Question about Luthiers' interactions with commercial guitar sellers

[Merlemantel]

I am just curious. No agenda. When a luthier establishes a relationship with a guitar store like Eddies or Dream Guitar, and the store sells a new instrument for them (not used, so directly from the builder) who sets the price? And, is the builder compensated for the instrument upon releasing it to the store for a cost, then they have no further financial interest in the instrument? Or does their pay wait until the sell of the instrument?

[Simon Fay]

The builder sets the price. In the US, almost all of the high-end guitar stores work on commission. The builder gets paid when the guitar sells.

[Merlemantel]

Originally Posted by Simon Fay

The builder sets the price. In the US, almost all of the high-end guitar stores work on commission. The builder gets paid when the guitar sells.

Thanks! I've always wondered. I think Eddies and Dream Guitar pick up a lot of instruments at events like Woodstock, and I just wondered how that works.

[justonwo]

The shop typically gets 30% of the new price of the guitar. The price is set by the builder. In an arrangement where the builder gets paid upon completion of the guitar, this is a pretty customary and reasonable retail markup. In an arrangement where the shop simply consigns the instrument, I’ve always felt this was unjustifiably high.

My guess is that the specific arrangement a builder gets depends in part on the demand for the instrument, the reputation of the builder, etc.

[Merlemantel]

Originally Posted by justonwo

The shop typically gets 30% of the new price of the guitar. The price is set by the builder. In an arrangement where the builder gets paid upon completion of the guitar, this is a pretty customary and reasonable retail markup. In an arrangement where the shop simply consigns the instrument, I’ve always felt this was unjustifiably high.

My guess is that the specific arrangement a builder gets depends in part on the demand for the instrument, the reputation of the builder, etc.

30% seems beefy to me, for sure. But, they do a lot on their end to market the instrument, or should, sound samples being most important, also excellent photographs of the instrument.

[justonwo]

Originally Posted by Merlemantel

30% seems beefy to me, for sure. But, they do a lot on their end to market the instrument, or should, sound samples being most important, also excellent photographs of the instrument.

That is about normal for a retailer that buys something at wholesale, takes inventory risk, deals with the cash flow of carrying inventory, etc. However, if you ask me, it's an obscene percentage if the retailer is simply consigning the instrument. The other big issue with the consignment model is that the retailer isn't motivated to sell as they would be if they owned the inventory. This means the builder and their dealer are somewhat at cross-purposes.

[Merlemantel]

Originally Posted by justonwo

That is about normal for a retailer that buys something at wholesale, takes inventory risk, deals with the cash flow of carrying inventory, etc. However, if you ask me, it's an obscene percentage if the retailer is simply consigning the instrument. The other big issue with the consignment model is that the retailer isn't motivated to sell as they would be if they owned the inventory. This means the builder and their dealer are somewhat at cross-purposes.

This was the issue I was curious about. That cross purposes thing had occurred to me.

[Bruce Sexauer]

The "C discount" (30%) model is pretty much history in our business. It went with the 2010 recession. Before that all of my retailers used that model and paid on delivery. Now only one shop I am aware of asks a consignment fee in that ballpark, whereas most are more like 20%, and as the price goes up, the consignment percentage goes down.

[H165]

I worked in a shop where the typical markup for retail sales was at least 100% - that is to say, the retailer paid 50% or less of the retail price for commonly available items. 95% of our sales were 100%+ markup.

Our custom-built and used items involved negotiated agreements based upon factors noted above.

The problem we encountered was that the negotiated items were in direct competition with the common items. We much preferred the 50% markup over any negotiated percentage, and the sellers/consigners of negotiated items always thought our markup or percent commission on their stuff was way too high.

Ours was a small shop. Every negotiated item took up floor or wall space where a 100% markup item could have been placed.

This invariably made for some tension in the negotiations. The shop finally gave up consignments altogether, and tended to offer 50% of retail minus cost of adjustments and repairs for all purchased items.

[IndianHillMike]

Like others have said, most dealers I've dealt with operate on consignment these days and pay when the guitar sells. Their cut can range from 15-30%. Someone like Dream Guitars is on the high-end of that spectrum, but in my experience they sell quickly, take great videos/photos, and pay promptly -- all of which justifies the higher cut in my opinion. I've had to hassle some well known dealers for MONTHS trying to get paid for guitars that have already sold; must definitely not fun.

As far as setting the price, I'll often spec out a build with a dealer in which case we come up with the price together. I'll also often look for their input once they get a guitar in their hands -- we're both motivated to get the highest price in the least amount of time and I'll trust their sense of the market over mine.

