Exchange Rates, VAT, and Pricing of Euro Gear in US

pdub

pdub

New member
Joined
May 31, 2013
Messages
234
Long story short, if a European manufacturer posts a list price in Euros, including VAT, that seems to be adhered to at all price-posting dealerships in Europe, would it not be reasonable to expect the American distributor to list these goods 20% less (to exclude VAT, which we don't pay) in USD, though maybe adding back in no more than 10% for import taxes and shipping costs (expecting greater expense to ship to US than to ship within Europe). But basically costing less in USD than the listed VAT-incl. prices in Europe. Certainly not more.

[That might not have been such a great summary ...]

To elaborate, some fairly esoteric Italian gear has caught my eye. European pricing through the line-up is 11,400 Euro ($13k US) - 30,000 Euro ($34.2k), VAT incl. The US price list is $15k (13.1 Euro)-$37k (32.4 Euro). In other words, the US price list, which should be starting from a base 20% less than the European, is actually more than the VAT-incl. European price list. So a 19,400 Euro VAT incl. piece would be 15,600 Euro, VAT excl. (ie, 20% less), or $17,800 at current exchange rates. The US distributor lists this piece at $25,000, and the manufacturer doesn't see a problem with this.

I did a down/dirty look at a couple other smallish European manufacturers with limited US distribution and found no evidence of US pricing in excess of VAT-incl. European pricing.

Realizing it's a free market yada, yada, is my understanding of the underlying economics here correct?

Thanks
Parker
 
It is not unusual for distributers having to assume costs for setting up and maintaining warranty and repair for imported products. This is just one reason why pricing for Asian and European products is not just the difference in VAT.
 
still-one said:
It is not unusual for distributers having to assume costs for setting up and maintaining warranty and repair for imported products. This is just one reason why pricing for Asian and European products is not just the difference in VAT.
Click to expand...

Sure. That's why I was guesstimating a 10% bump from the VAT excl. exchqange-rate price. But am I wrong to think that the markup from approx. $18k to $25k seems excessive? The distributor/dealer knows I'm interested, knows I've done the math, knows I've confirmed US pricing with the manufacturer, but hasn't extended any sort of counteroffer.
 
In addition to the previously mentioned costs for importing audio gear from another country, there is another tier added in the distribution process which requires an additional layer of profit margin required in order to make it a successful business venture. It is common in the audio market to have significantly higher prices in export markets than in a manufacturer's home country, much more than the 10% bump you were thinking would be reasonable. Some imported brands in the US are double or more than their home market pricing. Some of the larger manufacturers have found it to be advantageous to maintain their own distribution operations in specific markets which allows them to maintain lower pricing than having to support independent distributors.
 
audio.bill said:
In addition to the previously mentioned costs for importing audio gear from another country, there is another tier added in the distribution process which requires an additional layer of profit margin required in order to make it a successful business venture. It is common in the audio market to have significantly higher prices in export markets than in a manufacturer's home country, much more than the 10% bump you were thinking would be reasonable. Some imported brands in the US are double or more than their home market pricing. Some of the larger manufacturers have found it to be advantageous to maintain their own distribution operations in specific markets which allows them to maintain lower pricing than having to support independent distributors.
Click to expand...

This is a small manufacturer, a virtually unknown brand in the US and as far as I know the distributor is also the only dealer. And as noted above I compared pricing on a couple other esoteric European brands and didn't find anywhere near this sort of markup. And I'm not seeing any similar markups in Australasia (but not many data points).

I remember when there was quite a delta between Japanese domestic pricing and cost of the same gear in the US. Luxman seems to have turned this around -- not sure about the others, particularly the smaller brands that might be more similar to the one I'm referencing (albeit anonymously).
 
pdub said:
This is a small manufacturer, a virtually unknown brand in the US and as far as I know the distributor is also the only dealer. And as noted above I compared pricing on a couple other esoteric European brands and didn't find anywhere near this sort of markup. And I'm not seeing any similar markups in Australasia (but not many data points).

I remember when there was quite a delta between Japanese domestic pricing and cost of the same gear in the US. Luxman seems to have turned this around -- not sure about the others, particularly the smaller brands that might be more similar to the one I'm referencing (albeit anonymously).
Click to expand...

this may well be your first of many problems if you take the leap. Something i discovered over the years, no matter how much I longed for a specific component from some obscure mfr, there are probably a dozen equivalents that will float your boat just as well. Steering clear will avoid much heartache and drama--esp since you're talkin five figures (not chump change)--for whatever it is you're in hot pursuit of. good luck.
 
puroagave said:
this may well be your first of many problems if you take the leap. Something i discovered over the years, no matter how much I long for a specific component from some obscure mfr, there are probably a dozen equivalents that will float your boat just as well. Steering clear will avoid much heartache and drama--esp since you're talkin five figures (not chump change)--for whatever it is you're in hot pursuit of. good luck.
Click to expand...

