Wholesale price versus retail price

[LiveMusic]

Does anyone know the typical markup of guitar accessories like samplers and stuff? I know of one that sells for about $500 and a guy (dealer friend) said he could get it for $240. I hope so! That surprises me. Is the markup that high? Is it that much on guitars? They gotta make a living... just curious.

 

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Duke

[Tedster]

Markup is typically about that high. Lemme see if I remember correctly, there are also what they call "B" items...items where the markup isn't as high, so discount retailers can't sell it as low.

 

Strings have like about the highest markup, so dealers can sell 'em two for one and still turn a profit.

[Chip McDonald]

Originally posted by LiveMusic:

Does anyone know the typical markup of guitar accessories like samplers and stuff? I know of one that sells for about $500 and a guy (dealer friend) said he could get it for $240.

 

It depends... some things are an "A" mark (50%), some are less.

 

The way it works is, a music store can purchase X amount of goods from a company directly. The more they buy, the better breaks they get.

 

On some more pricey items, they're probably not making as much as they would make on cheaper ones, because of that.

 

Then, there's some interesting "counter competitive" phenomenons, like GC selling strings for much less than cost.... or Mars selling a guitar for less than cost, or Musician's Friend somehow selling a keyboard before it comes out, meanwhile the same company is cancelling the last line of keyboards they sold smaller stores that they're now stuck with. So potentially you can get a "better deal than is possible".

 

On the other hand - it would seem I've seen a lot of "questionably screwed up" guitars emanating from a certain mail order catalog.... and another chain outlet has various items custom labeled for them that are ostensibly a "good deal" until you look under the label and find it's not exactly as advertised... I suppose the operating principle is caveat emptor instead of the government looking into bad business practices.

 

It's quite amusing how Microsoft is being investigated for anti-competitive practices when there are so many "interesting" business practices being carried out by the instrument manufacturers and the big chains.

 

http://www.mp3.com/chipmcdonald

[Eric Worthington]

THE RETAIL GAME:

 

Five people buy the same item (whether a guitar, an amp, a digital workstation) but they buy it at different places on different days, so they pay different prices.

 

What's the markup? Obviously, there is no ONE markup. It's such a scam, and it goes beyond the musical equipment market. Depending on one's consumer savvy, ability to shop around (including the internet), timing, and luck (good or bad), the difference in price is ridiculous.

 

First of all, there's this whole concept of list price. The list price is $1,299.99, but we'll give it to you for $800, because we like you. (Look how much you're saving!) Of course, no one would ever sell it for list, and it turns out everyone sells it for $800 routinely. Some have it on sale for $750, and it can be had for $699 on the right day. Unless you threaten to walk away, in which case they can "see what they can do." Suddenly, it turns out they can "give it you" for $650, if you buy right now.

 

It's all bullshit, designed to make every customer feel like they're "getting a deal."

 

I don't believe anyone REALLY sells anything below cost. Example: I buy 100 T shirts for $300. What's my cost? $3 per shirt (you would think....) So I sell half of them at $5 each. I've profited $2 per shirt (you would think....) Then I have a "sale" and sell 20 more at $4 each. Only made $1 per shirt (you would think....) Then I have a clearance, and sell 20 more "at cost," $3 each. I made nothing on these (you would think....) Then, the final 10 I "give away" for $1 each, well below cost (you would think....)

 

Here's what really happened: My cost was NOT $3 per shirt; my cost was $300. Period. I brought in $250 (50 shirts x $5), then $80 (20 x $4). At this point, I've brought in $330. I've already recouped my cost. When I sell 20 shirts "at cost," for $3 each, it's really all profit. And then the final "giveaway," again, is really pure profit.

 

That's the retail game, folks. The real costs are not something we're privvy to. And it's all predicated on making each consumer feel like they're getting a deal.

[Sir Bob]

I suppose a good rule of thumb is a third off list. But then if it is backordered or being released that day with lots of demand, then you pay more.

 

I used to see guys peel out a wad of bills and get the price to drop. But you don't see that so much anymore. A check will get you a better price than a credit card.

