disillusioned with 'retail'

[BazzTard]

retailers buy things cheaper than they sell them for? wow didn't know that.

My fave guitar SHOP will match any online price for anything. Then they drop another $50 off. They also offer friendly advice, allowing me to play any expensive bass thru any expensive amp that I would never afford to buy. They even instal any pickup I buy for FREE! Plus I can browse thru their drum,guitar,recording,keyboard sections too! And I can chat with the bass guru about different pedals,strings,accessories to buy/try/order.

All this for less than I can find online,apart from the odd occasion an online retailer sells something really cheap,like with my MXR M87,which was $130 cheaper than any store could offer it for. I'm sure the online seller sells a few things at a loss to get people to their site.

 

[ole Jason]

Recent sales of the same bass on the friendly talkbass classifieds are $275 and $250 -- bargains to be sure for a hardly used instrument.

That isn't a "bargain." That is the current market value for the bass.

 

[Big Hoss]

It's basic economics. A manufacturer makes a product, and either sells direct to the consumer, or via a third fourth, or even fifth party. The number of steps between MFG and consumer varies greatly, but let's say there is the following structure...

#1. Gear Manufacturer. Including all the costs in labor and materials that entails...
#2. Wholesaler. This could be an independent wholesaler, OR it could be owned by the retailer. Including all the costs in labor and materials that entails...
#3. Retailer. (Your friendly neighborhood guitar shop, or big box music retailer). Including all the costs in labor and materials that entails... This level typically not only provides final sale but also typically support to the consumer (You typically don't send your instrument back to the MFG for things like setup, fix minor issues with POTs or pickups...)

Each of these levels have facilities, utilities, labor, and many, many other costs. I'm pretty sure you don't work for free, so why would you expect any one of the people providing their time and labor to get that item to you to do the same?

Many times retailers do make profit on items, but it typically isn't on the items you'd expect. Don't be mistaken, your local guitar shop guy is going to try to make $$ on every sale he makes, but without a doubt, many of thsoe huge % off offers are loss leaders, designed to get you in the door so that either now or soon after will purchase a good number more items at full price without complaining about it.

Instruments, and other gear are FAR better resold direct. You typically won't get anything more than 25% of original retail on trade in IF you are lucky... That's the way it works, and that money goes to keep people paid...

 

[drummer5359]

So businesses are in business to make money? You don't say!

Stunning.






I support my local Mom and Pop stores, buy used through classifieds, even buy from GC on occasion. I bought three brand new basses this year.

I ordered my Rickenbacker 4003W from Pittsburgh Guitars because they are good guys who deserve to make a living. They gave me good competitive price.

I bought my Fender American Deluxe Dimension HH V from N'stuff music, another local retailer. It was a bit of an impulse buy. I had the money in my pocket and saw online that they had one in stock. Again, they gave me a good price on it.

The Honeyburst -P that is an FSR for GC, I caught it on one of their sales. I like that the cheapest one came from GC.

 

[two fingers]

Craigslist is a tough sell for me. Everyone wants to trade two gophers and a left tennis shoe and threaten violence if you laugh.I miss the pre-internet days.

Hey jerk! I told you those gophers only had twelve freakin miles on them and that if you ever mentioned this again I was gonna kick yer face in! So bring me yer face right now!

 

[hdracer]

I do sell on CL...but it can be a challenge. Apparently the NO TRADES-CASH ONLY doesn't apply to some dipstick with a X-box to swap....then there is the no-shows, low-ballers and tire kickers. But I do manage to sell stuff at a reasonable rate eventually.

I have had more of that BS on here than I have on CL. Then you have to eat the shipping and PP fees.

 

[Jefff]

In my business we have a saying.."If I could buy you for what you are worth and sell you for what you think you are worth I would be a millionaire."

Thats how too many of us think of our stuff.

 

[iualum]

Dealers will never give you more than 50% of what they will resell the used item for. So you should never sell to a dealer, unless you are desperate for the cash.

