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Stephen Parker



Joined: 28/02/05
Posts: 180
Loc: Falmouth, Cornwall
Re: Digital Village new [Re: Peter Conz Connelly]
      #555125 - 10/12/07 09:53 AM
Hi - i've only had a small chance to scan through so answering the last question first - if you move abroad and want to get support (using Cubase as the example), you'll find that the distributor will ask you for a small fee to register an item bought outside it's territory - in the UK its £25.

Back to the pricing issue - a short while ago some of our manufacturers would issue SRP's with the same € & $ price, as the dollar has slipped, we're now seeing a differential and I would imagine that it's taking time for this to shake through - it takes a long time for prices to rise, if they ever do.

Anyway - back to work..

Stephen Parker
Music Technology Manager
Arbiter Group


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TAKEN.BALL.GONE.HOME
posting's fun


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Re: Digital Village new [Re: James Perrett]
      #555127 - 10/12/07 09:59 AM
Quote James Perrett:

There was an advert in there from a card handling company offering rates of 1.5% for credit cards and a fixed fee (something like 30p) for debit cards. As I understand it, Maestro is Mastercard's name for a debit card so the fee for a Maestro transaction should be fixed.



It still comes down to the volumes and the contract - I bought a bottle of water at Liverpool "John Lennon" Airport on Friday for about a quid and they happily took Maestro. Other places impose a minimum spend of ten quid.

I requested information and quotes from a couple of companies' Merchant Card Service divisions a few years back (and compared to PayPal). I don't remember the detail now, but there were sliding scales according to the transaction amount, and bandings which favoured high volume retailers. Debit cards invariably worked out cheaper than credit cards.

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Peter Conz Connelly
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Joined: 17/09/02
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Loc: Tyne & Wear, UK
Re: Digital Village new [Re: Stephen Parker]
      #555132 - 10/12/07 10:10 AM
Quote Stephen Parker:

Hi - i've only had a small chance to scan through so answering the last question first - if you move abroad and want to get support (using Cubase as the example), you'll find that the distributor will ask you for a small fee to register an item bought outside it's territory - in the UK its £25.




Sorry to be pedantic, but what if I was working abroad for a short time, i.e. 6 months at a time and needed to come back and forth?

In general, £25 aint a lot of cash but it seems a lot for something you technically 'should' already have, regardless of location. Saying that though, the last time I contacted Steinberg for Tech Support was... Never!

It's nice to know it's not mandatory and if you REALLY do need it, it's not overly expensive.

Cheers,
Peter

--------------------
Composer, Songwriter, Producer, Sound Designer
www.peterconnelly.com


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Stephen Parker



Joined: 28/02/05
Posts: 180
Loc: Falmouth, Cornwall
Re: Digital Village new [Re: Peter Conz Connelly]
      #555136 - 10/12/07 10:17 AM
Hi Peter - if i were you then i'd leave it unless I needed to get the support/service (i.e. transferring licences from a broken dongle etc).

Cheers

Stephen Parker
Music Technology Manager
Arbiter Group


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Re: Digital Village new [Re: Peter Conz Connelly]
      #555145 - 10/12/07 10:57 AM
I'll just bring a couple of other points to the table as I'm too tired to actually get into the whole debate here...

The idea of treating the whole world (or whole 'developed' world, say) as one market has limited application. The EU is a big trade bloc, sure. It imposes its own import tariffs on most products. It imposes VAT on most products. It is not quite the same homogeneous trading area as the US. For example, there are a whole range of currencies, languages, legislations, shipping companies for starters. Products need to be CE marked. Distributors have to observe minimum wage and working time limits for staff, and provide for decent holiday, sickness and pension entitlements - and cover the local income and corporation tax, and social security costs. In short, it is more expensive to trade in Europe - whether that's a good or bad thing, net.

The notion of an ideal market always finding the right price requires that we are comparing like for like - that we are talking identical, commodity goods essentially. And this surely only holds water when talking about things which sell in sufficient volumes to escape the 'noise' of small numbers.

Sorry, I'm only a humble engineer, not an economist. But what applies to generic computer peripherals doesn't necessarily hold for say DAW control surfaces or ribbon microphones...

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hifistud2



Joined: 12/02/06
Posts: 795
Loc: Near Sunderland, UK
Re: Digital Village new [Re: Stephen Parker]
      #555147 - 10/12/07 10:59 AM
Quote Stephen Parker:

Hi - i've only had a small chance to scan through so answering the last question first - if you move abroad and want to get support (using Cubase as the example), you'll find that the distributor will ask you for a small fee to register an item bought outside it's territory - in the UK its £25.[/qiote]

Possibly becasue Steinberg has never heard of International Warranties - like Sony's kit carries, for example.

Quote:

Back to the pricing issue - a short while ago some of our manufacturers would issue SRP's with the same € & $ price, as the dollar has slipped, we're now seeing a differential and I would imagine that it's taking time for this to shake through - it takes a long time for prices to rise, if they ever do.




When IBM made its PCs in the US and shipped 'em over here, there was, perhaps, some justification in making the figures the same and the currency sign different ($xx=£xx). But when product comes from Japan, China, Taiwan or Germany, there's no justification. And the prices in the US won't rise - their consumers won't wear it, and neither will the retaillers.

However, the way you word it is interesting... are we saying here that the price is set in pounds and then translated to dollars? Or is it in Yen, translated to dollars and then a sign change for pounds? Or - nd I suspect this is the true one - is it just what the market will bear?

