Equipment Prices

[CamdenRob]

[quote name='Grangur' timestamp='1420809880' post='2653712']
That's what I thought when I opened a games shop. I don't own a games shop any more.
[/quote]

Yes I did neglect to mention that not a single one of the clueless (about gear) majority I have encountered has ever been in a financial position to buy a new instrument from a shop anyway... probably why they havn't bothered finding out anything about gear...

[icastle]

[quote name='andy67' timestamp='1420809059' post='2653689']
From information given, at the £300 mark, it would cost £180.
[/quote]

Your information is wrong Andy.

The Moderators were discussing markups last year and, as an ex musical instrument retail person, I threw very similar figures to those that you've been using into the discussion.

One of the other Mods currently works in the industry and queried where I'd got my figures from.
The answer (which I got ribbed unmercifully for) was... 1984.

Back then 30/40% on major items was the norm and some 'accessories' could have as much as 70%, because that was what the market was used to.

Obviously, markup erosion to the current level didn't happen overnight, but it has happened.

[Big_Stu]

[quote name='andy67' timestamp='1420803750' post='2653564']
I've bought a lot from guitarguitar and soundcontrol. Red Dog Music in Edinburgh are a good bunch and I try to support them as much as possible. However, the range of basses for sale in shops all over Edinburgh is fairly limited.......[/quote]

It's part of Fender - and possibly Gibson's pattern. They demand that the shop devotes a certain % of space, cost & items to Fender alone - it's costs thousands to do so. To pay those thousands you have to be big enough to do so first & foremost and cut other brands out in many cases, or ditch Fender and sell close copies. Fender have realised it's bit them on the ar*e which is why you can now buy direct by MO.

[skej21]

[quote name='andy67' timestamp='1420799311' post='2653467']
Want to start a discussion re instrument prices/pricing on both new and second hand.

When visiting a local music shop recently, It came as quite a shock the price of a new fender, more specifically the road worn Mike Dirnt precision. I love the look of these basses and pretty much want one. New in shop, they cost £1067 however, on-line I can pick one up for £850. Still expensive but should shops start realising that, given the mark-up is already around the 45%, perhaps they should be more competitive with on-line retailers? I get the overheads and staff cost argument but again given the mark-up, does this really stand up to scrutiny?

Given the state of the economy and marketplace, musicians and most buyers are fairly tight for money meaning equipment is more or less sitting in shops or warehouses right now so, why is gear so over priced? Surely a bit of realism in pricing and maybe lowering would see lots of gear shifted really quickly?

I started looking at the second hand market and found some of the asking prices nothing short of ridiculous! Fender P new £1100 s/h £800, its no wonder they don't sell!! Again, equipment appears not to be moving as quickly due to most finding extra cash a little tight at the moment so, again, should sellers price their used gear more approriately? As with the above example, Fender seems the most ridiculous in the market. Look around the sites, pre-loved, gumtree, ebay or the more specialised sites and its staggering what some want! Why buy secondhand when for another £100 you could have new!

Crazy times we live in ...
[/quote]

Based on first hand experience, I can promise you that mark up is nowhere near 45% at street price (which is always much lower than the RRP). Additionally, when you purchase the item off the manufacturer, you pay a cost price EX VAT, so that's an extra 20% of the price you bought it for that you have to add on at store level just to cover your own costs/bills. That's before staffing overheads, premises rental and all the other etc. You're VERY lucky if the percentage is half of your quoted 45% on most items.

Edited January 9, 2015 by skej21

[icastle]

[quote name='Big_Stu' timestamp='1420810326' post='2653726']
It's part of Fender - and possibly Gibson's pattern. They demand that the shop devotes a certain % of space, cost & items to Fender alone - it's costs thousands to do so. To pay those thousands you have to be big enough to do so first & foremost and cut other brands out in many cases, or ditch Fender and sell close copies.
[/quote]

Not sure if they still do it, but Fender dealers could have their franchise removed if they were caught discounting as well.

They'd also only allow one Fender dealer within a certain area, which called for a little 'creative thinking' to get round when we wanted Fender kit.

We were 'Gibson' so we did a deal with a 'Fender' shop in the next town - they supplied us at cost plus a drink and we did the same back.

[skej21]

[quote name='icastle' timestamp='1420810828' post='2653736']


Not sure if they still do it, but Fender dealers could have their franchise removed if they were caught discounting as well.

