2nd party dealers

chutsk10 · #1 08-02-2007, 12:47 PM

I don't understand this concept, If I wanted to buy some parts from Hipshot, for example a 5 string bass bridge, they are charging $144, however the same bridge can be found all over the net from anywhere between 95$ and $125. How are second party dealers able to sell it cheaper when they also need to turn a profit? You'd think it would be cheapest straight form the manufacturer, or atleast that's how I see it.

BassikLee · #2 08-02-2007, 01:06 PM

That is because Hipshot is selling it to you at full retail, where dealers typically get a discount off retail. Sometimes, this discount is up to 50%. Manufacturers do this to A) support their dealers, and more importantly B) to discourage end users from buying direct. They'd rather deal with folks who buy in bulk than a guy buying one piece, and asking questions, and....

Lee

pointbass · #3 08-02-2007, 01:12 PM

Many times the manufacturer doesn't want to deal with you. Face it, it's a lot easier to sell 100 bridges to a distributor than to deal with you and your 1 bridge.

I have no idea how Hipshot works, but for the sake of conversation, if the $144 is the "list" price, a distributor will pay much less per piece (say 40% or 50% less) assuming they'll agree to purchase 100 (again, for purposes of explanation) bridges. And since they buy them cheaper, they can sell them at a discounted price, which is less than the list price from Hipshot.

Plus, by selling at only list, or near-list, price to the consumer, Hipshot is protecting their distributors. If Hipshot were to undercut the distributors, why would the distributor ever want to buy anything from them at all ???

Edit: Stated much better by Bassiklee, above ^^^^^

scootron · #4 08-02-2007, 01:17 PM

+1 on both replies. This is basic marketing. No retailers will carry a line if they have to compete directly with the manufacturer. There are a few manufacturers that sell "factory direct", but they usually don't have much or any of a retail network.

BassikLee · #5 08-02-2007, 01:30 PM

Competing directly with manufacturers....

the following is a little tale.....

Let's say there was an amp company out west. We'll call them CSQ. Now, CSQ comes out with a new line, call it LP2. They had an LP line, and the LP2 line was to all but replace the LP line. In an effort to protect smaller dealers, like myself, from those who would whore out the line, CSQ dealers were made to sign a minimum SELLING price agreement in order to carry the LP2 line. For the sake of argument, the largest LP2 amp at the time, the LP632, had an MSP of 1296, with a dealer cost of about 1050. There was a decent built in margin there for guys like myself. Well, after a short while (cupla years maybe?? 3-4ish??) CSQ ended up with a pile of B and/or C stock amps, so they openned up a "red tag" type store online. Therein, they were selling the LP632 for less than dealer cost, which was HUGELY less than dealers like myself could sell them to the general public for, and, THE RED TAG STORE SOLD TO THE PUBLIC!!!!!!!!!!!!!!!!!! Suffice it to say a gentleman by the name of Lee Bob got an earfull from little old me on that one. The red tag store was short lived, as I am sure I was not the only CSQ dealer fuming over it.

The above story is true, but names have been changed to protect the innocent.....

Lee

chutsk10 · #6 08-02-2007, 03:06 PM

Haha great story.

Thanks, it totally makes sence that the manufacturer would rather sell hundres of products to a dealer no questions asked Instead of having to deal with single buyers, pass the burden onto the dealer.

It's still ****** to know as the consumer how much things are marked up these days.

BassikLee · #7 08-02-2007, 03:16 PM

The markups are not that high. The difference between dealer cost and retail can be high. Take a $1000 retail widget. If it is an A mark item (which few are these days) the dealer pays $500 for it, often plus shipping. So, he's got say $540 in the widget. He sells it to you at 35 or even just 30% off, so 650 or 700. He's GROSSED $110 to $140on something that cost him $540, of his money. Now, subtract shop rent, payroll (for store employees, not the owner's profit), taxes, insurance, etc, etc. What has he actually made on the widget??? $50???

chutsk10 · #8 08-02-2007, 03:32 PM

The markup if you buy direct form the manufacuturer is high, again with hipshot as an example.

They charge $144, but they are able to sell it to a dealer for much much less if the dealer can then go and sell for $95 and still be making a profit.

Say hipshot wants to make 25% and the dealer wants to make 25% and yet is able to sell it for $95 then the bridge itself is around half the price to manufacture, in this case $50... and if you buy direct from hipshot they charge $144

... I know it's crude math and I don't know how much companies mark things up but understand it is not all profit to them as they have overhead... But none the less, isnt the markup huge if you don't go through a dealer.

BassikLee · #9 08-02-2007, 06:25 PM

OK, that markup. Yeah, but again, remember they're doing that to discourage folks from buying direct. They probably don't have the infrastructure set up so they can sell onesies-twosies, and when you call, ask "which of these three bridges do I want, in brass or aluminum, in chrome or black" it takes up valuable TIME from their sales guy who'd rather sell 300 of them today than ONE.

chutsk10 · #10 08-02-2007, 09:10 PM

Completely understandable and it makes sence.