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Hugh RobjohnsAdministrator
SOS Technical Editor


Joined: 25/07/03
Posts: 22131
Loc: Worcestershire
Re: Digital Village new [Re: Steve Hill]
      #555148 - 10/12/07 11:05 AM
Quote Steve Hill:

mic technology was pretty much settled in the 1930s and has not evolved since.




Er... A lot of Americans seem to believe that, and perhaps it's not surprising that you do too -- but it is complete and utter nonsense.

Just a few significant developments of the top of my head that have happened since the 1930s:

Neumann's extremely high dynamic range digital microphones

The phenomenal development of electret designs by the likes of DPA and AKG

Sennheiser's ultralow distortion symmetrical capsule designs

Audio Technica's development of highly directional mics through the use of multiple capsules and digital delays.

Royer's electronically buffered ribbons (now copied by several others)

The Soundfield concept and it's recent tranfer into the digital domain

Crowley and Tripp's new ribbon materials that allow safe placement in kick drums!

Sanken's multicapsule array short gun microphones

The huge development in compact microphone designs by the likes of Schoeps, Neumann, Sennhesier and others.

Massive new advances in time domain controlled arrays for stereo and surround application from the likes of Trinnov (and others)

And other developments yet to see practical audio mics, but already in use in industrial applications including optical and hot-wire systems.

Without the mic manufacturers investing in R&D to develop this stuff, we'd still be struggling with stupidly noisy capacitor mics and feeble dynamics with no top end -- which is all that was around in the 1930s!

You'll note that the majority of the developmetns I've listed above have come from the 'traditional' manufacturers you dismiss so quickly!

Hugh

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hifistud2



Joined: 12/02/06
Posts: 795
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Re: Digital Village new [Re: TAKEN.BALL.GONE.HOME]
      #555150 - 10/12/07 11:07 AM
Quote JimiQ:

The idea of treating the whole world (or whole 'developed' world, say) as one market has limited application. The EU is a big trade bloc, sure. It imposes its own import tariffs on most products. It imposes VAT on most products. It is not quite the same homogeneous trading area as the US.

Sorry, I'm only a humble engineer, not an economist. But what applies to generic computer peripherals doesn't necessarily hold for say DAW control surfaces or ribbon microphones...




It holds true for every manufactured product:

Cost of raw materials = X
Cost to manufacture = Y
Cost to ship = Z
Duties,taxes, levies = W

For any given market the base cost, then, is X+Y+Z+W, where X,Y and Z are costants, and the variable is W.

Judging by some prices, W can exceed the total of X,Y and Z - but only where the country is the UK. In truth, we know what the duties and taxes here are - and they are not that far removed from those in the US.

All of which means that prices are being loaded for the UK - it really is that simple.

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Hugh RobjohnsAdministrator
SOS Technical Editor


Joined: 25/07/03
Posts: 22131
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Re: Digital Village new [Re: Peter Conz Connelly]
      #555152 - 10/12/07 11:11 AM
Quote Conz:

It simply DOESN'T cost any more to ship to the UK than it does the US. The days when people actually believed that are long behind us!




I'm told that's really not the case -- it does cost more to ship in quantity to some places than others, depending on relative lcoations.

But the point is that the selling price is not just about the cost ex-factory. Every business has overheads which have to be factored in before you can arrive at the price a business can afford to sell to its local customers.

There's internal transport from the arrival port to the retailers. We know that transport costs in the US are a fraction of those in the UK/Europe. The there's warehousing and retail outlet ground rates -- both of which are considerably higher in the UK than in the US because this is a tiny overcrowded country and the US isn't.

It's just not as simple as you are making out.

I know a lot of UK retailers and distributors in this business, and none of them own mansions and drive about in rollers. Most struggle with cash flow on a regular basis. So it really isn't the case in general that people are being ripped off in the UK by the existing supply chain.

I think I'd point the finger more towards those who control the taxes in this country, personally.

hugh

--------------------
Technical Editor, Sound On Sound


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Hugh RobjohnsAdministrator
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Re: Digital Village new [Re: hifistud2]
      #555156 - 10/12/07 11:22 AM
Quote hifistud2:

Cost of raw materials = X
Cost to manufacture = Y
Cost to ship = Z
Duties,taxes, levies = W

For any given market the base cost, then, is X+Y+Z+W, where X,Y and Z are costants, and the variable is W.




You have left out the cost to run a business, and taht is a variable which is definitely higher in the UK and Europe than in the US.

Hugh

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markhodges



Joined: 07/01/07
Posts: 344
Loc: München
Re: Digital Village new [Re: James T Bigglesworth]
      #555158 - 10/12/07 11:26 AM
Quote Paul Johnson Rogers:

Just a little story. About fifteen years ago I decided to set up my studio in a high street location. I wanted to separate work from home, and it was a novelty to get up in the morning and leave the house. I thought that, given the location, I could start selling gear as a sideline, so I got the Yamaha rep round for a chat. It transpired that, on my projected sales, Yamaha's trade prices to me would actually be more expensive than Turnkey's retail prices! Not a huge surprise in retrospect, but an eye opener when it comes to the realities of music retail in this country.



I once watched the manager of a shop phone a supplier (UK arm of a big japanese firm) and rant at them when I asked if he could price match something. Turned out I could get it for less than him!


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John Willett
Sound-Link ProAudio


Joined: 07/03/00
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Loc: Oxfordshire UK
Re: Digital Village new [Re: hifistud2]
      #555165 - 10/12/07 11:58 AM
Quote hifistud2:

The point is as I've just made - if Yam etc can afford to have its it sold at $XX in the US, it can afford to have 'em sold at the exact same price over here.




Total rubbish!

Assuming a US and UK distributor buy at the same price........

