The Ethics and Economics of eBuying

[Dave B]

Folks, I have a dilemma that I hope you can help me with.

I have a big birthday coming up (5 oh!) and wanted to celebrate by buying a new piece of audio gear.

Originally, my plan was to go for a tube amp set up specifically for vinyl playback but after looking into this I found it was going to be both too costly and complicated to implement with only one set of speakers and a single listening room. I don't want to dismantle my surround system every time I listen to some LPs.

My second choice was to upgrade my current receiver (Denon AVR-3600) to the new AVR-5803. This new receiver has the following improvements over my current one : More power (always a good thing), DTS decoding, 2 sets of 6 channel analog inputs for DVD-A and SACD surround connection and, I believe, improved digital to analog converters.

So, here is my problem. This receiver has an MSRP around $4,300.00. From what I've found, most authorized brick and mortar and eStores sale it for around $4,200.00. A check of online stores on Yahoo shows prices as low as $2,817.00. However, Denon makes it very plain on their web site that they will not honor the warranty on equipment purchases made from an unauthorized seller.

So here is my question, why should I pay $1,400.00 more for a warranty? Even if I do have a problem and it cost $1000.00 to ship and repair I'd still be $400.00 ahead. My experience over the years has been that if a piece of equipment runs fine during the break-in period it will work until I'm ready to disown it.

My other question is, what is the profit margin on this type of equipment? If online stores can under price by over $1000.00 and obviously make a profit, how much are the authorized stores making on each one? It's a large sum, where does it go?

I hope someone from Red Trumpet, Analog Sounds or other store who regular lurk here will read and respond. I'm interested in the retail prospective.

I'm asking these questions because I find myself in somewhat of a moral tug-of-war. Do I save myself a considerable amount of money or support the manufacturer's dictates and dealer network in order to get the benefits of an authorized purchase? I like to support the authorized dealers and have the peace of mind that comes with a full manufacture's warranty but I'm afraid if it comes down to that I won't be able to afford it.

What's you opinion?

[rjp]

how long is the warranty?

if the warranty is only one year, save the money.

if 2-4 years it makes the decision a little tougher.

5 years or more, it may be worth extra money and piece of mind.


i have always been told by people that retail outlets would not offer the extended warranties if they thought consumers would have to use them. so, if i buy something with a one year warranty, and i am offered a three extended warranty for $100, i have to figure that the manufacturer and the seller figure i am good for at least 4 years! i never, ever buy them.

however, i always buy extended warranties on used cars, and i always end up ahead financially. cars are a totally different story.

tough decision, i agree.

probably not much help from me,

renny

[mudbone]

Hi Dave, I am making the same decision about the same piece of equipment with the same concerns.

As to the price differential, I wonder how these products can sell for so cheap at non-authorized Denon dealers. I mean somehow these have to be purchased from Denon for some type of low price. I saw a few 5803s on Ebay last week for $1500 using BIN. I thought, "these must be white van specials."

The high cost at authorized dealers is probably attributed to the fact that they have "showrooms" they have to pay for, commissions, and a certain type of cost snobbery. I've known people that buy expensive things so they can say they paid a high price or bought from a certain dealer. The dealers that do volume can charge a lower price and make profit on more units sold.

Thinking along your lines I've though pay the $2800+. If it breaks then any authorized dealer will fix it for a cost. But with my luck I'd get one that couldn't be repaired. I'm a month or so from a purchase and I'd like to see other's thoughts on this issue.

BTW, Happy Upcoming FIVE-OH!

mud-

[sgraham]

Not all eBay sales are from unauthorized sources.

OTO if you do buy from a "grey market" seller the equipment may have been set up for use in a country where the AC voltage is slightly different than it is in the U.S. (or wherever you live) which can have adverse sonic effects and shorten the life of the unit.

[Steve Hoffman]

It's the same with Leica cameras. $2500.00 from an authorized USA dealer. $1500.00 for the exact same camera bought gray market (imported into the USA from the far east.) Same EXACT product, but one is under warranty for three years and one isn't.

So, it's a gamble.

[-=Rudy=-]

I'd be interested to know if these items are grey market or not. Back in the 80's when i started buying more mail order goods, grey market was first sold with "warranty" (which usually meant a store's warranty), then a "US warranty" (just as worthless...since the store is in the US)...then the true non-grey-market goods would have a "manufacturer's US warranty" which to me would be mail order fraud if something else was sent or implied when I purchased the goods.

My big concern is about breakdowns. I agree--unless it's a Sony disc player (most I've owned have failed on me), anything I've bought has either failed very early, or has lasted for decades. For the huge savings on a receiver, I'd be willing to take the gamble.

But it's back to the grey market issue: if Pioneer is only selling these to authorized dealers, how in the heck are these eBay sellers getting them? Notice that a lot of them are on the coastlines, like NYC, California (San Francisco, San Diego...both "ports"), and even in Miami. And, how long have these sellers been around? Will they be there a month from now if the receiver suffers infant mortality? And do they represent their products as having full "manufacturers' warranties"?

That's a lot of money to shell out. I'd almost rather find a good online retailer where you might pay a bit more, but still pay under top-gouge retail.

My deal now, though, is to buy equipment used. Nothing new. A lot of electronics (especially larger brands) do not have a good resale value. I figure I might as well take advantage of it and either save a bundle, or spend the same amount and get a better model.

Agreed about the extended warranties. I agree they're worthless...they're pure profit for the retailer, since few units are probably returned out of the whole that are sold. But IF you still plan on one, at least go with a major reputable retailer. Again, if it comes to service something down the road, you want the company to be there.

