#1
anyone used to work at a guitar store? How much are guitars marked up?

heres my theory, im gonna use the epiphone les paul std plus as an example:

its made in a third world country for about 150bucks

epiphone sells it to guitar center for 350.

guitar center sells it to you for 550 plus tax


so basically, my theory is you pay 400 dollars more than its made. now i understand everything you buy, your paying more cause people have to make a profit, but i still think guitars are wayy overpriced.

what do you guys think??

and is there anyway to get it straight from the manufacturer??

if not then how much is a decent discount to ask for at guitar center?
#2
i think that you are complaining bout nothing cause if you live here, guitar center sell it to the stores from here for 750 and thay sell it to u for the reasonable price of 1000 bucks
#3
The only way you could get it from a manufacturer would probably only happen under the following circumstances:

A. You work for Epiphone.
B. You are buying those guitars in bulk.
C. You are buying them solely for resale to Guitar Center and other stores.
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#5
You live in America

You know little to nothing of crippling markups
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#6
Quote by Dopey_Trout
You live in America

You know little to nothing of crippling markups



hahaha i guess you guys r rite n im just bitchin...im just sayin kinda sucks to pay 1000dollars for something made for 200 or watever....damn the man and his evil ways
#7
Buy direct from the factory here in the USA, Carvin!
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#8
i get my guitars at cost price anyway.. so im not complaining
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#10
theres more into that. theres shipping from those third world countries, ppl who operate every little thing needs to get paid somehow. we could open more jobs too probably, for better QC, but that would increase the price. ur not gonna win.
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#11
Bhaok

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#12
i'm sure you're paying much more than the cost of assembly, even with carvin. carvin's guitars are still a bit pricey (cheapest customs are still close to $1000). i know the same is true with shoes. those converse you pay $40 for cost $5 or less to actually make. sucks, but such is mark up and profit. plus there are tons of people in the middle that need to be paid. those who supply materials, those who assemble, those who ship.
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#13
I am willing to bet the GC margin on a $1000 guitar is in the 15 - 20% range. Probably more like 30 - 40% on a cheap guitar.

Companies price product where it will sell, period. Why would they sell something for $400 when people will buy it for $700? Each company will extensively research each product and figure out whether it's better to sell more units for less money, or vice versa. A lot of it depends on the name on the headstock as well.

I think the Carvin website is very cool, and all the options they have is awesome. However, last night I priced out what I would buy, without even the finish I would really want, and it was $1150. Would I buy that over an Ibanez Prestige, for less? Tough call.
#14
It all depends on the store, places like GC, MF and the other big retailers buy huge qualities right from the factories and get better discounts that is why the can offer low prices compared to the small mom and pop stores. GC and other big name stores make a lot of money selling accessories like strings, straps pick-ups etc. From what I understand there really is not a huge mark up on guitars that's why it's hard to negotiate the price on new equipment like you can on used stuff. I know a shop will pay about 50 to 60% of what they think they can resell stuff for. I wouldn't say you get ripped off I don't think you can do better.


John
#15
Quote by potatohead_33
I am willing to bet the GC margin on a $1000 guitar is in the 15 - 20% range. Probably more like 30 - 40% on a cheap guitar.

Companies price product where it will sell, period. Why would they sell something for $400 when people will buy it for $700? Each company will extensively research each product and figure out whether it's better to sell more units for less money, or vice versa. A lot of it depends on the name on the headstock as well.

I think the Carvin website is very cool, and all the options they have is awesome. However, last night I priced out what I would buy, without even the finish I would really want, and it was $1150. Would I buy that over an Ibanez Prestige, for less? Tough call.


True but Carvin put their guitars against the 3K guitars. I have two, a Bolt kit ($600) and a DC127 ($1240). Their consistant quality are second to none.
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#16
Quote by potatohead_33

I think the Carvin website is very cool, and all the options they have is awesome. However, last night I priced out what I would buy, without even the finish I would really want, and it was $1150. Would I buy that over an Ibanez Prestige, for less? Tough call.