Always try to sell it yourself. You could sell the bass for 75% of what the store would and make more money. Let's say they will give you $200 to resell it at $400, you could sell it for $300 which is a better deal for both you and the buyer. Also keep in mind that whatever your asking price is, the buyer will try to get you to "deal"...I certainly do that. So when selling I ask a little more than I really want, say ask $350 when I want $300.

Now the question of whether your $600 bass is worth $400 in "hardly used" condition is really up to the buyer. I wouldn't pay more than that myself...used is used.

When selling, if you want top dollar expect to wait for it to sell. If you need the money quickly, set a lower price.

 

[SamJ]

I wish more manufacturers were like Mesa... Pretty much, like Rolex, as well as many German brands like Festool, Fein, etc.. , Mesa holds to one price, period. There is no inflated "List" price then the 40% off "street" price which is then further discountable depending on the retailer... with Mesa, you have THE price.. and this not only keeps it safe and simple to the buyer, but makes it easy to re-sell their stuff as you're never in danger of losing your pants.

 

[morgansterne]

MAP = Minimum Advertised Price. That's why the ads often state "Call for better price', 'Email for better price', or 'Add to cart for better price'. They can still sell the stuff for whatever they wish.
.

I don't think that's always true. Mesa and other manufacturers had minimum sale prices (as of around 1999 when I worked at guitar center for a while) and we were not allowed to give discounts under any circumstances.

 

[Big Hoss]

I don't think that's always true. Mesa and other manufacturers had minimum sale prices (as of around 1999 when I worked at guitar center for a while) and we were not allowed to give discounts under any circumstances.

Hewlett Packard does this with their equipment as well, and in my recent search for a new amp, it would appear that Fender is doing something similar...

 

[96tbird]

Wha? I had no idea! Yep, this OP belongs right up there on '60 Minutes'.

I hope you never see the markup on eyeglasses. Up to 1000%.

 

[Killer Of Giants]

I would never begrudge a business from making a profit, but I always try to buy anything of real expense used. Cars, musical gear - all used.

me to Harry

 

[placedesjardins]

Thanks to an over sharing by a friendly independent music store employee, I now know what their costs run.

I was seeing what I could get for a hardly used bass bought at a common online price of $599 and hoping to get $400, but their cost for the same instrument new is $345, so they could hardly be persuaded to give me $400 used for something they could buy new for $345. So when these 20% and 30% discounts come along, even independent stores maintain some profit margins.

Recent sales of the same bass on the friendly talkbass classifieds are $275 and $250 -- bargains to be sure for a hardly used instrument. Given those numbers I'm probably just going to ship this to a friend, rather than try to sell it. Given I keep acquiring more instruments I will one day have to avail myself of ways to also sell off the discards through talkbass classifieds, e-bay or craigslist.

I imagine national chains instrument costs may be even lower than these independent stores. I don't know. I had to order this particular bass at my local mom and pop store and was happy, theyur were able to provide internet prices.
And yes, I realize there are overhead costs. My other local independent music dealer has told me everything he sells has to be 40% over his cost for him to cover his overhead and stay in business.
And it looks like $345 is about 60% of $599 so I shouldn't be too surprised, and yes I want these independent stores to survive so I do patronize them rather than the big chains.

Maybe I'm just a cheap guy and naïve and retail business model seems exorbitant and harsh, but hey more reason to buy used.

Actually, that's the nature of retail. Doesn't matter whether it is clothes, sports equipment, books, music instruments, etc. Grocery stores have a lower profit margin but they sell more per day to meet and exceed expenses. Retail stores are open for 8 hours or more a day. But unlike grocery stores, sales volume fluctuates through the week. So, on the days where a music store sells instruments that have a higher profit margin, those sales will cover for days where there is less profit made. Certain expenses like utilities, rent, and salary don't fluctuate. I used to work retail at a mall. Not great, but I didn't have a lot of choices. Some days, we (all the sales people in our department) sold thousands of dollars of products around Christmas season. Other days during January and February, we barely sold $100 (all the salespeople in our department) in a day. Of that $100 in gross sales, there was over a 50% profit margin made, so that's like $50. The store lost money on that day. The good months help to cover the bad months. If you don't figure in enough profit margin, your good days won't cover the bad days.