They'd also only allow one Fender dealer within a certain area, which called for a little 'creative thinking' to get round when we wanted Fender kit.

We were 'Gibson' so we did a deal with a 'Fender' shop in the next town - they supplied us at cost plus a drink and we did the same back.
[/quote]

On paper, price fixing is illegal so I think you'd find it difficult to find proof that companies make such threats :-)

You're right about dealerships being carefully controlled though. Certain companies have levels of dealership, like Fender won't allow you to order custom shop stock unless you have a custom shop dealership etc. Nearly all of these companies also protect existing dealers by not opening new dealerships up in nearby locations and creating competition. However, if they have a really successful online retailer with no showroom, they may allow another shop location to have a dealership as they are unlikely to take business away from each other.

Edited January 9, 2015 by skej21

[JTUK]

[quote name='icastle' timestamp='1420810828' post='2653736']
Not sure if they still do it, but Fender dealers could have their franchise removed if they were caught discounting as well.

They'd also only allow one Fender dealer within a certain area, which called for a little 'creative thinking' to get round when we wanted Fender kit.

We were 'Gibson' so we did a deal with a 'Fender' shop in the next town - they supplied us at cost plus a drink and we did the same back.
[/quote]

A lot of shops are quite desperate for a big name to validate the shop, so the likes of Fender have very tightly nailed down
supply contracts. I'm using Fender instance here but I am actually talking about another large name and the deal is very very
specific about do's and dont's... And it isn't always a one way street. If they honour the conditions, then that supplier is very good
to have onboard and to satisfy their criteria gives the shop credence to other big name suppliers.

[andy67]

[quote name='icastle' timestamp='1420810255' post='2653721']


Your information is wrong Andy.

The Moderators were discussing markups last year and, as an ex musical instrument retail person, I threw very similar figures to those that you've been using into the discussion.

One of the other Mods currently works in the industry and queried where I'd got my figures from.
The answer (which I got ribbed unmercifully for) was... 1984.

Back then 30/40% on major items was the norm and some 'accessories' could have as much as 70%, because that was what the market was used to.

Obviously, markup erosion to the current level didn't happen overnight, but it has happened.
[/quote] Quite happy to be wrong, just going on info imparted to me from a rep.

[andy67]

[quote name='skej21' timestamp='1420810596' post='2653733']


Based on first hand experience, I can promise you that mark up is nowhere near 45% at street price (which is always much lower than the RRP). Additionally, when you purchase the item off the manufacturer, you pay a cost price EX VAT, so that's an extra 20% of the price you bought it for that you have to add on at store level just to cover your own costs/bills. That's before staffing overheads, premises rental and all the other etc. You're VERY lucky if the percentage is half of your quoted 45% on most items.
[/quote]Again quite happy to be wrong, just enjoying the discussion.

[icastle]

[quote name='skej21' timestamp='1420811116' post='2653739']
On paper, price fixing is illegal so I think you'd find it difficult to find proof that companies make such threats :-)
[/quote]

Hence the 'Not sure if they still do it' comment.

They certainly did back in the mid 80's, but that was 25 years before the 'Competition Law' stuff that covers price fixing only appeared.

[icastle]

[quote name='andy67' timestamp='1420811643' post='2653746']
Quite happy to be wrong, just going on info imparted to me from a rep.
[/quote]

Yep.
You're going on what you were told which is totally understandable.
In comparison, I was 30 years out of date which is bleedin' ridiculous.

[Cameronj279]

[quote name='Grangur' timestamp='1420808479' post='2653671']


How do YOU know? You don't know their buy costs and overheads.
[/quote]

Indeed I don't and didn't claim to know either. I did however misuse "Mark up" though. I mean from the view of general consumer a several hundred pound saving is quite drastic.

[quote name='Mykesbass' timestamp='1420809073' post='2653691']


Bit of a moot point this as we are talking about music gear that people don't actually need, but want. Therefore, if they can afford the £850 bass, say it has taken them a year to save for it they only need to carry on saving for another 3 months and then they can pay the premium, which then means that good music shops can continue to provide great service like the one that Grangur enjoyed.
[/quote]

I agree however as I say several hundred pounds can be a lot of money for people especially when money is so tight for so many right now. I wish I was financially comfortable enough to voluntarily pay a premium like that.

As I said (and what seems to have been ignored) I generally buy second hand as majority of gear I would use isn't in local shops but when I do find something the price hike is generally quite small...usually only a tenner or so.

