The price guitar shops pay to the Manufacturers?

[hangil210]

What are the typical base price that guitar shops pay to the makers when they bring in new guitars? What is the percentage of the MSRP?

I am interested in mostly Gibson, Martin, and Collings!

[JayBee1404]

I’d be very surprised if that information is available - it’s the kind of thing that any builder/manufacturer would wish to keep private between himself and the retailer(s).

You may strike lucky, but I’d be very surprised if you get anything more reliable than guesswork.

And I do have to wonder what benefit would be gained by having that knowledge.

The usual disclaimers apply......IMHO, YMMV etc.

[Silly Moustache]

When I first started haunting the guitar dealers in the UK in the '60s-'70s it was generally thought that the margin was about 50% (but of course the final price in the UK always included the purchase tax - currently 20% VAT)

Last time I discussed such things with anyone in the know, I understood it to be far less - 15-20%.

Foreign made instruments - Far-eastern and American also have import tariffs of course which makes them far more expensive here than in the USA, and generally the "sticker" price IS the buying price.

So, the makers make a margin, the item cost, shipping costs and Excise duty are added then distributor margin, then dealer margin, plus 20% on the lot.

Big brands like Gibson deal direct with the dealers and demand a shared deposit account, from which Gibson take a standing order of so much a month and ship whatever they like to the dealer, who must accept whatever they send - hence fewer and fewer Gibson dealers are around.

My numbers might be out of date - not sure.

[Steadfastly]

Originally Posted by Silly Moustache

When I first started haunting the guitar dealers in the UK in the '60s-'70s it was generally thought that the margin was about 50% (but of course the final price in the UK always included the purchase tax - currently 20% VAT)

Last time I discussed such things with anyone in the know, I understood it to be far less - 15-20%.

Foreign made instruments - Far-eastern and American also have import tariffs of course which makes them far more expensive here than in the USA, and generally the "sticker" price IS the buying price.

So, the makers make a margin, the item cost, shipping costs and Excise duty are added then distributor margin, then dealer margin, plus 20% on the lot.

Big brands like Gibson deal direct with the dealers and demand a shared deposit account, from which Gibson take a standing order of so much a month and ship whatever they like to the dealer, who must accept whatever they send - hence fewer and fewer Gibson dealers are around.

My numbers might be out of date - not sure.

A company could not stay in business if the only made 15-20% margin. The aim is around 40% or higher if possible, of course. The more expensive and item is, the less the margin tends to be but it is more that 20% unless they are selling a boatload full, which rarely happens on big ticket items. My knowledge comes from being in the mfg., wholesale and retail business so I've seen the pricing and margins from all ends.

[rokdog49]

Originally Posted by Steadfastly

A company could not stay in business if the only made 15-20% margin. The aim is around 40% or higher if possible, of course. The more expensive and item is, the less the margin tends to be but it is more that 20% unless they are selling a boatload full, which rarely happens on big ticket items. My knowledge comes from being in the mfg., wholesale and retail business so I've seen the pricing and margins from all ends.

Likewise^^^^
I was there as well and Steadfastly is on the mark. In most instances, the lower-end, high volume stuff has much better margins even though the dollars per individual sale are less. A 40% margin is good, higher is better.
If Taylor were to have a sales increase of 25% on the 114e this year, they would be real pleased. My guess is Taylor is getting better than 40% margin on that guitar.

[musicman1951]

Back in the early 70's when I was working part time at a music store it was 50%. The store only made 10-15% on each sale. Sometimes we made out better on used equipment as nobody really knows what their trade-in is worth and nobody knows what the store has into the used gear for sale.

That was without the year end quantity bonus.

[Shades of Blue]

Originally Posted by rokdog49

If Taylor were to have a sales increase of 25% on the 114e this year, they would be real pleased. My guess is Taylor is getting better than 40% margin on that guitar.

Taylor may be, but the middle men aren't seeing 40% margins.