 

[placedesjardins]

The internet should have taken retail entirely out of the equation by now. If manufacturers can sell directly to us (which they clearly can) then why are we still dealing with retail mark-up?

It makes no sense. Clearly the manufacturers don't want to de-value their products by admitting that a large percentage was just the retail cut, but at the same time they weren't earning that cut anyway. I guess it would be difficult, contractually, to dump all of their global retailers simultaneously, but really what are the retailers doing except making products more expensive?

In the bigger picture of things, retail sales and wholesale or business-to-business sales are different. Overhead costs are different. Depending on the products sold, it may not be good business sense for a wholesaler/manufacturer to go 100% retail.

 

[Bim1959]

You have to remember one thing wrench45us. When the retailers buy that instrument from the corporation, it comes with a manufacturers warranty - anywhere from 90 days to 5 years, sometimes lifetime under certain conditions. If we buy your bass for more than what a retailer can get a new instrument for, will you personally cover it if anything happens in the year to 5 years afterward? Most likely not.

If you dont want to support a brick and mortar store, then dont and see how long it will take before they go under and you have to buy it online without trying it first to see if it's exactly what you want. Other things brick and mortar stores offer are product knowledge and repair. If you buy it online and it craps out under warranty, who's going to fix it for you? If you thought that brick and mortar store whose prices you thought were too high (and are authorized to repair it for you) will, think again. THEY DON'T HAVE TO!!!

I worked for a brick and mortar store as a service tech for over 20 years and was told by the service techs at the corporations that we had the right of refusal if a customer brought in a product that wasn't sold by us (that we were authorized to repair for) to them. We were told that we should give them the number to customer service and send them on their way.

Something for you to think about.....

 

[Bim1959]

So if I can buy that bass new from the corporation for $345, why should I give you $400 for yours? I cant warranty it like I could a new one. If anything Id do 90 days. And I have to make money off it, so I look it up on ebay (under completed listings of course) and offer you $50 - $100 less, depending on my mood. Why? Because I have to make money to keep the store open. Those bills dont magically pay for themselves. And the employees need paid and insurance and building payments - well, you know how it goes.

 

[Kevan Campbell]

I'm also one of the ones who remember when Mom & Pop music stores charged FULL LIST PRICE for gear. Complain, plead, schmooze, threaten, that was the price and you only got discounts at their discretion. Since we have more knowledge accessible to us now we're simply more aware of how profit margins work (or don't) in many industries. Used is still the best way to buy in my opinion, but there are times that it's to your advantage to take the financial hit on trading your gear in to a music store towards something they have.

For example, if I had the opportunity to purchase a pre-CBS Fender P in great and original condition that was priced around $2k and I didn't have $2k sitting around, you'd better believe that I'd trade in some stuff towards that P since that would lower the out-of-pocket expense for me for something that is rare, unique and/or will hold/appreciate in value. Sometimes a little loss up front is necessary to profit later.

 

[joebar]

I worked in the car biz for 25 years-
it amazes me-the current car dealer business model.

it is not uncommon for a person to have 1000 dollar payments/ month over 6 or 7 years-sometimes longer.
lets say it's a Cadillac Escalade; 100k new-a guy trades in his 4 year old Escalade(which has depreciated at least 50-60%; he paid 75K new for it). they give him 37K for it on trade + his tax differential towards the new one.

but the guy put down hardly anything on the 4 year old one and took the longest amortization he could to pay it off-lets say 7 years.
because he bought a vehicle that depreciated faster than just about anything and the length of his loan, he actually is upside down and owes more than its worth. the only thing he can do is:
-keep the old one and hope no major repairs come his way anytime soon
-or trade up and allow the dealership to roll his debt into the new one.