An Ibanez Prestige is a production guitar who's design is set in stone. They are mass produced in factories. Any Carvin you buy other than a kit has specifications that you yourself choose and is made to order after you order it, not before. Consider the difference between a hamburger you get at a nice restaurant versus on at McDonalds. That's why there is usually at least a 4 month wait.
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#17
I got mine in 6 weeks. They are certainly very nice. You do get a lot of options to pick from.

On the original topic, you're never gonna get a guitar for that close to materials cost unless your best friend builds them in his back yard.

Thing is, the price you pay is the "profit" for the store plus what they paid the manufacturer. What the store pays is the manufacturer's profit plus the manufacturer's cost.

Out of the store's profit, they need to pay things like rent, payroll for their employees, electricity for lights,ac/heat, and computers, phones bills, probably internet, water (toilets and such). Also, they probably need to either pay for warehousing through a 3rd party or pay a lease or a mortgage on their own warehouse. When I worked in e-commerce, we got charged per box each month. That adds up after a while. Sicne they don't sell every product they have as soon as they get it (they need to keep stock available because people like to look at stuff) they have some amount of their company's money tied up in inventory. I'm leaving out insurance, inventory shrinkage (stuff breaking or ending up missing) and a numebr of other things to simplify. Now, out of how ever many guitars they sell in a month, they have to be able to pay all these bills. So they can't give the products away without a significant profit or they go out of business pretty quick.

The manufacturer will generally have less headaches, but they'll have much less profit to work from and they have to set money aside to cover the cost of honoring their warranties as well.

So yeah, if you look at it as it costs $150 to make and you pay $1,000 it sure sucks, but to bypass the middle man, the manufacturer would have to invest a LOT of money into direct marketing, which will tend to drive their cost up quite a bit as they're usually not set up to do business transactions on the small scale most of us could afford to interact with them on. Early on, it might even cost them more money to sell the product to us than they'd make.
#18
I'm getting my old summer job back for the holidays, if you want I'll do a rundown of the cost of most of UG's favourite goodies.
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#19
i don't have much to offer, but i know for a fact that BOSS pedals are only marked up a very small margin. i can't remeber exactly but it's less than $10 IIRC
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#20
I dont know, but it was worth it lol
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#21
Quote by necrosis1193
I'm getting my old summer job back for the holidays, if you want I'll do a rundown of the cost of most of UG's favourite goodies.


You going to offer me some sweet deals? Your store sells Caparison guitars right?
#22
Welcome to capitalism.
What exactly were you expecting? Also, you leave out a lot of very obvious over-heads for the business such as the premises, energy, staff, marketing.
Ever wondered how much per day if costs to keep that stuff moving?
Been in Japan since August, no fucking money left!
#23
Quote by azn_guitarist25
You going to offer me some sweet deals? Your store sells Caparison guitars right?


I can give you the price the store sells at so you know just where to set your haggling. And we're a subsidary of Guitar Center, you tell me.
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#24
Quote by necrosis1193
I can give you the price the store sells at so you know just where to set your haggling. And we're a subsidary of Guitar Center, you tell me.


LOL not much haggling on Caparison's unfortunately
#25
It's because Gibson tried charging less and they ended up selling less. There's an inverse price-demand relationship. Gibson is seen as a premium good so charging more makes it appear more valuable, thus increasing sales.

http://books.google.com/books?id=4DmFPriyxEEC&pg=RA1-PA354&lpg=RA1-PA354&dq=gibson+guitar+pricing+principles+of+marketing&source=bl&ots=SQp4rw7yOi&sig=vI0i1B4pzDkCvcqBSveu-DDkwNA&hl=en&ei=1E0bS4KlOI_KsQOy8uj8BA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CAwQ6AEwAA#v=onepage&q=gibson&f=false

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So ... blame the man (human nature/Gibson owners)
#26
People here seem to have little understanding of competition and profit. Nobody can stay in business without making enough beyond cost-of-materials to make a living. But nobody can stay in business charging much more (for an equivalent product) than someone else who IS making a living.

If the notion of making guitars for $200 and selling them for $1000 were remotely accurate, a hell of a lot of people would get out of the business of making shoes and canned peas and hamburgers and start making guitars. Why settle for 10-12% profit when you can make 500%?