The distributor needs to pay staff, have a competent service dept., have office and warehousing premeses, pay the UKs exorbitant business tax, pay, pay, pay - as well as making a profit.

From what I have seen there is nothing at all about "profiteering" or keeping prices high in the UK - just that a business needs a certain profit margin to survive and the dealer price is worked out on the cost of goods + cost of running the business - nothing else.

Yes, the "retail" price includes a dealer margin and the dealer can sell for what he wants.

The difference between the US and UK price for European manufactured goods is purely down to the lower cost of running a business in the US - don't forget there is no National Health there and everyone has to buy insurance (so no employers contribution. etc.).

Some manufacturers also manufacture in the USA for the US market (Sennheiser certainly do, for some products) which would also affect the price.

And checking the price of a stereo set of MKH 8040 at $2,500 street price and £1,395 UK list price (I don't know the UK street price) it's not very far apart.

--------------------
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President - Federation Internationale des Chasseurs de Sons


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thenaturallevel



Joined: 28/02/07
Posts: 1211
Re: Digital Village new [Re: Hugh Robjohns]
      #555166 - 10/12/07 12:00 PM
Quote Hugh Robjohns:

Quote Conz:

It simply DOESN'T cost any more to ship to the UK than it does the US. The days when people actually believed that are long behind us!




I'm told that's really not the case -- it does cost more to ship in quantity to some places than others, depending on relative lcoations.

But the point is that the selling price is not just about the cost ex-factory. Every business has overheads which have to be factored in before you can arrive at the price a business can afford to sell to its local customers.

There's internal transport from the arrival port to the retailers. We know that transport costs in the US are a fraction of those in the UK/Europe. The there's warehousing and retail outlet ground rates -- both of which are considerably higher in the UK than in the US because this is a tiny overcrowded country and the US isn't.

It's just not as simple as you are making out.

I know a lot of UK retailers and distributors in this business, and none of them own mansions and drive about in rollers. Most struggle with cash flow on a regular basis. So it really isn't the case in general that people are being ripped off in the UK by the existing supply chain.

I think I'd point the finger more towards those who control the taxes in this country, personally.

hugh




This isn't true for the desk I imported from the US. The UK dealer basically did the same as me. Bought the desk direct from Omnirax (for cost/dealer price)and then shipped it into the UK. They then doubled the price in dollars and then converted into £s. They have overheads sure, however, I don't see it justifying doubling the price. A $750 dollar desk became a £1500 desk.


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John Willett
Sound-Link ProAudio


Joined: 07/03/00
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Re: Digital Village new [Re: Hugh Robjohns]
      #555169 - 10/12/07 12:03 PM
Quote Hugh Robjohns:


I think I'd point the finger more towards those who control the taxes in this country, personally.





Nail - head - knocked.

--------------------
John - Sound-Link ProAudio
President - Federation Internationale des Chasseurs de Sons


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Peter Conz Connelly
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Joined: 17/09/02
Posts: 2194
Loc: Tyne & Wear, UK
Re: Digital Village new [Re: Hugh Robjohns]
      #555179 - 10/12/07 12:24 PM
Quote Hugh Robjohns:

Quote Conz:

It simply DOESN'T cost any more to ship to the UK than it does the US. The days when people actually believed that are long behind us!




I'm told that's really not the case -- it does cost more to ship in quantity to some places than others, depending on relative lcoations.

But the point is that the selling price is not just about the cost ex-factory. Every business has overheads which have to be factored in before you can arrive at the price a business can afford to sell to its local customers.

There's internal transport from the arrival port to the retailers. We know that transport costs in the US are a fraction of those in the UK/Europe. The there's warehousing and retail outlet ground rates -- both of which are considerably higher in the UK than in the US because this is a tiny overcrowded country and the US isn't.

It's just not as simple as you are making out.

I know a lot of UK retailers and distributors in this business, and none of them own mansions and drive about in rollers. Most struggle with cash flow on a regular basis. So it really isn't the case in general that people are being ripped off in the UK by the existing supply chain.

hugh




Hi Hugh,

This is why I'm sure it is beneficial for companies (and their customers), such as NI, to sell direct just as Sounds Online US and Sounds Online Europe do. Their prices are the same, regardless. Obviously this isn't good for the retailers, but if a UK supplier, at the end of the chain, has to up their price, just to keep their business above water, then, unfortunately, I really can't see them surviving much longer.

More and more people, "post google world", are looking for cheaper and alternative means of making a purchase.

Maybe if some masterplan was devised to equal the economy then everyone will benefit in the long run. It sounds like, under the current circumstances, it's a complete struggle which, to me, spells out something really needs to be done other than charge more! People just aren't buying this (pardon the pun) anymore.

I'm not, for one minute, pretending to know anything about economics... as I don't... what I do know is I strongly disagree with how thing are and sure there is an alternative & more appealing way of dealing with this.

Cheers,
Peter

--------------------
Composer, Songwriter, Producer, Sound Designer
www.peterconnelly.com


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markhodges



Joined: 07/01/07
Posts: 344
Loc: München
Re: Digital Village new [Re: thenaturallevel]
      #555183 - 10/12/07 12:35 PM
Quote thenaturallevel:


This isn't true for the desk I imported from the US. The UK dealer basically did the same as me. Bought the desk direct from Omnirax (for cost/dealer price)and then shipped it into the UK. They then doubled the price in dollars and then converted into £s. They have overheads sure, however, I don't see it justifying doubling the price. A $750 dollar desk became a £1500 desk.




You said yourself in an earlier post you saved £300 after taxes and shipping. Lets assume it costs the importer the same amount to get it here, less the VAT which they can reclaim (about £65 on $750). From that £365 deduct the cost of office space, telephone calls to the US, heating, warehousing, office computers & machines and so on.

