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Your expensive guitar and its actual low value

Discussion in 'Sidewinders Bar & Grille' started by axis69, Mar 8, 2018.

  1. axis69

    axis69 Strat-O-Master

    Feb 5, 2016
    As far as i know everything you buy new has a 100% markup.There are many middlemen who are involved in the retail pricing process whether its guitars or toothpaste.And basically off that 100% markup they may only net 10-20%.

    You pay $600 for your made in mexico Strat at the retail store.
    The store bought it for $300 from a distributor/wholesaler who bought it for $150 from Fender who put maybe 75$ into making it.
    abnormaltoy likes this.

  2. Paperback Rocker

    Paperback Rocker Nitro-mancer Strat-Talk Supporter

    Sep 18, 2014
    Victoria TX
    Buy used.

    Play as long as you want.

    Sell it for what you paid.

  3. CaseCandy

    CaseCandy Senior Stratmaster

    May 9, 2015
    Never never never ever pay the asking sticker price on new expensive guitars. There's always a deal to be had. Some of that markup, ask them to share it.

  4. newplayeroldguy

    newplayeroldguy in the wind Strat-Talk Supporter

    May 12, 2015
    north and east
    value and price are rarely the same thing
    8T_BoCO, Synapse2k, TheDuck and 3 others like this.

  5. valor19

    valor19 Strat-Talker

    Jun 17, 2010
    Huntsville, Alabama
    No way Fender makes a MIM for $75 or sells for $150. Think when they were going to go public they released financial details and people were shocked about how little the profit on each guitar. So a $599 MIM might sell to Guitar Center from Fender for $400. But it cost something like $300 for Fender to make that guitar. Seriously, they have very small margins. Anyone have the actual details of the IPO? It had a lot more detail of the cost and overhead involved. Having trouble finding this info. Think it was about 2012 or so. Don't get me wrong, when you buy a new guitar everyone gets a chunk of that (store, distributor, etc) but I think you underestimate how much it cost to make a Statocaster.

  6. Stratoskater

    Stratoskater Senior Stratmaster

    Feb 8, 2011
    Raleigh NC
    Yeah now way it only costs Fender $75 to make any Strat. Think about it, you have employee salary, insurance costs, rent or mortgage to pay, power bill, Etc. My guess would be if everyone is making 10-20% then the $600 guitar cost GC around $475 and cost fender around $400 to make. This is of course assuming a 10-20% markup.

    In 2011 Fender had $700 Million is sales but only a $19 Million profit. That's $681 Million in costs to produce their products, advertise their products and other overhead. The profit margins are no where near what the OP thinks they are.

    Here are their SEC fillings

    Here is the filling for the IPO

    While neither show the cost per guitar you can extrapolate their costs from the data if you want to.
    Last edited: Mar 8, 2018

  7. CephasG

    CephasG Strat-Talker

    Dec 13, 2017
    Land of Lincoln
    Can't go wrong with that!
    There are brands that dealers move very quickly and the volume is not that big, so asking prices for new instruments are fairly non-negotiable or almost non-negotiable. Never hurts to haggle a bit though. Nothing to lose.
    abnormaltoy and Paperback Rocker like this.

  8. johnnymg

    johnnymg Senior Stratmaster Strat-Talk Supporter

    Sep 5, 2015
    Central Coast Ca
    Yup, the OP's #'s aren't valid for US distributed guitars where there generally isn't a distributor. Margins are fairly tight through the entire chain.

    I think the markups for 'offshore' sales do include National distributor fees which seem to really inflate the retail price.

  9. axis69

    axis69 Strat-O-Master

    Feb 5, 2016
    I think my breakdown is pretty accurate.I may be wrong especially if they deal direct with retailers and cut out the distributor.However,i see mim strats at mom n pop for the same price as GC and they must be dealing with a wholesaler.Why would fender wanna deal with each mom n pop?
    abnormaltoy likes this.