If you live in a world where everyone not working for free and selling at a loss is "ripping you off", you're doomed to live in a rotten world. Sorry about that. (Oh yeah, we should be aware that Gibson has nearly died a couple of times, and is probably not profitable right now...)
Last edited by phank at Dec 6, 2009,
#27
Guitars a niche item and thus are going to be highly marked up. I don't work at a gc or anything but I bet most guitars have 30-50 percent margin. And as you said obviously there is a mark up from manufacturer to retailer, but also keep in mind, the mark up alone doesn't equal the profitability of the store. A guitar store has to have a huge inventory most of which is just sitting there for long periods of time, they have to pay all their overhead and employee's. Retail is not a very profitable industry in general. It's dying, if it wasn't for the fact that people like to see a product and touch it before they buy it, it would be dead. It's a horrible business model. But there will always be a demand for it. So don't think you're getting ripped off, it's just the way it is. You can probably get 10% off a guitar at GC though, if you're a good negotiator.
#28
Quote by phank
People here seem to have little understanding of competition and profit. Nobody can stay in business without making enough beyond cost-of-materials to make a living. But nobody can stay in business charging much more (for an equivalent product) than someone else who IS making a living.

If the notion of making guitars for $200 and selling them for $1000 were remotely accurate, a hell of a lot of people would get out of the business of making shoes and canned peas and hamburgers and start making guitars. Why settle for 10-12% profit when you can make 500%?

If you live in a world where everyone not working for free and selling at a loss is "ripping you off", you're doomed to live in a rotten world. Sorry about that. (Oh yeah, we should be aware that Gibson has nearly died a couple of times, and is probably not profitable right now...)

Not to be an ass but you're logic here is very wrong. These people don't get into the guitar business because 1) there isn't that much demand for guitars and 2) there is a high barrier for entry. And those products you mentioned are marked up far more than guitars. Those aren't luxury items, guitars are. Everyone must wear shoes and eat food, consumers have less power over the pricing of such objects (well not shoes, if people weren't superficial losers no tennis shoes would sell for more than maybe $30, but there is still a market for low margin shoes)
And a world could not exist where everyone is selling at a loss, but if consumers were actually intelligent one would exist where stores only made enough money to 1) pay their employee's and 2) continue to do business. But 90% of consumers are idiots so this will never happen.
In conclusion, the guitar market and no other market will be changing anytime soon because on a global scale, everyone would have to wake up one day with a drastically different view on the world. They would also have to gain an education in economics and an understanding of mathematics over night which again are things that very few people possess.
Don't worry about the pricing of guitars, it is what it is. The manufacturers won't sell you a guitar cheaper because they'd then be undermining their biggest buyers, basically just accept it. Buy used, and try to make more money. That's the only way you're going to overcome the pricing.
#29
Quote by whysky
i think that you are complaining bout nothing cause if you live here, guitar center sell it to the stores from here for 750 and thay sell it to u for the reasonable price of 1000 bucks


Same as Australia!
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#30
Quote by Dopey_Trout
You live in America

You know little to nothing of crippling markups


This isn't really relevant, but i couldn't help but notice this guys sig.

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#31
Quote by IbanezRGS
This isn't really relevant, but i couldn't help but notice this guys sig.

Dihydrogen monoxide= 2 hydrogen 1 oxygen=H2O= Water is infecting our water supply!!!!



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#32
If you want a guitar, cheap, buy it at a pawn shop, or make it yourself.
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#33
As I said, some people have almost no clue about how business operations. But fortunately, here we have a completely clueless person who illustrates the general ignorance well enough to serve as an academic lesson, for those interested in the Dismal Science of economics.

Quote by KurdtStaley
Not to be an ass but you're logic here is very wrong. These people don't get into the guitar business because 1) there isn't that much demand for guitars and 2) there is a high barrier for entry.
This is a misunderstanding, which we need to nip right in the bud. Where there is profit to be made, capital will be available to make it. It doesn't matter if demand for a product is low, or if barriers to entry are high. If you can make 15% while everyone else is making 12%, this is where you will invest. If nobody is making more than 5%, then that market is overcrowded and capital will leave. The product itself simply does not matter.