Lets say there is £300 left after expenses. To turn that into someones wage you need to pay around 12% employers NI, 12% employees NI and either 22% or 40% income tax.
Alternatively if it's treated as profit and taken as a dividend by shareholders they'll pay 19% corporation tax and 32.5% income tax. Either way, the take-home benefit to someone somewhere of importing your desk for you is going to be around £150, for maybe a days work spent dealing with the supplier, customs, shipping and potentially supporting you in the future. It's a reasonable living, sure, but it's hardly bare-faced greed.

This is where volume wins. If you are importing 10 or 100 or a thousand, you *might* get a 5% lower price to start with, but the per-unit costs will be much lower, maybe even only 5% of a single unit. Even so, the saving, if passed on, is only in the region of 10%.

Edited by markhodges (10/12/07 12:54 PM)


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Hugh RobjohnsAdministrator
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Joined: 25/07/03
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Re: Digital Village new [Re: Peter Conz Connelly]
      #555184 - 10/12/07 12:35 PM
Quote Conz:

This is why I'm sure it is beneficial for companies (and their customers), such as NI, to sell direct.




It's a decision for the manufacturer. Many manufacturers don't want to get involved selling to the end user. They don't want all the hassle that comes with individual sales to people, they prefer dealing with a few distributors.

Quote:

More and more people, "post google world", are looking for cheaper and alternative means of making a purchase.




Yes, they are, and it is quite understandable. The question is whether it is realistic in the long term, and how such a change in behaviour will affect the market and the supply chain. Things will obviously be forced to change. That is inevitable. But do the short term price savings warrant the potential long term damage? Many of us fear not, but who knows.

hugh

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Technical Editor, Sound On Sound


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Hugh RobjohnsAdministrator
SOS Technical Editor


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Re: Digital Village new [Re: markhodges]
      #555187 - 10/12/07 12:47 PM
Quote markhodges:

Either way, the take-home benefit to someone somewhere of importing your desk for you is going to be around £150, for maybe a days work spent dealing with the supplier, customs, shipping and potentially supporting you in the future. It's a reasonable living, sure, but it's hardly bare-faced greed.




A very well reasoned argument that just highlights the reality of the situation. As you say, hardly bare faced greed.

hugh

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Technical Editor, Sound On Sound


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TAKEN.BALL.GONE.HOME
posting's fun


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Re: Digital Village new [Re: Hugh Robjohns]
      #555189 - 10/12/07 12:55 PM
Quote Hugh Robjohns:

The question is whether it is realistic in the long term, and how such a change in behaviour will affect the market and the supply chain. Things will obviously be forced to change. That is inevitable. But do the short term price savings warrant the potential long term damage?




Edward de Bono on "Ludecy":
Ludecy (i)
Ludecy (ii)

It's his own made-up word, but would seem to be appropriate here...

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thenaturallevel



Joined: 28/02/07
Posts: 1211
Re: Digital Village new [Re: markhodges]
      #555190 - 10/12/07 12:58 PM
Quote markhodges:

Quote thenaturallevel:


This isn't true for the desk I imported from the US. The UK dealer basically did the same as me. Bought the desk direct from Omnirax (for cost/dealer price)and then shipped it into the UK. They then doubled the price in dollars and then converted into £s. They have overheads sure, however, I don't see it justifying doubling the price. A $750 dollar desk became a £1500 desk.




You said yourself in an earlier post you saved £300 after taxes and shipping. Lets assume it costs the importer the same amount to get it here, less the VAT which they can reclaim (about £65 on $750). From that £365 deduct the cost of office space, telephone calls to the US, heating, warehousing, office computers & machines and so on.

Lets say there is £300 left after expenses. To turn that into someones wage you need to pay around 12% employers NI, 12% employees NI and either 22% or 40% income tax.
Alternatively if it's treated as profit and taken as a dividend by shareholders they'll pay 19% corporation tax and 32.5% income tax. Either way, the take-home benefit to someone somewhere of importing your desk for you is going to be around £150, for maybe a days work spent dealing with the supplier, customs, shipping and potentially supporting you in the future. It's a reasonable living, sure, but it's hardly bare-faced greed.

This is another place where volume wins. If you are importing 10 or 100 or a thousand, you *might* get a lower price to start with, but the real benefit is that per-unit costs will be much lower.




I doubt the paid the same price I did in the first place. I agree that volume pays in this case. However, I don't see doubling the price in £s showing any great thought as to how much the desk costs in real terms i.e wages; floor space rent; heating etc. The way I looked at it is they were charging £1500, or effectively $3000 dollars, for a desk that cost $300 - $350 n the US. Ok the exchange was in my favour but it was in the UK dealers favour as well.


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dubbed



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Re: Digital Village new [Re: Hugh Robjohns]
      #555191 - 10/12/07 01:02 PM
Great thread - something I've thought about for some considerable years.

I stand on both sides of this fence - I've extensive experience in a manufacturing/distribution company in Europe which shall remain nameless, and I also buy stuff for my small home studio occasionally.

To oversimplify - there are really two ways to do international distribution.

1 - Take all your costs globally including cost of manufacturing the product and shipping it everywhere, and divide them into every product sold, and then make the cost approximately equal worldwide. This means markets where product *could* have been sold cheaper, will end up more expensive to subsidise the markets that are harder to get to.

2 - Take your unit costs and add on the local cost of landing the product and supporting your supply chain in each territory. This means you will get potentially large differences between some countries.