I've never bought one for the cars either. Asking me to shell out $900 for a five-year extended warranty is pointless when I've only had to change the oils and replace plug wires and plugs. :D If someone offered a decent warranty, like 10 years/unlimited mileage, I might think about it. ;)

[Dave B]

Originally posted by rjp
how long is the warranty?

The manufacture's warranty is two years.
Some of the online stores indicate that the item is warrantied but I haven't contacted any of them to determine the terms or length.

I have purchased extended warranties on some things but have yet to ever use one. I agree that the stores would not be as eager to sale them if they were not profitable.

[SamS]

Dave,

I will go against the grain here and strongly urge you to purchase from your local store. If you find a store with it in stock, I'll bet you can get them to offer you one at $3200. Just find the right salesperson and be prepared to buy one if they offer you a fair price.

Even though this would be ~$500 more than a potentially grey-market piece, there are several things you should consider:
1) There are people raging all over about gear (esp. receivers) bought online that either never show up, come open, or have serial # modified. Why give yourself the headache?
2) You might find a store/salesperson with some knowledge on the unit that can provide set-up hints and tips.
3) Full warranty!
4) You can take it back if you decide that's not the piece you want. Try doing that with an online store (besides the big ones like Crutchfield where you pay full retail anyways).

[Dave]

I agree with Sam Dave. I've had many purchases where I've found the "grey market" price and gone to the retailer (with cash in hand mind you) and asked for a better price...and received it.

You'd be surprised how many retailers can't watch you walk out of their store with "real money" in your hands to be possibly spending it at their competitors. Give it a try, can't hurt at this point.:) The "real money" in your hands is the key my friend.;)

[mudbone]

Don't forget the sales tax.

Where I live it's 6.5%. So on $3200 we're talking $208. The shipping on these from some e-store is $40. So that's an additonal $168 (rather than the $208)

mud-

[Gary]

Cash does work wonders!

Tell them you are in a delema as you can buy it for "X" online and rather plunk down your $20.00's at their store - fo something reasonable.

They may try to make up some of the "lost profit" by trying to sell you over priced accessories....

I wonder how many of these online retailers are licensed dealers? Hmmmm.

Just a thought! :)

[Dave B]

Gary I assume that none of the sellers with a price under $3000.00 is authorized by Denon.

One of my problems is that the nearest audiophile stores are at least an hours drive or better. Also many are in New York City where there is obviously a big selection but higher sales tax. In addition unless I drive down and pay a days wage to park (if I can find a spot), I'm stuck lugging this monster home on the train. Another problem in the City is that any place that might give me a real "deal" is likely to be no more authorized that these e-tailers.

I appreciate all the comments so far. All good advice. I'm having a hard enough time convincing my wife that I should spend $3000.00 to replace a receiver that to her is practically new and sounds, "fine to me". Another grand will most likely push this out of my reach. Maybe that's not altogether bad. Every year brings new stuff. I do find though that as my taste become more critical there aren't nearly the bargains as when I started on my stereo buying quest with the purchase of a Wards Airline 8Track receiver and BSR mini-changer. Ah those were the days!

[Gary]

Have you looked at selling the old receiver to offset the cost of the new? Or even trading it in - for a credit on a new one. I'm sure there is a place in NYC that'll do this.... we have a few in Toronto!

Have you looked at Steve's Home Page for Authorized Sellers? I don't know if you'd find any..... just another thought.

Check the Denon site to find a list of dealers. Maybe some of these will have online / web sales at a great price.

Does Red Trumpet sell hardware? Can they order one for you (special order)? Might be worth an e-mail.

Good luck, Dave! And - Happy Birthday (eventually!).

[SamS]

I'll expand a bit on what Dave said. Yes, if you plan on buying from a real store, go with cash (or cc) on hand to make the decision. Let the salesperson know you're serious. Try not to waste their time by trying to get their "best price" and heading immediately out the door to "do some more research" :)

Sales tax is a concern, yes. But, calls around to the unauthorized places will get you some nasty shipping charges. I've heard of $100+. They've gotta make some profit somewhere!

[dwmann]

If you're not in a hurry and have cash in hand and are willing to do a little shopping, go to authorized dealers, show them the money, and tell them what you're willing to pay. The price can be absurdly low provided it is above cost. DON"T be obnoxious about it. When they aren't interested, ask them to call you when they're willing to sell at your price. Keep checking with them periodically. Be nice and laugh when you ask like you KNOW they'll say NO. Eventually, someone will sell. I've purchased 2 Mcintosh amps new in box from authorized Mac dealers this way at just a little above dealer cost. And it's hard to get ANY kind of discount on a Mac.

You're talking about a large purchase. Eventually most stores need a quick infusion of a couple of grand to make their numbers look better, or a salesman will need the sale to hit a commission level. And they will offer you a deal if they know you are serious. Of course, it will happen in their time, not yours, and you have to have the cash when they call you. But you can get some unbelievable deals this way. Maybe LESS than $2800.

[lv70smusic]

Just a word of caution as to seller's representations regarding warranties:

I bought something off ebay from a seller who had an online store. The store's website went on and on about their in-house warranty, assuring buyers that they would handle all repairs for the duration of the manufacturer's original warranty period. Stupidly I bought something from them and THEY DID NOT RETURN MY PHONE CALLS OR EMAILS ASKING ABOUT SERVICE, though they had returned my call promptly BEFORE the sale. Fortunately the manufacturer honored its own warranty even though they didn't "recognize" the seller as an authorized dealer.

Originally posted by Dave B


The manufacture's warranty is two years.
Some of the online stores indicate that the item is warrantied but I haven't contacted any of them to determine the terms or length.

I have purchased extended warranties on some things but have yet to ever use one. I agree that the stores would not be as eager to sale them if they were not profitable.