And those products you mentioned are marked up far more than guitars. Those aren't luxury items, guitars are.
No, once again, businesses across the economy, ALL businesses, operate at around 10-12% profit margins. The only exceptions are for unique patented inventions in high demand, which can dominate a limited market and make HUGE returns until functional equivalents appear MUCH cheaper, that don't violate the patent. This might take a few years. Guitars (and shoes, and peas) don't often enjoy that temporary privileged position.

Everyone must wear shoes and eat food, consumers have less power over the pricing of such objects (well not shoes, if people weren't superficial losers no tennis shoes would sell for more than maybe $30, but there is still a market for low margin shoes)
Again, the assumption here seems to be that higher price is the same as higher margin. But this is not usually the case. Pricing is set by competition - not just between competing shoemakers, but between making shoes and making guitars, or doing banking, or offering a maid service.

Now, there are structural issues involved as well. Grocery stores sell actual food items at cost or even a very slight loss, to get customers into the store to buy sundries (non-food items) which have very much higher profit margins. But the store as a whole had better make 10-12% profit over the long run, or the owners will close it and go into making guitars or whatever where they CAN get those profits.

And a world could not exist where everyone is selling at a loss, but if consumers were actually intelligent one would exist where stores only made enough money to 1) pay their employee's and 2) continue to do business. But 90% of consumers are idiots so this will never happen.
Except in the real world. Businesses are in business to make a competitive profit. This means making payroll, making or buying inventory, paying overhead, paying taxes, and returning money to shareholders (the profits). I suppose you could say that "continue to do business" MEANS making 10-12% profit over the long run, because if you don't you won't continue to do business. But consumers aren't idiots for paying the total cost of what goods and services actually cost. If they did not pay that much, those who produce what they are buying would go broke.

In conclusion, the guitar market and no other market will be changing anytime soon because on a global scale, everyone would have to wake up one day with a drastically different view on the world.
Interestingly, this is true. In a competitive economy, businesses MUST turn a profit, or go under. Other nations have tried controlled ("command") economies not based on supply and demand. All have gone broke. And people still wake up with different views of the world - why don't we just all LOVE everyone and GIVE everything away, and we'll all be so happy. But this approach has never worked either. Maybe someday some genius will invent a way to sell everything below the cost of producing it indefinitely. But don't hold your breath.

They would also have to gain an education in economics and an understanding of mathematics over night which again are things that very few people possess.
Amen to that! But to keep profits competitive across every sector of the economy, with no special or unfair advantages or disadvantages for anyone, doesn't require all that education. All it requires is that consumers shop around. There must be hundreds of Strat clones out there for prices ranging from $50 to $50000. And there are hundreds of non-Strat guitars competing with all of THEM. So if consumers generally try to buy the most bang for their buck, the system will continue to work fine.

Don't worry about the pricing of guitars, it is what it is.
But it doesn't hold still. You can buy a Fender strat, or a Chinese Strat-type guitar, or a Carvin strat-type guitar, and all of these are different business models offering different advantages and disadvantages. If some business model produces higher profits, you'll see more people adopting it.

The manufacturers won't sell you a guitar cheaper because they'd then be undermining their biggest buyers, basically just accept it. Buy used, and try to make more money. That's the only way you're going to overcome the pricing.
Ever heard of Carvin? How about Rondo? With the advent of the internet, the direct-to-customer model is growing increasingly attractive to makers and sellers. The cost Guitar Center shoulders of warehousing, maintaining, setting up, paying staff and overhead, shoplifting, and so on actually adds significantly to the cost of each guitar. But in exchange, you can try before you buy and you can do a lot of immediate comparison shopping. Is it worth an extra 30% in price to do these things? If you don't think so, just head for the direct sellers.

Now, it's possible that the electric guitar is past its prime and total overall sales are starting to decline, being replaced by higher sales of computer-generated music, DAWs, and the like. I read one opinion that Guitar Hero prolonged the effective sales life of electric guitars, all by itself. And if this is true, the guitar business may face a shakeout like other businesses whose product lost favor with the public generally. But shakeouts are NOT going to mean cheaper guitars. They only mean fewer choices.