In an ideal world, everyone would be following model '1'. There are a good few reasons why not everyone does. Primarily, it's insanely complicated, nearly impossibly so. In some countries you have manufacturer 'direct' to customer. In some countries you may go manufacturer-dealer-customer. In some countries you may go manufacturer-distributor-dealer-customer. You have to manage every one of these possibilities, in every single country worldwide, make sure that everyone along the way gets a viable margin (otherwise everything stops) - and ensure that every customer pays roughly the same.

On top of the multiple different steps you may have in many countries, you then have to cope with exchange rates which may be sliding in different directions all at once, duty which is different all over the world, and taxes which are both different and occasionally variable. Steve - your assertion that distributors should simply 'hedge' against moving exchange rates is very much wide of the mark, to put it mildly!! To take the almighty dollar as an example - it has now been significantly on the slide for an extended period of time. This means that if you manufacture outside dollars, but sell in them - your revenue from the US market is decreasing all the time, and it's absolutely out of your control. Imagine if every week your customers paid you 1% less, and you didn't know how long it was going to continue to drop! You can guess things may slide a little bit, but there are limits - there is no effective hedge against a protracted movement of this type. On the other hand, if you are a US company with European facilities, your European operations are currently getting more and more expensive (without you doing anything to cause it!) as everything is accounted for in dollars. Lower budgets, lower advertising, fewer special offers, etc etc.

Plus, 'hedging' as you refer to would basically entail making the prices artifically high in the first place, to protect the manfucturer against unseen fluctuations - and high prices are exactly what you are asking manufacturers to *not* do!

Quote:

I repeat my open question to Yamaha, Sennheiser et al... why will they not sell to me at US retail prices?




I'm sure you can find a way to purchase at US retail prices - just get a mailing address in the US - it can be done.

The most common misunderstanding that customers have, is seeing US$ prices on websites, and directly equating that via conversion rates with £ or € prices here. As has been pointed out many, many times, Sterling and Euro prices (even on websites) typically include shipping, duty, and VAT - the cost of getting that product to where it is, and where it is going. US prices typically do not include duty (which you will pay), do not include VAT (which you will pay) and so on.

I'm *not* saying there aren't differentials, even after you take all that in to account. Some companies are better, some companies are not as even. But the fact that it's a horrifically complicated and difficult issue does not mean that companies are out to rip off the consumer.

Quote:

The consumers are going to win this one - be under no illusions. It's only a matter of timing.




Well I'd dispute that, and your assertion that the consumers 'won' with the victory of supermarkets over small shops. The intangible social costs of the destruction of the traditional high street have yet to be fully realised. And enjoy your edge-of-town supermarket when peak oil hits (sorry - that's for another thread!)

As for my small micro-studio - I do buy occasionally on price, but I try to balance it with service. More and more, I want to purchase from a shop that will look after me if I need help, plus I want to support them before their knowledge and support is lost forever.

So, I understand what you mean Steve, but I'm with Hugh on this - the dealers have provided a fantastic service to customers and manufacturers for a long time, and doing globally uniform pricing is not as simple a matter as you paint it.

Each to their own - just rememember that every time you purchase studio equipment, you make a small choice about what the industry will look like in the future.

cheers,

d


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The Red Bladder



Joined: 05/06/07
Posts: 2524
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Re: Digital Village new [Re: Peter Conz Connelly]
      #555213 - 10/12/07 02:09 PM
The question I have agonized over, these many years, is one that I've never read about in any philosophical treatise, and yet I have found it has applied to countless situations and conversations overheard in bars, repair shops, sporting events, political debates, forums, etc.

The question: Do two people who don't know what they are talking about know more or less than one person who doesn't know what he's talking about?

We have been discussing this HERE at our off-topic forum.

This thread has brilliantly answered that question, once and for all!


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hifistud2



Joined: 12/02/06
Posts: 795
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Re: Digital Village new [Re: Hugh Robjohns]
      #555217 - 10/12/07 02:23 PM
Quote Hugh Robjohns:

Quote hifistud2:

Cost of raw materials = X
Cost to manufacture = Y
Cost to ship = Z
Duties,taxes, levies = W

For any given market the base cost, then, is X+Y+Z+W, where X,Y and Z are costants, and the variable is W.




You have left out the cost to run a business, and taht is a variable which is definitely higher in the UK and Europe than in the US.

Hugh



You're missing the point - it's cheaper to buy at retail in nthe states than it is to buy trade in the UK. British retaillers are not being supplied at the same price as their US cousins... That is the point.

--------------------
[url=http://www.facebook.com/pages/hifi-studios/117322741632389[/url]


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Peter Conz Connelly
active member


Joined: 17/09/02
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Re: Digital Village new [Re: markhodges]
      #555220 - 10/12/07 02:27 PM
Quote markhodges:

You said yourself in an earlier post you saved £300 after taxes and shipping. Lets assume it costs the importer the same amount to get it here, less the VAT which they can reclaim (about £65 on $750). From that £365 deduct the cost of office space, telephone calls to the US, heating, warehousing, office computers & machines and so on.

Lets say there is £300 left after expenses. To turn that into someones wage you need to pay around 12% employers NI, 12% employees NI and either 22% or 40% income tax.
Alternatively if it's treated as profit and taken as a dividend by shareholders they'll pay 19% corporation tax and 32.5% income tax. Either way, the take-home benefit to someone somewhere of importing your desk for you is going to be around £150, for maybe a days work spent dealing with the supplier, customs, shipping and potentially supporting you in the future. It's a reasonable living, sure, but it's hardly bare-faced greed.




But why would anyone want to buy from a supplier in the UK, selling something which they could import themsleves, for much cheaper? It's no harder to arrange than it is in the UK.