 

Lastly, you might pay a little more at your corner Mom and Pop store as opposed to Gutiar Center. But that's okay. Support your local music store.

[rosespappy]

Mark-up.... Oh Lordy, where to start? I'va a Mennanite friend who is a luthier by trade. Builds some of the sweetest sounding pieces out of "sub-standard" woods that I've ever seen. Mark-up? He'd build you one for free if thats all you could afford and you would love "it" like he loved you......

 

Web based purchasing is fast approaching the 10% threshold. When it does, it will escalate to 90% in the next 3-4 years. I love my local Mom/Pop Shop. But, I can't buy enough to support them.

 

I will however continue to stop by and jam on their front porch as long as I can.

 

For now, I buy from whos' word I trust, and whos' face I can read.

Rick

[fantasticsound]

Here's what really happened: My cost was NOT $3 per shirt; my cost was $300. Period. I brought in $250 (50 shirts x $5), then $80 (20 x $4). At this point, I've brought in $330. I've already recouped my cost. When I sell 20 shirts "at cost," for $3 each, it's really all profit. And then the final "giveaway," again, is really pure profit.

 

Eric, you need to know a LOT more about business before you make irresponsible statements like the preceding example. Your math would be perfect if:

 

• The store had no employees with hourly or commission compensation.
  
• The store had no rent or mortgage to pay.
  
• The store had no heat, A/C, electrical service, phone service, etc.
  
• The store had no advertising expenses
  
• The store didn't have any hooks, hangers, displays of any kind to buy or maintain.
  

 

The list has a lot more points I won't waste time mentioning.

 

Once you factor in expenses, they have to make a LOT more than cost on average, just to stay in business. Remember, you go to the grocery store and other retail stores and throw your money down to the tune of an "A" mark everyday without questioning it, beyond scanning the papers for coupons and sales that barely put a dent in the mark.

 

I don't like music retailers where the price fluctuates with every customer. Mars, for all it's problems, puts the price in plain view everyday for every customer. Do they make deals on packages? Sure. Do some salespeople take better care of their friends. Sure. For the most part, you don't have to be a negotiator to get an extremely fair deal at Mars, or on sale items already marked down at GC, etc.

 

Guitars are generally an "A" or "B" mark. Electronics, especially recording gear, can be "B" mark or worse. When I sold Pro Audio at GC in Chicago in 1991, guitar players were always trying to get 40% or 50% off on 4-track portastudios. Not even GC could make a buck at that price, and as the salesman, I'd make NOTHING if the unit sold at or near cost.

 

My suggestion to Live.. Don't pay any more than the Musician's Friend price. They generally have a FAIR price, to both business and customer. If you can do better somewhere else then you're getting a better than fair deal. Mom & Pop's are just like convenience stores. Sure, they're right in the neighborhood, but they don't sell enough quantity to cover expenses unless they charge higher prices than the chains.

 

Neil

 

Neil

[Eric Worthington]

Neil,

 

Of COURSE I realize there are plenty of other expenses, and other issues. My example has an implied disclaimer: all other things being equal.

 

I'm not looking at it from a salesperson's perspective. Part of my point is that there's a game of bullshit being played, by the company. The sales staff might be given a list of Unit Costs, and then they get commission based on a sale above that. But I submit that a salesperson doesn't really know what the REAL cost is.

 

 

As a consumer, should I buy something from a sales rep because "I like them"? Should I support a company because "I like them"? What if I don't like the company, but I like the sales rep? Should I be concerned about how much commission the rep is getting? Should I haggle over price, but not TOO much, because, after all, the sales rep "has to eat, too."

[LiveMusic]

I didn't mean to start a thread knocking profit. No harm in making a profit. I was just curious about markup.

 

Personally, I'm a haggler. I hate paying asked price. If I ask for a better deal, if they can't, all they have to do is say no. But you can bet I'm going to try. It's capitalism. And it's as old as commerce itself.