From my experience I imagine that the dealer cost is about 30% less than list. For example, when you get a 15% discount at a big box retailer, they are still making 15% on the sale. Just from hear say and haggling, I can say that a 25% discount is about the lowest I've ever gotten, and the comment is generally "I am not making anything on it at this price, but I need to move it." So, they are still making a little, so maybe no more than 5-10%. I think there is about 30% off list price there to haggle with. How much of the 30% the dealer is willing to give you is up to them.

I don't go around asking for 25% off, but sometimes dealers are motivated enough to match coupons from big box stores. I'd rather give a small dealer the business than Guitar Center, but it is hard to pass up a 25% off GC coupon.

Martin and Taylor may be a little different because their discount is based on MSRP, but I think it still works out to about 20-25% off list price.

Bottom line is that dealers aren't making much on guitars. My local shop told me that they make more money on accessories than guitars. The guitars are the draw to the shop, but it's the strings and cables that keep the lights on.

[RagtopGT]

Originally Posted by JayBee1404

.....I do have to wonder what benefit would be gained by having that knowledge.

I've been saying that very same thing.

The only percentage that matters is the amount of the discount to the buyer.

[JonWint]

Martin wholesale price is 50% of MSRP.

[Paddy1951]

Originally Posted by Steadfastly

A company could not stay in business if the only made 15-20% margin. The aim is around 40% or higher if possible, of course. The more expensive and item is, the less the margin tends to be but it is more that 20% unless they are selling a boatload full, which rarely happens on big ticket items. My knowledge comes from being in the mfg., wholesale and retail business so I've seen the pricing and margins from all ends.

If you are speaking of total sales, you are probably correct. Specialty businesses rely on the "extras" to make their total incomes, profit margins. A company may only make a relatively small profit on a guitar. It is all the related things that make up for the large item/small profit nature of the business. I am talking about business in the States.

Percentage wise, a retailer makes more money on a music book than a guitar. The smaller items are things most people don't quibble about.
You might be able to buy a capo for
$ 1.77 less online. If your already in the store, and need the item are you going to get concerned about small amounts? I doubt it. Your time is worth money. Buy the capo and move on.

I have never worked in a retail music store. I have worked in both high end electronics and photography shops. Mark ups on the core products are not great. That high end Nikon you buy has maybe 15% in it to the retailer. The protective glass filter you place on the lens, a lot more.

To the retailers advantage are incentives. Dealer net on x guitar might be $325.00 for one. But $289.00 for 3, $265.00 for 12.

There can be unseen incentives as well. A given guitar may have a dealer net of $489.00. But if you buy 6, you get the seventh for 1/2 off net, effectively lowering the net on all 6 guitars. Then there are spiffs, which can help the bottom line.

Finally, the big box stores may actually be able to negotiate nets that are quite a bit lower because they agree to order a total mix of 1000 guitars per store.

Perhaps, somebody who works in a music store retail environment can elaborate more specifically on all of this.

[Shades of Blue]

Originally Posted by RagtopGT

I've been saying that very same thing.

The only percentage that matters is the amount of the discount to the buyer.

This is exactly right.

The only benefit to the buyer in knowing dealer cost is using it for leverage, which at that point is a low blow anyways. There is always a struggle in negotiations between two parties to get the better end of a deal. The winner is always going to be the less motivated party, and the loser will be the more motivated. If the seller is more motivated to sell, then they might give the buyer a bigger chunk of the markup, vs a motivated buyer who is going to buy it regardless of the discount.

The power in negotiation for the buyer comes when you know the markup and you know how motivated the seller is. You have to know both parts of the puzzle in order to get the maximum deal. If you know how motivated the sell is AND you know the markup is, say 30%, then you can ask for a much larger discount in the 20-25% range and expect that the seller might be happy making 5% just to move it.

Negotiation is a fascinating subject to me. The old empty hotel room analogy comes to mind for me. Do you make more money by letting the hotel room stay empty, or rent it at a huge discount? Is that guitar worth hanging on the wall for 6 months at $1000 when you could sell it in a week for $750?