[Roger2611]

Where the mark up prices are made to look bad is when you look to trade something in and the dealer starts quoting "I only pay this much for a new one so can only offer you a quarter of that" Perfect example, I recently wanted out of my (totally mint) Hiwatt High Gain 100w head (current sale price between £900 and £1100) I wanted to trade for an Ampeg Pro 7 SVT (current sale price around £699) I was expecting to chuck £200 at the deal.....not a chance, PMT offered me £300 for the Hiwatt against an ex demo incomplete head, Richtone could only manage £200 against an ex demo, both shops quoting "it's what we can get them for and recent sale prices on Ebay" so exactly what mark up had they got in a £1000 head that only allows them to offer £250 as a trade in?

Neither shop got my business, I sold the Hiwatt for £400.00 and brought a mint used, fight cased Pro 7 for £350.00, not been back to either shop since and now have no plans to, a big loser for PMT as I have spent close to £10.000 in there over the past five years (I know that because the guy inadvertently showed me my account screen!)

[Mykesbass]

[quote name='Roger2611' timestamp='1420828527' post='2654031']
Where the mark up prices are made to look bad is when you look to trade something in and the dealer starts quoting "I only pay this much for a new one so can only offer you a quarter of that" Perfect example, I recently wanted out of my (totally mint) Hiwatt High Gain 100w head (current sale price between £900 and £1100) I wanted to trade for an Ampeg Pro 7 SVT (current sale price around £699) I was expecting to chuck £200 at the deal.....not a chance, PMT offered me £300 for the Hiwatt against an ex demo incomplete head, Richtone could only manage £200 against an ex demo, both shops quoting "it's what we can get them for and recent sale prices on Ebay" so exactly what mark up had they got in a £1000 head that only allows them to offer £250 as a trade in?

Neither shop got my business, I sold the Hiwatt for £400.00 and brought a mint used, fight cased Pro 7 for £350.00, not been back to either shop since and now have no plans to, a big loser for PMT as I have spent close to £10.000 in there over the past five years (I know that because the guy inadvertently showed me my account screen!)
[/quote]

I must admit, even when I was on the other side of the counter I couldn't understand how other shops thought they could get away with earning full whack twice out of a trade-in deal - OK, a little margin on the traded in item to cover overheads, but if you don't think you can move it easily turn it down! I did take a couple of pieces that I wasn't too confident of shifting and made a good price on them, but both times the sellers were very keen to offload.

[andy67]

[quote name='Roger2611' timestamp='1420828527' post='2654031']
Where the mark up prices are made to look bad is when you look to trade something in and the dealer starts quoting "I only pay this much for a new one so can only offer you a quarter of that" Perfect example, I recently wanted out of my (totally mint) Hiwatt High Gain 100w head (current sale price between £900 and £1100) I wanted to trade for an Ampeg Pro 7 SVT (current sale price around £699) I was expecting to chuck £200 at the deal.....not a chance, PMT offered me £300 for the Hiwatt against an ex demo incomplete head, Richtone could only manage £200 against an ex demo, both shops quoting "it's what we can get them for and recent sale prices on Ebay" so exactly what mark up had they got in a £1000 head that only allows them to offer £250 as a trade in?

Neither shop got my business, I sold the Hiwatt for £400.00 and brought a mint used, fight cased Pro 7 for £350.00, not been back to either shop since and now have no plans to, a big loser for PMT as I have spent close to £10.000 in there over the past five years (I know that because the guy inadvertently showed me my account screen!)
[/quote]

This is one example that really annoys me and causes much distress and distrust in the seller! I have seen me buying a guitar one week, attempting to trad it back less than one month later and being offered peanuts for it!

Edited January 9, 2015 by andy67

[timmo]

[quote name='andy67' timestamp='1420837092' post='2654189']
This is one example that really annoys me and causes much distress and distrust in the seller! I have seen me buying a guitar one week, attempting to trad it back less than one month later and being offered peanuts for it!
[/quote] Why does it distress you so much? If you aren`t offered what you think it is worth, then sell it privately. I bought a bass , i would be surprised to get half the price back from a shop, even though it is in ungigged, immaculate condition. Try buying from on online shop, and try trading in the guitar, and see how much you would get for it. I suspect, not as much as you would hope

[andy67]

Bit of a difference between 50% and 25% on immaculate!