 

Go to Wal-Mart. There's the price. Period. I prefer to buy from smaller places if I can, just to give them the business. IF they can give me a decent deal. If it's something small, no big deal, I sometimes buy from them even if they don't have the best price. But sometimes they truly can't match a price I have from somewhere else and if it's substantial, I'll buy from the place with the best price. I weigh the benefits and hassle of going somewhere else.

 

I recently spent about $3,000 on equipment and did not buy from the small mom & pop music store I originally stopped in at. The owner was extremely rude. He really blew it.

 

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Duke

[Lisa]

With all the competition among the big stores, mail order houses and web dealers, these days, it's much easier to get a good deal on musical gear than it was 10 years ago. In the larger chain stores, there is less haggling to be done on the regular items that all stores carry, especially on sale items. The price is the price. Period. Unless you're buying a pile of gear, the items are likely to be already deeply discounted, so that's what you can expect to pay. There's less chance of getting ripped off when you're paying the price marked on the tags for competitive items that all the big stores carry. However, if a dealer has an exclusive item that only that store sells and other area dealers do not carry, then there may be a bit of room for negotiation. As the smart shopper, you should know the going rate on whatever it is you are interested in purchasing, so you'll know whether or not the price being offered to you is fair. You shouldn't always feel like you're getting beaten up every time you walk into a music store. Do you feel that way when you go to the supermarket? Do you haggle with the cashier when you pay for your groceries? Shop around, know what the going prices are in other area stores, but don't expect to pay any less than that just because you feel that you shouldn't pay the price marked on the tag.

[fantasticsound]

As a consumer, should I buy something from a sales rep because "I like them"? Should I support a company because "I like them"? What if I don't like the company, but I like the sales rep? Should I be concerned about how much commission the rep is getting? Should I haggle over price, but not TOO much, because, after all, the sales rep "has to eat, too."

 

Exactly, Eric. This is why I was an enthusiastic salesperson at a Mars Store in Nashville. I didn't have to attempt to extract the maximum dollars on any given item. Price was pretty set, and I wasn't on commission. (They did move to commission as of last year, though.) I steered people into the best product at a given budget, and made sure they understood what they'd be missing if they bought x today instead of saving more money to purchase a better product.

 

Lisa pretty much covered the whole topic. With one caveat. Prior to 1997, when two chains FINALLY invaded Nashville (And no, neither is GC. The boneheads at GC missed their chance 10 years ago to be theMI retailer in Nashville.), the smaller MI stores took advantage of their customers. I was surprised more people didn't buy from Musician's Friend, which was already firmly established around the country. I understand working with friendly, knowledgable people, locally. But there are many mom and pops with poor service, too. I was thrilled to see the big boys come in. The caveat is, for those of you in small towns, far from a superstore: If you DON'T have a reputable mom & pop music store in your area, get on the internet or call for a catalog from one of the big chains. You'll save a lot of money, and several have tech support for the products they sell.

 

Neil

[greed2000]

Just make sure you educate yourself. If you don't, there's a good chance you'll pay more then you have to. There are many resources for musicians to know what things are selling for. (catalogs, web, etc.)

 

If you go into a store and know what the current selling prices are, you'll be better able to negotiate a "good" deal. Don't leave it up to the salesguy to tell you that you are getting a good deal...find out for yourself!

[Chip McDonald]

Originally posted by Eric Worthington:

I don't believe anyone REALLY sells anything below cost.

 

"Cost" as a term is becoming as ambiguous to music retailers as "list price" to buyers....

 

THINGS NOT COMMONLY KNOWN THAT SHOULD BE KNOWN BY MUSICIANS PURCHASING GEAR:

 

Right now I know there are things in various catalogs that are priced at the "official cost" price or below.

 

Now and then stores get a chance to buy things that would be considered "factory seconds" or "blems" at a considerably lower price.

 

You'll notice that gear from certain sources tend to have more problems than gear from other sources.

 

There's as much shifty stuff going on in the music gear manufacturing business as the music distribution business.

 

 

As a Guild Navigator once said: I was not here, I am invisible....

 

http://www.mp3.com/chipmcdonald

[strat0124]

Aw hell, just buy used.