm…
That is why Stuart & Sons eschew the dealership mechanism.
1) Stuart pianos are normally sold through the factory
2) People who buy them don’t need the fancy services and choices afforded by dealers who have to add substantially to the cost of the piano just to keep themselves in business and to provide facilities for those who want their hands held during the purchasing process.
3) Pianos and pianists are not static but adjust to each other over a period of time (I know that for a fact). The trick is to trust the brand, its quality and reputation.
4) Whilst it may seem that one pays premium prices for Stuart pianos, in fact the price reflects virtually 100% manufacturing costs and in fact is very good value when one compares these pianos against other brands which are still forced to submit to the old way of doing things.
The result is the best of all worlds.
• The challenge to adapt and reinvent.
• A piano of hand crafted quality which invariably exceeds all expectations of it
• A piano which does not feed the finances of those people who are not relevant to the design and manufacturing process
• A piano which, as an investment, keeps its value and indeed appreciates over time
I keep saying that you cannot say that about any other brand of piano.
The strategy is right. If ‘high-end’ pianos need to have dealers to sell them, then I would postulate that they’re not really high-end at all.
Another dastardly marketing trick exposed.