Volume sales is the best way to increase immediate cash flow, but it isn't necessarily going to give you your record year in sales. There has to be a good mix of the two in order to be successful. I've seen guitars hang in local shops for up to 2 years because they refuse to come off the price $1. What good is it making your entire margin on an item if you have to house it for a year or more?

The dealer has all the power, but the buyer has the leverage. Some people would fault me for "driving dealers out of business" or "people like me" are what is wrong with the economy. I beg to differ, because it is up to the dealer whether or not they want to play ball and make a quick 5-10%, or whether to hold out for their full 30%. (I don't know the actual numbers, I'm just using 30% as an example.)

People tell me I can sell anything, but I think it is because I give more leverage to the buyer and am willing to sell for a little less in order to make a quick sell. That doesn't mean I win the negotiation either, because I actually give too much to the buyer from time to time. Bottom line though is that I can sell quickly, make money, and keep product moving where I don't have to pay a lot of overhead housing stock.

It's all in how you choose to run your business. It's all negotiating, and to me it is FUN!!!

[Yrksman]

Originally Posted by RagtopGT

The only percentage that matters is the amount of the discount to the buyer.

If we are to keep the smaller specialist and mama/papa stores, it’s important that retailer makes a decent profit. That matter too.

[Steadfastly]

Originally Posted by RagtopGT

I've been saying that very same thing.

The only percentage that matters is the amount of the discount to the buyer.

Discount means nothing. The bottom dollar price you pay is what matters.

I.E. Guitar lists at $2500.00 less 40%=$1500.00

Guitar lists at $2000.00 less 30%=$1400.00

The point is, companies can put the list/regular or whatever they want to call it price wherever they want to. It's what you pay in the end that counts. In the example above you can get 40% off or 30% off. Which one would you want? This is a marketing ploy retailers do all the time. Why? Because it works. Don't be fooled by it.

[RGWelch]

I recently bought a "high end" Yairi guitar. It was quite a bit higher priced than what I was really wanting to spend on a guitar. A couple of factors made me want to buy it, though. First the guitar is quite nice, of course, and it's rather unique compared to some of the other guitars I compared it to. Also, I really like dealing with that store, I've dealt with the owner quite a few times over the years and it's not a big box store.

The guitar had a price that was 35% off the listed original MSRP. Now I suspect that original MSRP price marked was substantially jacked up. I've seen advertised MSRP for the same guitar that was 20% less. So what is the real MSRP? Is it different for an online retailer vs a small local store? But that doesn't matter, I was looking at the marked price they had, and it was simply more than I could afford. However, there was no harm in me offering what I could and see what they could do. I wound up getting it for 20% off the listed price, which was about 48% off the marked MSRP, or 35% off the MSRP I've seen advertised online. I'm sure he made money, or he wouldn't have sold it to me, but likely not a lot. What his profit was, I don't know, but I guess his cost had to be somewhere around 50% of MSRP, depending on what MSRP actually was. Doesn't matter to me, though. What does matter I is I got the guitar I wanted at a price I could (barely) afford, and I suspect he was happy to get a guitar moved that might have sat in the store a long time. I think I had some leverage in that it's a very nice guitar, and it's not one that is high on most people's radar, though I consider it as good as many that are. There was a Martin in another store I was looking at, similar spec'd model, that had a lower MSRP listed, but a higher sale price listed. Martins, of course, are very popular and likely easier to sell, so I think that plays into marked and sale prices as well.

[varmonter]

I am sure leverage is the intent of the OP.
But i think a smart retailer has a point of no return.
as in a margin hes not willing to go below.
So If like said above lets say a d28 is 3000.00
and the dealer buys it for 1500 He may have to
make an additional 30 percent to keep the lights on.
Case in point I would ask you to put a guitar
on consignment at guitar center. Ask them what
They charge for doing that service. The answere
here is 40%. So it lends me to beleive thats what
they need to keep the lights on. Or slightly less. So the best one may
hope for in negotiating would be 10-20%
at best. Guitars and cars are about the only thing
left in this country to do this with. Go to united
and try to negotiate a flight. Unheard of.