no problem-help is on the way!
dealerships roll the dice on these dream customers every day; and it amazes me at what problems people get themselves into.

so buddy gives away his old Escalade to the dealer for 37K-they detail it and spend 1K on it and get it ready for the lot for the weekend. if its a premium piece, it will sell in a few days. there is probably 10K profit In that car.

so buddy gets approved for a loan for $75K (12% tax + luxury tax+ protection package + extended warranty + purchase price - trade-in...) the total for the new one comes to 120k or so after the heart starts beating again.

he once again finances to the boobies-8 years/ roughly $1100/ month or whatever.

the dealer knows the customers' history though; he trades up every two to three years. they know he babies his cars too. he maintains it religiously because it will void his warranty if he doesn't; $120/hour in the shop every month-forks over $500 or so per month to the service dept.

rinse/repeat.

guy never owns the vehicles; in fact, most people cannot sell privately because they are so upside down and have no liquidity or equity.

these days, people treat auto dealerships much the same way home owners treat banks-as ATM's.

if people became content with their cars and paid them off and kept them, dealers would go under fast. their business model actually is a house of cards just like the sub-prime crash. they often over-extend credit and sell them stuff they know they cannot afford-but that is another story- and I could go on...

as much as i hate what the dealers do, it is ultimately the customers fault. no one made him trade in that car; he wanted instant gratification.

it is no different than trading in anything. profit needs to be made and this requires a willing participant

 

[Son of Wobble]

I worked in the car biz for 25 years-
it amazes me-the current car dealer business model.

it is not uncommon for a person to have 1000 dollar payments/ month over 6 or 7 years-sometimes longer.
lets say it's a Cadillac Escalade; 100k new-a guy trades in his 4 year old Escalade(which has depreciated at least 50-60%; he paid 75K new for it). they give him 37K for it on trade + his tax differential towards the new one.

but the guy put down hardly anything on the 4 year old one and took the longest amortization he could to pay it off-lets say 7 years.
because he bought a vehicle that depreciated faster than just about anything and the length of his loan, he actually is upside down and owes more than its worth. the only thing he can do is:
-keep the old one and hope no major repairs come his way anytime soon
-or trade up and allow the dealership to roll his debt into the new one.

no problem-help is on the way!
dealerships roll the dice on these dream customers every day; and it amazes me at what problems people get themselves into.

so buddy gives away his old Escalade to the dealer for 37K-they detail it and spend 1K on it and get it ready for the lot for the weekend. if its a premium piece, it will sell in a few days. there is probably 10K profit In that car.

so buddy gets approved for a loan for $75K (12% tax + luxury tax+ protection package + extended warranty + purchase price - trade-in...) the total for the new one comes to 120k or so after the heart starts beating again.

he once again finances to the boobies-8 years/ roughly $1100/ month or whatever.

the dealer knows the customers' history though; he trades up every two to three years. they know he babies his cars too. he maintains it religiously because it will void his warranty if he doesn't; $120/hour in the shop every month-forks over $500 or so per month to the service dept.

rinse/repeat.

guy never owns the vehicles; in fact, most people cannot sell privately because they are so upside down and have no liquidity or equity.

these days, people treat auto dealerships much the same way home owners treat banks-as ATM's.

if people became content with their cars and paid them off and kept them, dealers would go under fast. their business model actually is a house of cards just like the sub-prime crash. they often over-extend credit and sell them stuff they know they cannot afford-but that is another story- and I could go on...

as much as i hate what the dealers do, it is ultimately the customers fault. no one made him trade in that car; he wanted instant gratification.

it is no different than trading in anything. profit needs to be made and this requires a willing participant

Fascinating post, thanks. Obviously the type of consumer you describe helps prop up the auto industry. My question is, where does this type of car buyer typically
make the money to support his car turnover at $1,000 a month? Surely he can't be a business owner, or else he would exhibit more financial acumen. So what does he do for bread, typically, this type of buyer?