Profit mark ups and margins

JanekLubanski · May 2020

What are the usual percentage mark ups for a (guitar instruments) retailer/ seller? I suppose it could be any percentage that they want to charge. I was looking at a guitar on the Bay that appears to be a retailer selling their stock on the Bay. I've looked at the guitar a few times but haven't made a bid to buy it ( it's a buy it now item......not an auction). Now I've received an 'offer' price reduction of 23% off the original price. I still may not purchase it.....but it begs the question what difference in price from their supplier to the customer.

octatonic · May 2020

30% is typical but distributors/manufacturers often do discounts if retailers buy multiples, which gives them more margin to discount.

They can also get instruments on 'splits', for instance a 30/60/90 split where say they do a 9k order, they pay £3k after 30 days, £3k after 60 days and £39 after 90 days.

JanekLubanski · May 2020

octatonic said:

30% is typical but distributors/manufacturers often do discounts if retailers buy multiples, which gives them more margin to discount.

They can also get instruments on 'splits', for instance a 30/60/90 split where say they do a 9k order, they pay £3k after 30 days, £3k after 60 days and £39 after 90 days.

Thank you. I just might have to pull the trigger and buy it now......even though I have never purchased a guitar by mail order before. I always worry about what condition it will be in when it eventually gets to me. Apologies for any sellers on here who send stuff out in good order with adequate packing.

Even if I found the same guitar for sale in a local music store (post lockdown)......I don't think that I would manage to negotiate
a 23% reduction.

FelineGuitars · May 2020

Be aware that there will be stores so in need of keeping afloat during the lockdown that they may give away some margin to liquidate some stock assets possibly so they can simply pay their overdue supplier bills.

If you get offered a deal as an incentive to pull the trigger all well and good, but avoid getting into the mindset that unless the seller gives up ALL the margin you are not buying . That margin is the thing that must be used for paying rent and wages and other overheads . Without it a shop basically shuts down never to be seen again.

Few of us would like to get told by our bosses that we have to take 100% salary cut as the company is being forced to operate without making any money.

JanekLubanski · May 2020

I wouldn't wish to have all the sellers margin. I'm just thinking, as a potential buyer, that the 23% discount from it's original selling price is a most generous offer......I've had 5% 10% even 15% reduction offers before....but never 23%.

prowla · May 2020

One store had a bass up for £2395 on ebay; I made them an offer and they came back with £2250 as their best price, which I declined...

JanekLubanski · May 2020

prowla said:

One store had a bass up for £2395 on ebay; I made them an offer and they came back with £2250 as their best price, which I declined...

Same sort of thing with me. One store had a Fender Pino Palladino Precision bass up for £3,800 on the bay. I made them an offer and they came back with £3,500 as their best price, which I declined.

Pakhan · May 2020

JanekLubanski said:

What are the usual percentage mark ups for a (guitar instruments) retailer/ seller? I suppose it could be any percentage that they want to charge. I was looking at a guitar on the Bay that appears to be a retailer selling their stock on the Bay. I've looked at the guitar a few times but haven't made a bid to buy it ( it's a buy it now item......not an auction). Now I've received an 'offer' price reduction of 23% off the original price. I still may not purchase it.....but it begs the question what difference in price from their supplier to the customer.

Hi guys, been a lurker for a bit,

It really depends. Sometimes you get 40% sometimes 20%, sometimes just 10%. Most of the factory items (tuners, strings) as well as guitars offer a volume discount. Having said that, most of the time a discount of 20% is significant. It signals a serious attempt to move the guitar.

That’s why some of the mail order companies can offer lower prices, they can bulk their way into a better pricing, and reduce overheads on retail space. Incidentally, this is not meant to be an inditement, just an observation.

If you are talking about trade ins or consignments, it’s a different story. Some find they attract lower margins, others seem to be able to work it, I suspect when there is a good system in place to help turn around or there are sunk costs in marketing, consignments do make sense.

Terence

guitars4you · May 2020

Cash is king and to enhance cash flow on old stock, or excess stock, then the discount may well be higher than the profit margin - I've sold £10 notes before for £9 if quick cash is required - But it is not part of a regular business plan and obviously can't be

FelineGuitars · May 2020

guitars4you said:

Cash is king and to enhance cash flow on old stock, or excess stock, then the discount may well be higher than the profit margin - I've sold £10 notes before for £9 if quick cash is required - But it is not part of a regular business plan and obviously can't be

Yup - I've been selling stuff like pedals at a loss or no margin, just to put some rent in the bank

And if I offer stuff up at clearance prices they will be things that we have had for a while and not our just completed and premier lines.....that simply wouldn't make any sense

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Profit mark ups and margins

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