The price guitar shops pay to the Manufacturers?

[harpspitfire]

its all government, i would say the profit markup is 25-30% max, even if you went to china and bought a guitar, it would cost you more money because any exports are subsidized, at least this is my understanding, so your best deal is usually just that- the best price from a home dealer, the US pricing usually has a standard mininum

[KevWind]

Originally Posted by 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!

Not sure what exactly you mean by "base price" ? Do you mean the mfg. wholesale price to the retail dealer ? Or what it actually costs the retailer to put that item on the shelf/wall , which includes wholesale price,+ overhead = fixed operating costs , wages, utilities, rent or mortgage, etc. + any variable costs, advertising, promotions, etc. Which are all going to vary depending ion specific individual dealers situations. I am guessing here But for example if wholesale is 50% of MSRP than it is likely going to leave the dealer with somewhere between a 25% to 40 %(if lucky very little overhead ) margin.

But as some have pointed that knowledge is pretty much academic and irrelevant . What matters is what you are willing to pay, or what the dealer will sell it for ..

[EverettWilliams]

I don’t think any knowledge is irrelevant. What is relevant is how you use it. I like knowing what a dealer pays. It allows me to more fairly negotiate. My objective is to ensure that good dealers stick around and knowing what they stand to make allows me to ensure they are getting a decent margin.

Those who have said Martin is 50% of list are correct (market has them selling at 60% of list, MAP is irrelevant), Collings is 60% (but they are contractually required to discount to no less than 90% of list), and Gibson was 50% but I haven’t checked that in years (Gibsons were made in Kalamazoo, don’t need no stinkin new Gibson). Dealers typically have to pay inbound shipping too, so that adds on to this.

Now doubters say “buy how do you know” - well, I used to work in a guitar store and I’m friends with a number of dealers. It’s all a pretty open secret.

[pszy22]

If the goal is open transparency for use in the negotiation process, would any of you object if the sales person asked you what your income was, what your credit card limit was, etc, etc?

[Portlandplayer]

It's important to understand the definition of Markup and Profit Margin.

If an items wholesale cost is $100 and the retail price is $200, this equates to a 100% percent Markup, but is a 50% Profit Margin. In this case a 50% price reduction from retail ($200), would be the wholesale cost of $100.

Retail stores think "Margin".

[archerscreek]

Originally Posted by pszy22

If the goal is open transparency for use in the negotiation process, would any of you object if the sales person asked you what your income was, what your credit card limit was, etc, etc?

This brought a laugh. Haha. But then I thought about it, and in a way they do obtain that info. If you pay by cash, you obviously have enough to cover the amount. If you pay by card, the limit left of the card is checked when the card is read. If you finance a purchase the dealer asks for income information and runs a credit check to make sure you qualify for the loan/purchase and to set the interest rate.

Searching for dealer cost in the recent past, I've read numerous posts in a wide variety of music related forums of people claiming to work in music stores, and they all listed dealer cost around the 50% of MSRP figure for Martins, Gibsons and the like. However, I made offers on a couple of National resonators at a percentage of MSRP near what one could get on a Martin guitar, and I was twice told by different dealers that my offer was less than their dealer cost. So I'd guess dealer cost is 65% of MSRP plus or minus on some other brands.

[vindibona1]

Retail is a very funny (and difficult) business and wholesale purchases aren't simple in the big picture. The retailer has so many categories of expense that would make a 15%-20% profit per sale unsupportable.

In retail there is a term known as "keystone" which basically means you buy a product at 50% of what you *initially* list it for. Some industries mark up higher (bridal dresses for instance are usually marked up 300% of cost!). Some mark up less. I doubt that a car dealer will only pay 50% of the retail price of a car- but probably pay far less in the end than they claim on "invoice price". There are incentives, promotions, "off-price goods" which go into the mix of top line margin. As I said, complicated- and difficult. That's why so few retailers stay in business for the long term.

[Paddy1951]

You could know exactly what a dealer pays for a given guitar. It won't really help you much. The dealer knows how much the guitar must be sold for in order to to stay in business and make a living. Yes, a dealer will sell an occasional item at little profit, at cost or below for specific reasons. The dealer cannot do that routinely. They have to make a living.

The one thing that is not being considered and talked about is the intangible value of the dealer's knowledge, good will- customer service. You cannot have or expect to get it all. The absolute lowest price means little when it hits the fan.

[EverettWilliams]

Originally Posted by pszy22

If the goal is open transparency for use in the negotiation process, would any of you object if the sales person asked you what your income was, what your credit card limit was, etc, etc?

Dealers profile customers all of the time and, as guitars are pretty inexpensive in the grand scheme of things, the question of whether one is a bona fide prospect is less a judgment of ability than willingness to buy. This is why, excepting the premier vintage and boutique instruments, most dealers make them readily available to people. This isn’t trying to see a multimillion dollar house or test drive a Ferrari.