As a dealer, I personally couldn't sell anything to anyone knowing that they could buy it for half the price abroad, but that's just my "honest" nature. If I was in this trade, I would sell things fairly and if it wasn't making me any money, I'd rather change trade than hike the price to just survive.

P

--------------------
Composer, Songwriter, Producer, Sound Designer
www.peterconnelly.com


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Peter Conz Connelly
active member


Joined: 17/09/02
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Re: Digital Village new [Re: Hugh Robjohns]
      #555223 - 10/12/07 02:34 PM
Quote Hugh Robjohns:

Quote Conz:

This is why I'm sure it is beneficial for companies (and their customers), such as NI, to sell direct.




It's a decision for the manufacturer. Many manufacturers don't want to get involved selling to the end user. They don't want all the hassle that comes with individual sales to people, they prefer dealing with a few distributors.






I reckon it would be easier, more lucrative and be more long term beneficial to the compnay to employ an in-house sales force to deal with all of this, rather than rely on distibutors around the world who seem to be causing this price war in the first place.

However it pans out, the consumer will always chase the best deal, so whoever is offering this will survive the longest, assuming they're not selling at a loss of course. If you're not making any money on it, I don't see why you would be selling it in the first place.

Cheers,
Peter

Edited by Conz (10/12/07 02:35 PM)


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thenaturallevel



Joined: 28/02/07
Posts: 1211
Re: Digital Village new [Re: Peter Conz Connelly]
      #555224 - 10/12/07 02:38 PM
Quote Conz:

Quote markhodges:

You said yourself in an earlier post you saved £300 after taxes and shipping. Lets assume it costs the importer the same amount to get it here, less the VAT which they can reclaim (about £65 on $750). From that £365 deduct the cost of office space, telephone calls to the US, heating, warehousing, office computers & machines and so on.

Lets say there is £300 left after expenses. To turn that into someones wage you need to pay around 12% employers NI, 12% employees NI and either 22% or 40% income tax.
Alternatively if it's treated as profit and taken as a dividend by shareholders they'll pay 19% corporation tax and 32.5% income tax. Either way, the take-home benefit to someone somewhere of importing your desk for you is going to be around £150, for maybe a days work spent dealing with the supplier, customs, shipping and potentially supporting you in the future. It's a reasonable living, sure, but it's hardly bare-faced greed.




But why would anyone want to buy from a supplier in the UK, selling something which they could import themsleves, for much cheaper? It's no harder to arrange than it is in the UK.

As a dealer, I personally couldn't sell anything to anyone knowing that they could buy it for half the price abroad, but that's just my "honest" nature. If I was in this trade, I would sell things fairly and if it wasn't making me any money, I'd rather change trade than hike the price to just survive.

P




I'm more than happy to pay a far price for the gear that I buy. I try and support my local music shop as much as possible. In this instance I just felt it was too much money. It was easy to order from Omnirax direct and it didn't take that ling to ship to the UK. The import duty is not to steep on furniture - I believe it more for electronics though.


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hifistud2



Joined: 12/02/06
Posts: 795
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Re: Digital Village new [Re: Hugh Robjohns]
      #555225 - 10/12/07 02:40 PM
Quote Hugh Robjohns:

Quote markhodges:

Either way, the take-home benefit to someone somewhere of importing your desk for you is going to be around £150, for maybe a days work spent dealing with the supplier, customs, shipping and potentially supporting you in the future. It's a reasonable living, sure, but it's hardly bare-faced greed.




A very well reasoned argument that just highlights the reality of the situation. As you say, hardly bare faced greed.

hugh




Except that it isn't. Waged people have a "top line" figure - let's say it's £24k per year - just to make the maths easier. The employer only has to find the Employer's NI contribution - everything else has to come out of the £24k - and the NI threshold is at around £5k and is capped beyond a certain figure. So most of that heart-rending set of figures was completely specious.

Also, if that £150 is take-home, that amounts to £750 per week, or £39,000 per annum, which, on top, implies a salary of £54,600. Hardly your average muso shop assistant's wage, is it? Indeed, I'd love to be on that kind of money.

--------------------
[url=http://www.facebook.com/pages/hifi-studios/117322741632389[/url]


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markhodges



Joined: 07/01/07
Posts: 344
Loc: München
Re: Digital Village new [Re: thenaturallevel]
      #555229 - 10/12/07 02:45 PM
Quote thenaturallevel:

However, I don't see doubling the price in £s showing any great thought as to how much the desk costs in real terms i.e wages; floor space rent; heating etc. The way I looked at it is they were charging £1500, or effectively $3000 dollars, for a desk that cost $300 - $350 n the US. Ok the exchange was in my favour but it was in the UK dealers favour as well.




You said it cost you £1200 when all said and done. Minus what you paid for the desk, thats around £650 ex-vat in shipping and duty by my calculation. So even assuming they pay the manufacturer 60% less than you did the desk actually costs them £800 to get into the UK.

Add on say £300 for the wages required to pay (in NI, pension etc) someone for the days work involved and another £60 for the cost of office & warehouse space (which seems cheap based on my experience of small offices) and it's cost them £1160. Add VAT and the price to the consumer is £1360 even if they don't make a single penny of profit. As it is they are looking for about 10% markup.

I have in the past looked myself at the viability of importing and reselling some higher volume, lower margin 'consumer' electronics products. I worked out that the profit margin would be 3-4% at best and I'd need to put literaly tens or hundreds of thousands of pounds (with associated borrowing costs) on the line to get the ball rolling and turn over enough stock to make it worth while. It just isn't the easy money everyone thinks.

One thing that has surprised me is that some of this stuff is as expensive in Japan as it is here!