[uncle psychosis]

Shops have to pay VAT and other niceties when dealing with second hand gear. I had a long discussion about this with someone who sells second hand gear and the numbers are terrifying. They don't offer peanuts because they're screwing you, they offer peanuts because it's the only way to make any profit.

Subtract VAT, overheads, and a small profit margin (5% ain't gonna cut it ) off what an item is "worth" second hand, that's what a shop can pay you.

Edited January 10, 2015 by uncle psychosis

[karlfer]

I was under the impression VAT wasn't applicable on used equipment?

If a dealer has something out at top whack and offers insult on trade, they are POTENTIALLY losing profit on 2 transactions.
A lot of folk decide to sell something and check the prices on FEEBAY. Most folk slap around 15% on to cover their FEEbay costs. For example my Thumb. £1150 on t'bay (inc courier) £900 on here (not inc courier).

Then the even more ambitious look at Andy Baxter

Edited January 10, 2015 by karlfer

[goingdownslow]

In 1973 I bought a Gibson EB3 from a local music shop that had not been in business long. He never had one in stock so rang Selmer, who sent one up the next day on which I paid for the delivery.
The bass cost me £240. My brother who worked in the shop later showed me the invoice which was for £144. Not a bad profit for a phone call.
Not long after the shop owner was driving around in a Rolls Royce.

Edited January 10, 2015 by goingdownslow

[ead]

[quote name='andy67' timestamp='1420809059' post='2653689']
From information given, at the £300 mark, it would cost £180.
[/quote]

Only if you believe the GM is around 45%. I would suggest evidence doesn't really support that assupmtion.

[molan]

[quote name='andy67' timestamp='1420811643' post='2653746']
Quite happy to be wrong, just going on info imparted to me from a rep.
[/quote]

No idea what he was repping but 45% markup is definitely old history.

The more exclusive and higher demand products are the lower the margin an MI retailer will make.

May be an odd accessory out there at 45% but not instruments or amplification that I know of.

PS - If he does rep basses or amps that actually sell at 45% markup then get him to give me a call and we'll stock them!

[molan]

[quote name='karlfer' timestamp='1420905199' post='2654825']
I was under the impression VAT wasn't applicable on used equipment?

[/quote]

VAT is payable on everything a vat registered shop sells.

Calculation is based on any profit made.

[molan]

[quote name='icastle' timestamp='1420811768' post='2653751']


Hence the 'Not sure if they still do it' comment.

They certainly did back in the mid 80's, but that was 25 years before the 'Competition Law' stuff that covers price fixing only appeared.
[/quote]

It is absolutely still the case that some large suppliers and/or distributors will aim to price fix.

Dealers discovered selling below a certain price and/or margin can find their supply 'severely restricted' in the future. . .

[molan]

It's interesting to see all the comments in this thread about Thomann and their buying clout.

In some cases they actually are not able to buy any cheaper than anyone else. However their logistics operation is so large and efficient that this can allow them to sell way cheaper than other European retailers.

A recent example is a brand that has a fixed price policy to all retailers. From what I understand Thomann have a large truck (or trucks) circling the USA collecting products and delivering them en masse to a central sea based shipping point.

Everything is put in a huge container and shipped together. I'd assume they have a big insurance contract that covers everything whilst in transit. There will also be a big saving in centralised paperwork on the importation and clearance fees.

Individual shipping cost per unit is negligible because so many things are coming over at once.

Conversely we recently bought two units from the same supplier. Our shipping cost was $400 with an additional $80 for insurance.

Depending on exchange rates that's a cost of about £150 per unit.

On this simple calculation Thomann could afford to offer £100 discount and still make £50 extra profit (and that's obviously excluding any other savings involved in running an online only business).

On the surface this looks like a good thing for buyers of this product. A straight £100 saving (or more) simply saving on shipping - the only people being hit on profits are the courier companies. Manufacture is still getting the same price and the end user gets it for less money.

The potential downside is that this particular product was previously unavailable to try at any retailer in the UK. We reintroduced the brand and lots of people have been able to try them out and have subsequently purchased.

If our margins are so eroded that we can't afford to stock this brand then it's highly likely it won't be available to demo anywhere in the UK. Obviously people could order online, try at home and return if not happy. This wouldn't allow comparison against lots of other similar products which, for some people is very important.

This isn't a moan about online retailers, that's just a different way of doing business that can be very succesful. However, as a gigging bass player I think it will be a sad day if the few decent shops in the country are closed down because of the new economic models