The used market is just another option, but less predictable in the sense that you can find steals (sold by suckers) and ripoffs (sold TO suckers). But if nobody makes new product, there won't be used product to be bought. And you're still shopping around for the best deal you can find. The used market is another check on the profitability of the new market, anyway. If new guitars are priced too high (above that 10-12% profit), this drives buyers into the used market. Supply and demand don't go away.
#34
I don't know anything either, but just like any other goods. Guitars gets shipped around, handling, flight, caring, electric bill @ shop, sales associate who sells you the guitar, they all need to be paid for.

AND ABOVE ALL, for guitars? the other guitar next to the one you baugh that DOESN'T get sold, then gets dusty, and decays one day and never got sold. Am i right?

Everytime I drag my brother to the guitar store(not a fan of instruments,listens to pop/trance). he'd always say"How the hell do these people make money??" and i can only give what you said.

PS: I read the above thread, since its too long im assuming my above concludes what you said, in a realy brief horrible way .
Someone should SERIOUSLY write an article about this. its really interesting
Last edited by howangcturtle at Dec 13, 2009,
#36
Quote by dave_molina
anyone used to work at a guitar store? How much are guitars marked up?

heres my theory, im gonna use the epiphone les paul std plus as an example:

its made in a third world country for about 150bucks

epiphone sells it to guitar center for 350.

guitar center sells it to you for 550 plus tax


so basically, my theory is you pay 400 dollars more than its made. now i understand everything you buy, your paying more cause people have to make a profit, but i still think guitars are wayy overpriced.

what do you guys think??

and is there anyway to get it straight from the manufacturer??

if not then how much is a decent discount to ask for at guitar center?
LOL I love it when people who have zero understanding of business and/or economics come up with theories.

I don't even know anything about business, but I can already tell you several flaws in your model.

guitar dealers buy a lot of the guitars at wholesale prices. if you buy from the manufatctuer, you're going to pay the MSRP, which is far beyond the wholesale. What the guitar store charges will be less than the MSRP but above wholesale. That way, they make a profit. Lets say that they buy 50 les pauls at the wholesale price of 350 per and then sell for 550 per and make $200 per guitar. Now, lets say that your local guitar center sells 20 Epiphone les pauls in a day (which is probably a stretch), so they've made $4000 that day. How much of that goes into maintaining the store? How much of that has to pay employees? There is a lot of overhead costs that are involved, not all of it is pocketed by money grubbing suits.

This applies at the guitar maker/retail store interface as well.

Complain all you want about profits, but consider this, profits make the business lucrative, what happens when you generate more revenue? higher returns for shareholders, more investors, which allows the corporation to grow and expand and as a result pump out higher production, which allows wide distribution of these guitars. and thus, when everyone and their mother wants an epiphone les paul, they can get one.

have you ever thought about it that way?
Last edited by al112987 at Dec 14, 2009,
#38
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#39
Look at it this way. A guitar center orders 1000 of the same guitar to be distributed amongst stores. The maker sells em at 1200 bucks a pop. Since GC is ordering 1000 of em, the maker gives them a bulk discount. They get 1000 guitars at 850 bucks. Split em up amongst stores and sell em all at 1000 apiece. You've just gotten a guitar for $200 less than the maker, and GC made a $150 profit.

Tell me how that's getting ripped off. Honestly, in the long run, guitars are still way overpriced for the sole fact that most of them are manufactured. A hand-made one of a kind axe, should be expensive as hell, that's a work of art. A manufactured chunk of wood with strings? No. Problem is nobody wants to be a guitarist. The few that are curious buy Squier. Demand sucks, so to keep in business, supply gets more expensive.
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#40
Try buying all the parts that make a guitar, building it yourself. And see how much you would want to sell it for...then compare it to other guitars in the pricerange. I bet the one you built is a lot worse even though you spent weeks building it. Wood and parts are not cheap, then add in the time and skill to make a quality guitar. Guitars are great values. Guitar companies are offering a service that you can't or aren't willing to do yourself. Live with the prices or build one yourself, but I doubt you're willing to spend the time and money on it.