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thenaturallevel



Joined: 28/02/07
Posts: 1211
Re: Digital Village new [Re: markhodges]
      #555232 - 10/12/07 02:54 PM
Quote markhodges:

Quote thenaturallevel:

However, I don't see doubling the price in £s showing any great thought as to how much the desk costs in real terms i.e wages; floor space rent; heating etc. The way I looked at it is they were charging £1500, or effectively $3000 dollars, for a desk that cost $300 - $350 n the US. Ok the exchange was in my favour but it was in the UK dealers favour as well.




You said it cost you £1200 when all said and done. Minus what you paid for the desk, thats around £650 ex-vat in shipping and duty by my calculation. So even assuming they pay the manufacturer 60% less than you did the desk actually costs them £800 to get into the UK.

Add on say £300 for the wages required to pay (in NI, pension etc) someone for the days work involved and another £60 for the cost of office & warehouse space (which seems cheap based on my experience of small offices) and it's cost them £1160. Add VAT and the price to the consumer is £1360 even if they don't make a single penny of profit. As it is they are looking for about 10% markup.

I have in the past looked myself at the viability of importing and reselling some higher volume, lower margin 'consumer' electronics products. I worked out that the profit margin would be 3-4% at best and I'd need to put literaly tens or hundreds of thousands of pounds (with associated borrowing costs) on the line to get the ball rolling and turn over enough stock to make it worth while. It just isn't the easy money everyone thinks.

One thing that has surprised me is that some of this stuff is as expensive in Japan as it is here!




Well it felt expensive to me. I was able to import from the US and save £300 and that's what I did.


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markhodges



Joined: 07/01/07
Posts: 344
Loc: München
Re: Digital Village new [Re: hifistud2]
      #555246 - 10/12/07 03:33 PM
Quote hifistud2:


Except that it isn't. Waged people have a "top line" figure - let's say it's £24k per year - just to make the maths easier. The employer only has to find the Employer's NI contribution - everything else has to come out of the £24k - and the NI threshold is at around £5k and is capped beyond a certain figure. So most of that heart-rending set of figures was completely specious.

Also, if that £150 is take-home, that amounts to £750 per week, or £39,000 per annum, which, on top, implies a salary of £54,600. Hardly your average muso shop assistant's wage, is it? Indeed, I'd love to be on that kind of money.




Apologies for my rough reckoning. I was working from the perspective of one who has run their own one-man business for some time (although I pay an accountant to do the actual sums). The line between employers and employees taxes becomes somewhat immaterial as it's all my money they are stealing

My point was that running a business and earning a reasonable income from such activities, not to mention paying the tax bills once you exceed a certain threshold of profitability, adds up to a sizeable amount of money. You just can't compete with someone who's going to do the work essentially for nothing.

Edited by markhodges (10/12/07 03:35 PM)


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hifistud2



Joined: 12/02/06
Posts: 795
Loc: Near Sunderland, UK
Re: Digital Village new [Re: markhodges]
      #555251 - 10/12/07 03:51 PM
Well, take some examples where costs can be quantified exactly, eh?

A Neuman TLM !03:

Sweetwater: $999.97 + FREE Shipping
Digital Village: £665.99 (inc vat) (which is 566.80 ex vat - and since I can reclaim any VAT, we don't really need to add it all in) - currently $1,149.41372

Import duty:
Sweetwater - 2.5%
DV- zero.

Sweetwater price, then... $1024.97
DV... $1149.41

I'd likely buy from DV on this one...

BUT...
Yamaha 02R96

Sweetwater: $9299.99
DV: £7,199.00 (inc VAT = £6126.81 ex vat) which is $12 424.558

Sweetwater's duty rate... the same 2.5 %, takes its price to $9532.50.

Look at the difference - it's $2892.05, or 1,426.13048 British pounds - and even if you ship it over at a cost of £500 (highly unlikely), you're still a grand into pocket.

Go figure.

--------------------
[url=http://www.facebook.com/pages/hifi-studios/117322741632389[/url]


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hifistud2



Joined: 12/02/06
Posts: 795
Loc: Near Sunderland, UK
Re: Digital Village new [Re: markhodges]
      #555254 - 10/12/07 03:57 PM
Quote markhodges:

Apologies for my rough reckoning. I was working from the perspective of one who has run their own one-man business for some time (although I pay an accountant to do the actual sums). The line between employers and employees taxes becomes somewhat immaterial as it's all my money they are stealing




You're not alone - I'm MD of a small company, and have all this stuff to deal with - it's all spreadsheeted and so on - and it's why I get so annoyed at the music tax we pay to disties over here.

Quote:

My point was that running a business and earning a reasonable income from such activities, not to mention paying the tax bills once you exceed a certain threshold of profitability, adds up to a sizeable amount of money. You just can't compete with someone who's going to do the work essentially for nothing.




Tell me about it - neither can you afford to pay inflated prices in the UK when, say, an 02Rv96 can be had for over a grand less by going to the States...

Don't get me wrong - I know what UK trade prices are, and I also know that I can buy in cheaper at retail from US suppliers - it's not the retaillers doing the ripping off - and with duty rates at 2.5% on the kind of kit we're talking about, it ain't the government, either... that kinda points to the disties and the likes of Yamaha...

--------------------
[url=http://www.facebook.com/pages/hifi-studios/117322741632389[/url]


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John Willett
Sound-Link ProAudio


Joined: 07/03/00
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Re: Digital Village new [Re: hifistud2]
      #555261 - 10/12/07 04:14 PM
Quote hifistud2:


You're missing the point - it's cheaper to buy at retail in nthe states than it is to buy trade in the UK. British retaillers are not being supplied at the same price as their US cousins... That is the point.