But this information would be as relevant to the transaction as what the sales person makes or what kind of health care benefits the dealer provides - none. We’re talking about the narrow range between what’s on the sticker and what it costs the dealer. The range of sales prices aren’t very broad. The bounds of that range are very relevant to finding a price. Whether I’m able, or more crucially willing, to pay that price is secondary. Knowing my net worth or open credit facilities would perhaps allow a dealer a dealer to know whether I possessed the ability to buy something. But even knowing that wouldn’t help the dealer know whether I’d be willing to utilize it.

[billybob77036]

As a Buyer in the retail world with over 250 brick and mortar locations and a sales goal of $55 million, I find this thread interesting.

Personally, I wish there was no negotiations when it came to guitars, the price is the price. This would save people a lot of haggle, and everyone would know that they are paying the same for it and you don't have to go shop to shop to get the best deal. These are the reasons no one likes to buy a new car, everyone wants to know they got the best deal they could.

[stringjunky]

Originally Posted by EverettWilliams

Dealers profile customers all of the time and, as guitars are pretty inexpensive in the grand scheme of things, the question of whether one is a bona fide prospect is less a judgment of ability than willingness to buy. This is why, excepting the premier vintage and boutique instruments, most dealers make them readily available to people. This isn’t trying to see a multimillion dollar house or test drive a Ferrari.

But this information would be as relevant to the transaction as what the sales person makes or what kind of health care benefits the dealer provides - none. We’re talking about the narrow range between what’s on the sticker and what it costs the dealer. The range of sales prices aren’t very broad. The bounds of that range are very relevant to finding a price. Whether I’m able, or more crucially willing, to pay that price is secondary. Knowing my net worth or open credit facilities would perhaps allow a dealer a dealer to know whether I possessed the ability to buy something. But even knowing that wouldn’t help the dealer know whether I’d be willing to utilize it.

I think he was being sarcastic. The point being that it's nobody's business but the dealer's what they get stuff for.

[EverettWilliams]

Originally Posted by stringjunky2

I think he was being sarcastic. The point being that it's nobody's business but the dealer's what they get stuff for.

Perhaps, but I don’t grant the premise.

[Paddy1951]

Originally Posted by billybob77036

As a Buyer in the retail world with over 250 brick and mortar locations and a sales goal of $55 million, I find this thread interesting.



Personally, I wish there was no negotiations when it came to guitars, the price is the price. This would save people a lot of haggle, and everyone would know that they are paying the same for it and you don't have to go shop to shop to get the best deal. These are the reasons no one likes to buy a new car, everyone wants to know they got the best deal they could.

The difference with the car business is that it started the whole negotiation thing. It is an out of date approach but is still widely used. More progressive auto dealers have stopped using this approach.

As for guitars... I have paid asking price if I felt it was reasonable. I do not begrudge my local dealer his cut.

Guitar manufacturers are somewhat at fault for the whole pricing situation. Some guitars are just priced higher than they should be or maybe, in some cases, lower than they should be.

[Harmonics102]

Here's some good information on Profit Margin and what not. There's a lot that goes into calculating profit margin, including what to include when calculating profit margin. I'm sure all the MBA's on this forum can elaborate. In the meantime, for us Lay Persons, here's an interesting link>

https://www.salehoo.com/blog/low-cos...profit-margins

H102

[EverettWilliams]

Originally Posted by Paddy1951

The difference with the car business is that it started the whole negotiation thing. It is an out of date approach but is still widely used. More progressive auto dealers have stopped using this approach.

As for guitars... I have paid asking price if I felt it was reasonable. I do not begrudge my local dealer his cut.

Guitar manufacturers are somewhat at fault for the whole pricing situation. Some guitars are just priced higher than they should be or maybe, in some cases, lower than they should be.

Collings and its peers have actually done a pretty good job with this - there’s a maximum discount at which their dealers can sell, and everyone sells for the same price, so they wind up competing on service. Martin, with its MAP, has created a bit of a problem - if it’s common knowledge that you can get a Martin bellow MAP, why wouldn’t you? And if there’s a typical ceiling for those discounts, why wouldn’t you seek to hit it? With Collings, there’s just The Price.

I typically view new prices as fixed and don’t negotiate. I’ll pay 90% of list for Collings and, if I were to get a new Martin, I’d expect to pay 60%, that’s market. I don’t try to negotiate below market. But if someone said - I’ll sell you this Collings at list, I’d look at them funny - nobody does it.

The place where I’m inclined to negotiate is with vintage and used. If something is priced fairly, I won’t push it, but if someone is asking over market, I’m inclined to offer market. I don’t really care about the dealer’s cost here - just where the tag is in comparison to the market. But I’ve also been known to overpay for a particularly great example.