Where is the real money in making guitars?

[JacobE]

I just had an interesting thought, what would be the most profitable way to manufacture guitars?

Now I'm not really talking about Luthiers here as one would assume there profit margins/ sales in comparison to Bigger Manufacturers would be quite small. No what I'm talking about is those Bigger Manufacturers such as Fender and Gibson who have both "Budget" and "Premium" lines.

Where are the main sales/ profits from these companies coming from in terms of their product lines?

One would think that most of the money would come from those budget models (e.g. Squier or Epiphone) being mass produced in countries such as China or Indonesia due to the low manufacturing costs and their popularity.

Now of course there is a god chance I'm dead wrong, regardless I thought it was an interesting question to ask/ discuss.

[Phendyr_Loon]

I would say that sales vary according to the market and area. The larger guitar stores, in my area anyway, have a ratio of about 1 USA Fender bass for every 4 Fender import or Squier bass.
Judging by what my local SamAsh and GC stocks a would guess that they move more <$600 basses.
Not just Fender too, Ibanez, Gibson/Epiphone, EBMM, and Warwick/rockbass always run the potential to sell more low end models to a beginner to intermediate demogragh.
However, in regards to location, I can see an area like Nashville to move more higher end stuff in local shops with musicians passing through, and the iconic history of that part of the country. Not to mention the population of recording studios and famous venues bringing the sort of crowd that will pay more for quality gear.

[hrodbert696]

I have no idea, just musing... I certainly doubt that boutique luthiers run on a very high profit margin, even as expensive as their instruments are.

The thing with Fender/Squier or Gibson/Epiphone is that the different models on the scale are interrelated; people buy a Squier Affinity because it resembles an MIA Fender, and people upgrade to MIA Fenders because they're used to the Squiers they learned on so the pattern is familiar. If you removed either end of the line, the business model unravels. Actually, I wouldn't be surprised if the Affinities were what they call "loss leaders" in retail - products you sell cheap and even take a loss on so that people will shop in your store and spend money on the products that are actually profitable.

My guess would be that the profit is in the midrange - the $600-1200 instruments. Benefits of mass production but more profit headroom than in the bargain basement models.

[Sahe_Bassist]

i think i agree with your statement...however how many squire strat packs do you need to sell to equal what one american fender strat (guitar only) costs? 10? i dont know the actual numbers but thats something to think about...

i can say i've seen alot more budget brand instruments being bought than there premium counterparts...but again...how does it stack up?

good thread sir.

[Sahe_Bassist]

Originally Posted by hrodbert696

If you removed either end of the line, the business model unravels. Actually, I wouldn't be surprised if the Affinities were what they call "loss leaders" in retail - products you sell cheap and even take a loss on so that people will shop in your store and spend money on the products that are actually profitable.

this actually make alot of sense...i wouldnt be surprised either.

[Jazz Ad]

Originally Posted by Sahe_Bassist

i think i agree with your statement...however how many squire strat packs do you need to sell to equal what one american fender strat (guitar only) costs? 10? i dont know the actual numbers but thats something to think about...

If Fender works like most product manufacturers and they likely do, they make more money over a single Squier than over a single Fender.
For example VW make twice as much on a Polo as on a Touran.

[JacobE]

Originally Posted by hrodbert696

If you removed either end of the line, the business model unravels. Actually, I wouldn't be surprised if the Affinities were what they call "loss leaders" in retail

Very interesting point I agree, American made Fenders, Gibsons, Music Mans etc,are "aspirational" brands and the role that Squiers, Epiphones etc are essentially introducing them to the "watered down" version similar to the way that software developers give out trial versions to customers to encourage them to buy the full version.

Though this is not with out it's risk, think about all the kids who play for a few months and then sell there instruments/ lock them away in the cupboard surely this sort of behavior would affect profits. So one would think that they would take this into account and limit the amount of loss buy cutting back on production costs however immoral that may (remember people make these guitars in relatively poor conditions)

Another thing I'd like to point out is the fact that those intermediary brands e.g. the Vintage Modified Squiers or the Higher end Epiphones, the quality in terms of both build and sound is getting increasingly better and hence their value for the customer is increasing. This may mean that serious young/new players and even experienced players may not fork out the cash for "Locally" made instruments as they can get an instrument of similar quality with or without a few modifications to the instrument for far less money hence cannibalizing the sales made by the "Higher End" brands.

Lets not forget that tastes change as well just because you start out on some cheap Epiphone SG doesn't mean your never going to play buy a non Gibson "made" guitar.

Not trying to stir you though I still agree with the fact that it is those "Intermediary" brands that make the money i just don't think that everybody who buys a Squier is going to get an American pbass 5-10 years down the track.

[MatticusMania]

Q: Where is the real money in making guitars?

A: Selling them.

[JacobE]

Originally Posted by MatticusMania

Q: Where is the real money in making guitars?

A: Selling them.

You win.

[cjmatt]

When I was in college I did quite a few reports on Harley Davidson. Their working model doesn't actually begin with the manufacturing of motorcycles. They view themselves as a "lifestyle" brand and design and franchise products to meet the needs of their clients. This would include everything from toilet paper to their high end motorcycles.

Is Fender or Gibson doing the same? I would assume they are since you can buy Fender branded products at Target. And Fender has a deal going with VW right now. Fender did have a deal going with Sucker Punch Sally as well.

The Fender and Gibson names are very strong. They sell themselves. People want t-shirts and hoodies and belts and shoes with those logos on them.

A Fender t-shirt sells for $15 to $25 depending on where you buy it. When your buying t-shirts in the quantities it takes to supply every Target and mom and pop guitar shop in America, the cost per shirt goes down to somewhere around 15 cents a pop.

That's where the money is....lifestyle oriented products.

[Pilgrim]

The money is in low end, high volume, inexpensive basses and guitars made overseas.