You are totally missing the point that the overheads for the UK distributor are much higher than for the US distributor.

--------------------
John - Sound-Link ProAudio
President - Federation Internationale des Chasseurs de Sons


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Robin Lemaire
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Re: Digital Village new [Re: John Willett]
      #555265 - 10/12/07 04:27 PM
I think maybe this thread should be moved to OT.


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Studio Support Gnome
Not so Miserable Git


Joined: 22/07/03
Posts: 9386
Loc: UK *but works all over the pl...
Re: Digital Village new [Re: John Willett]
      #555267 - 10/12/07 04:30 PM
and of course all of this utterly ignores the relative value of currency within a local economy.... eg the average wage, and cost of living in relative terms...


perhaps prices should be listed in weeks wages for 3 different trades, to get some sense of perspective?

after all, a Teacher, a Plumber and a Shop assistant.... ought to give a different perspective.

--------------------
Don't get the hump when i tell you it's going to be expensive, it's not my fault , you picked the site/building/room â


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markhodges



Joined: 07/01/07
Posts: 344
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Re: Digital Village new [Re: Studio Support Gnome]
      #555272 - 10/12/07 04:42 PM
Quote Max!:

and of course all of this utterly ignores the relative value of currency within a local economy.... eg the average wage, and cost of living in relative terms...


perhaps prices should be listed in weeks wages for 3 different trades, to get some sense of perspective?

after all, a Teacher, a Plumber and a Shop assistant.... ought to give a different perspective.




A sort of 02R96 index?

Going on the prices from dv247 and sweetwater (and adding a made-up 10% sales tax to make it fairer ) the average wage here is about 3.25 02R96 p.a. wheras in the states it's closer to 3.7

http://www.statistics.gov.uk/cci/nugget.asp?id=285
http://www.ssa.gov/OACT/COLA/AWI.html


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Hugh RobjohnsAdministrator
SOS Technical Editor


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Re: Digital Village new [Re: hifistud2]
      #555287 - 10/12/07 05:16 PM
Quote hifistud2:

You're missing the point - it's cheaper to buy at retail in nthe states than it is to buy trade in the UK.




That maybe so, but I'm not missing the point -- your argument and mine are actually the same. The UK retailer normally buys from a UK distributor who will have higher overheads than his US counterpart and thus has to pas on a higher unit cost. Also, the US distribution buyer will probably be dealing in bigger product numbers so may well warrant a slightly better source price for the US variant product from the manufacturer anyway.

hugh

--------------------
Technical Editor, Sound On Sound


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hifistud2



Joined: 12/02/06
Posts: 795
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Re: Digital Village new [Re: John Willett]
      #555292 - 10/12/07 05:25 PM
Quote John Willett:

You are totally missing the point that the overheads for the UK distributor are much higher than for the US distributor.




Exactly why I quoted the TLM 103 example comparing sweetwater with DV - there's not that much of a differential there - indeed, for a non-VAT registered person, the import probably isn't worth it.

But I fail to see how a UK distie has an overhead that swallows well over a grand on a bit of kit no bigger than a decent sized lunchbox - the Yamaha 02R.

Neither do I swallow the whole overheads thing, given the pressure I've witnessed from reps and disties threatening to pull accounts from retaillers who won't toe the company line on pricing. Sure, if you're based inside the M25, you're going to pay a premium for your premises. If you've got all the chrome and smoked glass... well, overheads are what you make them.

I could have taken premises at £14+ per square foot per annum, and paid fifteen times what I've paid for the decor in my current place. Instead, I chose to get somewhere at £4 per square foot, and put the money into what the clients wanted, rather than what looks totally amazing. In business, you control your overheads, or they will control you - usually out of business.

But, as I say, I don't buy the overheads being the main cause of higher UK pricing - it's maybe 25% of the problem, nothing more. The rest is down to what the market will bear. Well, the market won't bear it for much longer

--------------------
[url=http://www.facebook.com/pages/hifi-studios/117322741632389[/url]


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Hugh RobjohnsAdministrator
SOS Technical Editor


Joined: 25/07/03
Posts: 22131
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Re: Digital Village new [Re: thenaturallevel]
      #555295 - 10/12/07 05:29 PM
Quote thenaturallevel:

I was able to import from the US and save £300 and that's what I did.




That's fine, but in that saving you haven't costed the time spent organising it, or the cost of any phone calls (if there were any) or of the running costs of you internet provision, computer, office space, heat and light, and all the myriad of other things that a commercial business has to fund.

As a one off personal import, yes, I'm sure the savings make it seem attractive. I don't think the same is true of someone running a business that way. If it were, then high street retailers up and down the land would be grey-important from the US all the time, and I don't think they are...

Hugh

--------------------
Technical Editor, Sound On Sound


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Hugh RobjohnsAdministrator
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Re: Digital Village new [Re: markhodges]
      #555301 - 10/12/07 05:35 PM
Quote hifistud2:

Also, if that £150 is take-home, that amounts to £750 per week, or £39,000 per annum, which, on top, implies a salary of £54,600. Hardly your average muso shop assistant's wage, is it? Indeed, I'd love to be on that kind of money.




Most employees don't work 52 weeks a year. Holidays, bank holidays and sick leave training days, days when sales are slow or non-existent and even things like paternity/maternity cover and so on all need to be funded from what ever income the business generates. So your figure of 39k take home is as wide of the mark as you claim the original figures were.

I take your point, but we are throwing largely unfounded figures around here without any real foundation of accuracy on either side of the argument.

Hugh

--------------------
Technical Editor, Sound On Sound


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