It's a pretty unique technology. Manufacturer is not a newcomer. Fair amount of good press worldwide (incl. US). But you're right, 5 figures is not chump change to take a chance on a product that may have limited resale value due to lack of awareness. What really gives me pause is the sense that there's a "rich American" upcharge. The same distributor does the same thing with a speaker line that he carries -- I backed away from that one a few years ago because of the pricing.
 
pdub said:
And I'm not seeing any similar markups in Australasia (but not many data points).
Click to expand...

Mark up in Australia is terrible - for a good number of products it is much cheaper to pay FULL RETAIL in Singapore & import direct - still pay all the Govt taxes & realise a sizable saving.
 
For most imported brands if you buy directly from a dealer within their home market then you will have no warranty support in your country. YMMV applies.
 
audio.bill said:
For most imported brands if you buy directly from a dealer within their home market then you will have no warranty support in your country. YMMV applies.
Click to expand...

Generally that is true - if you are buying a quality product - the chances of something going wrong under warranty are minimised - especially speakers.

And for that reason - I would "roll the dice" - but as I almost always buy "pre-loved & broken in" anyway - I mostly "roll the dice"
 
A few months ago I bought a Polish DAC which has had quite a buzz. Definitely not cheaper (in the 5 figures) it is sold directly from the factory and shipped in a Pelican case for safe arrival. There is reasonable charge for shipping and the company does has a few US dealers (I don't know the price in the US). The company lists their non-VAT included prices on their website with a notation to add 20% VAT if the purchaser is in the E.U. You need to pay through paypal and PP charges for Euro conversion from USD. So that is another way to do it if the manufacturer in Italy will ship to the US. If there are enough sales, then there could be a service center in the US set up by the manufacturer to handle repairs both in and out of warranty. That would be cheaper than having a distributor and dealership network. I had previously bought another piece of hardware manufactured in Switzerland which went through a well known US distributor to my dealer. That works also. In that case the manufacturer doesn't sell direct.

Larry
 
pdub said:
I remember when there was quite a delta between Japanese domestic pricing and cost of the same gear in the US. Luxman seems to have turned this around -- not sure about the others, particularly the smaller brands that might be more similar to the one I'm referencing (albeit anonymously).
Click to expand...

Ummmm.... accuphase has not turned it around. Makes my stomach turn when I hear what accuphase stuff sells for in Japan and really throughout Asia pacific region.


Sent from my iPad using Tapatalk Pro
 
Hounddog said:
Ummmm.... accuphase has not turned it around. Makes my stomach turn when I hear what accuphase stuff sells for in Japan and really throughout Asia pacific region.


Sent from my iPad using Tapatalk Pro
Click to expand...

and they will not turn around. I think Accuphase wants to project their products as "exclusive" and "luxuriuos" out side of their home region, to compete with US and European ultra high end brands. It's like in home country, Mcintosh vs. Bryston and outside region, Mcintosh vs. Gryphon, CH precision, Vitus. Seriously what the hell is wrong with them? Never seen such a company being so shamless and ruthless.
 
ben said:
and they will not turn around. I think Accuphase wants to project their products as "exclusive" and "luxuriuos" out side of their home region, to compete with US and European ultra high end brands. It's like in home country, Mcintosh vs. Bryston and outside region, Mcintosh vs. Gryphon, CH precision, Vitus. Seriously what the hell is wrong with them? Never seen such a company being so shamless and ruthless.
Click to expand...

McIntosh compete with Gryphon - Vitus - that's funny - not even in the same ball park.
 
How much is the VAT in the USA?

When I convert the euro price to dollar a Magico S1 Vast colour costs a little over $24.000 in the Netherlands. VAT is 21%.
 
puroagave said:
there are four States in the US that have 0% VAT or no sales tax: Delaware, Montana, Oregon and New Hampshire.
Click to expand...

Sales tax is collected by the retailer when the final sale in the supply chain is reached via a sale to the end consumer. End consumers pay the sales tax on their purchases. Businesses issue resale certificates to their sellers when buying business supplies/inputs that will be resold since sales tax is not due. Tax jurisdictions do not receive the tax revenue until the sale is made to the final consumer.



VAT (Value-Added Tax) is collected by all sellers in each stage of the supply chain. Suppliers, manufacturers, distributors and retailers all collect the value added tax on taxable sales. Suppliers, manufacturers, distributors, retailers and end consumers all pay the VAT on their purchases. Businesses must track and document the VAT they pay on purchases that will be resold in order to receive a credit for the VAT paid on their tax return. Tax jurisdictions receive the tax revenue throughout the entire supply chain as opposed to at the sale to the final consumer chain.
 
You must log in or register to reply here.
Back
Top