Guitar Markup - Wholesale, Retail

[Wisertime]

I often wonder, when one pays, say, $2400.00 for a new LPCustom or $600.00 to 800 for a new Strat, what the dealer is buying them for. Anyone know the markup on electrics these days?

 

[doodman]

I often wonder, when one pays, say, $2400.00 for a new LPCustom or $600.00 to 800 for a new Strat, what the dealer is buying them for. Anyone know the markup on electrics these days?

Most companies need to make a margin of 27% profit to stay in business. I don't know where that comes from, but the companies I deal with (distributors and end-users) use this figure. I would be willing to bet, though, that it would be an average of 10%-14% overall profit for guitar shops. I think this would mainly be due to inexpensive labor and cometition (if everybody has it, you can't charge too much). Someone like GC or SA have more overhead with marketing, stock, and higher salaries (more management). So that is why you see hsigher prices on the tag in these places. They may also buy in bulk to get a better price. So that may have an additional 2.5% to 5%.

I know that doesn't quite answer your question, but it may give you an idea on it and similar areas, also.

 

[Mathieu Rainville]

Dunno if this applies to Gibson, but I know that PRS dealers pay 50% off list price and sell anywhere between 60% and full list price if they can get away with it.

I paid 65% off list price for mine, so the dealer got 15% ($330 in this case). Seems quite reasonable to me.

 

[ShawnRT]

Hey Mathieu,
How are you getting along with your new custom? How do you feel about it compared to your PRS?

 

[Mathieu Rainville]

Hey Mathieu,
How are you getting along with your new custom? How do you feel about it compared to your PRS?

Hey Shawn, thanks for asking. I'll start a thread about it, complete with audio and/or video clips. In short, I like it a lot and I've learned to work with its stock features.

 

[ShawnRT]

Cool, I'll check it out!

 

[George]

I used to work in music retail, then music wholesale. It is really a shitty business, especially now, with internet dealers discounting so heavily.
The rule of thumb used to be , and probably still is list price was twice what the dealer paid. In other words, a dealer paid $500 for a guitar that LISTED for $1000. He had to pay the shipping to get it to his store, overhead, taxes (on the whole purchase price) unemployment taxes, etc., AND a profit (little to none) after the obligatory 35-40% discount.
Overhead is so unbelievably high, I can't imagine there is much left over for the dealer.

 

[NBlair930]

There MUST be profit somewhere & enough to justify the cost of doing business -Let's face it no music shop (big or small) is in it to help mankind.

 

[Heritage 80]

There MUST be profit somewhere & enough to justify the cost of doing business -Let's face it no music shop (big or small) is in it to help mankind.

That's where volume comes in. Witness the slow but steady dissapearance of the "mom and pop" stores vs. the growth of the mega-store chains (particularly GC). Buisnesses can generally tolerate erosion of profit margin as long as it's offset by increasing market share.

 

[PatentAppliedFor]

$$$ is in accessories & parts.

 

[doodman]

The ma & pa shops often get by with giving lessons.

 

[philtone]

I've worked in a couple of independants and still service two small shops. They have to be careful with inventory because thats their paychecks hanging on the wall. Some shops have accounts and pay interest on the stock until they sell it.

Think of it as an investment: The MSRP is $1000, cost $500, shipping $25, someone to unpack and log into inventory and keep track of it, twaek it a little, spend time pitching it to customers. Put this cost at say another $25. So the instrument costs $550, street price at 30% off is $700, so profit is $150 - the magic 30% margin.

I fthe discount is lower or the piece sits instock for a while, teh margin is less. Meanwhile there is overhead and payroll.

Consumers beat price down so low its no wonder that jobs are leaving the US and GC and Walmart (Sprawlmart ont eh Simpsons - I love it!) are taking over.

Smaller shops specialize and compete with service, lessons etc.

 

[Snags]

$$$ is in accessories & parts.

Bingo. Accessories and entry-level guitars that you can sell for full pop.