[lfarhadi]

While we are on the topic...

I see a lot of highly-in-demand luthiers, with very long or closed waiting lists, still selling new instruments through dealers such as those named here. These luthiers are many years into their careers.

Why is that? Do the dealers lock them into long-term exclusive arrangements?

If I were a highly desired luthier, even a 10-20% cut would feel like a lot if I only make 10-20 instruments a year, have a long wait list, with used examples selling at premium to new, and I could just pick up the phone and sell directly any guitar I make.

[Merlemantel]

Originally Posted by lfarhadi

While we are on the topic...

I see a lot of highly-in-demand luthiers, with very long or closed waiting lists, still selling new instruments through dealers such as those named here. These luthiers are many years into their careers.

Why is that? Do the dealers lock them into long-term exclusive arrangements?

If I were a highly desired luthier, even a 10-20% cut would feel like a lot if I only make 10-20 instruments a year, have a long wait list, with used examples selling at premium to new, and I could just pick up the phone and sell directly any guitar I make.

GREAT QUESTION!!! I've wondered the same thing.

[usb_chord]

Originally Posted by lfarhadi

While we are on the topic...

I see a lot of highly-in-demand luthiers, with very long or closed waiting lists, still selling new instruments through dealers such as those named here. These luthiers are many years into their careers.

Why is that? Do the dealers lock them into long-term exclusive arrangements?

If I were a highly desired luthier, even a 10-20% cut would feel like a lot if I only make 10-20 instruments a year, have a long wait list, with used examples selling at premium to new, and I could just pick up the phone and sell directly any guitar I make.

The short answer is it depends on the builder. Some luthiers will gladly give up a percentage of their bottomline to divert superfluous customer calls, questions, emails, shop visits, clerical work, and tedious customer service related conflict resolution in exchange for more time at the bench.

It's also useful for builders to be able to reference a new instrument of theirs that's "out in the field" if the prospective client has never played one of their works(surprisingly common).

There's something to be said for being able to go to a shop like Music Emporium and compare the new Circa OM-28 to, say, a Collings Traditional OM and decide for yourself if the price difference is really worth it to you. Or maybe you end up using that experience as a basis for what Circa (or whoever) you decide to order instead.

In short, a good dealer will promote growth in the industry and educate "the public" about instruments they may never encounter otherwise (this mitigates the need to take a $$$ chance on a blind commission or unvetted used purchase).

To your last point, you might be surprised to learn that not many luthiers are as skilled marketing their work as they are with crafting a fine instrument. Those are two very different skills and the creme doesn't always rise to the top in this wacky world of handmade instruments.

It actually seems to me far less common for artisans to take joy in the marketing process. Again, another perk to a dealer relationship, I suppose. There are some downsides, too of course but I think some of those are a bit more obvious than the potential upsides.

[Guitars44me]

Originally Posted by usb_chord

The short answer is it depends on the builder. Some luthiers will gladly give up a percentage of their bottomline to divert superfluous customer calls, questions, emails, shop visits, clerical work, and tedious customer service related conflict resolution in exchange for more time at the bench.

It's also useful for builders to be able to reference a new instrument of theirs that's "out in the field" if the prospective client has never played one of their works(surprisingly common).

There's something to be said for being able to go to a shop like Music Emporium and compare the new Circa OM-28 to, say, a Collings Traditional OM and decide for yourself if the price difference is really worth it to you. Or maybe you end up using that experience as a basis for what Circa (or whoever) you decide to order instead.

In short, a good dealer will promote growth in the industry and educate "the public" about instruments they may never encounter otherwise (this mitigates the need to take a $$$ chance on a blind commission or unvetted used purchase).

To your last point, you might be surprised to learn that not many luthiers are as skilled marketing their work as they are with crafting a fine instrument. Those are two very different skills and the creme doesn't always rise to the top in this wacky world of handmade instruments.

It actually seems to me far less common for artisans to take joy in the marketing process. Again, another perk to a dealer relationship, I suppose. There are some downsides, too of course but I think some of those are a bit more obvious than the potential upsides.

Excellent points USB!!! From my musical perspective, I would much rather play music for humans who care than market myself to folks who don’t care! Hahah

If I was a builder, I would want to BUILD, NOT market my work.

Many younger musicians spend more time on their social media than playing music. Or so it often seems. Only so many hours in the day…

I would rather go for a walk in the woods.

Just me, but I am sure some other folks feel likewise.

Cheers

Paul

[conecaster]

it is done to validate price, to promote a wider market and a value not necessarily possible independly.