  10. Johnny Danger

    Johnny Danger Strat-Talker

    Aug 28, 2017
    Denton, TX
    From my recent time in a similar industry, "accessories" usually have a 50% margin (meaning it costs them half of retail). But when it comes to the actual hard product itself (actual guitars in this case), margins can be between 20-35% or about that. Margins are usually smaller on less expensive items. So I would expect a $150 Squire to be maybe 115 to 120 bucks, give or take. But then you can sell them strings, picks, etc. and improve your margin by selling the package deal to the beginner starting from scratch. Higher dollar guitars get into more serious territory and have a higher margin, but are often negotiated or put on sale.

    Also having done retail, I don't care about what it originally cost to make because I understand there are several people in between me and the manufacturer and they aren't doing it for charity.

    Also, as it pertains to distribution vs direct, I'm talking about products sold direct to dealers by the manufacturers. (EDIT: in this case, guitars are direct from manufacturer. Strings, straps, etc. from Erie Ball and the like are probably sold via a distributor. There might be some super cheap guitars owned by the store/sold by a distributor, and there might be more margin for them there, but that's another story.)
    Last edited: Mar 8, 2018
    abnormaltoy and Stratoskater like this.

  11. Thrup'ny Bit

    Thrup'ny Bit Captain Crapocaster Strat-Talk Supporter

    May 21, 2010
    out to lunch
    Pre internet and with importers/distributors the mark up here was huge by the time a guitar or amp hit the shop floor. Now, not so much, but stores can still give a very generous discount if choose to.
    abnormaltoy and Stratoskater like this.

  12. stratomatt

    stratomatt Strat-Talker

    Sep 23, 2010
    San Diego
    idbuythat.jpeg [​IMG]
    Last edited: Mar 8, 2018
    ChaplainMike and abnormaltoy like this.

  13. Stratoskater

    Stratoskater Senior Stratmaster

    Feb 8, 2011
    Raleigh NC
    Your breakdown is definitely not correct. Fender does not deal with many mom and pop shops. My local guys at Harry's guitars sell Martin and Taylors but lost both Gibson and Fender when they raised their annual minimum purchase requirements. If a mom and pop has new Fenders they are typically buying them from a wholesale outlet and not direct from Fender thus they have to sell for more and can't compete. I believe Harry's told me the minimum Fender would allow you to order was 75 guitars per year or $60,000 in guitars which ever was lower. At the end they were trying to sell MIM's for $749!

    Also in 2015 Fender pissed of the retailers (excluding the big boys) by offering to sell direct to customers. This really crushed the mom and pops. Fender and Gibson would prefer to only have their guitars sold via large retailers and direct. They do not care about the mom and pop shops. Sad but it's the way of the business world.

  14. Paperback Rocker

    Paperback Rocker Nitro-mancer Strat-Talk Supporter

    Sep 18, 2014
    Victoria TX
    "Pop and Pop and Son" shop Clawson's in Corpus is a Fender dealer.

    I bought my first (and only new) CS Strat there. The Fender rep was standing there when Pop quoted me the price, which was $800 below what Musician's Friend was selling it for.

    The rep said, "You can't do that!" I think it was more out of surprise than referencing any policy. As another thread said, dealers can sell below MSRP but cannot advertise that.

    Mr. Clawson said, "Yes I can." And did.

    He told me that their yearly quota of CS sales specified xxx number, and he needed to get xxx number sold. He said they made their money on lower end Fenders, not the handful of CS models they sell each year.
    velvet_man, johnnymg and abnormaltoy like this.

  15. vid1900

    vid1900 Senior Stratmaster

    Nov 25, 2016
    Accessories are our big markup items.

    Cables we buy for $6 retail at $25. That's why we can run "buy 2 get 2 free" all the time.

    A guitar like the Clapton costs us $1200 and sells for ~$1600 so not much of a markup.

    Item mark ups are grouped. An "A list" item would be 2x markup, a "B-list" item 30-40% markup, you get the idea.

    Strings, picks, capos, cables, straps, lessons, repairs = good markup

    Cheap guitars = good markup

    High end guitars = not a good markup, but often your best customers.
    Artunes, axis69, abnormaltoy and 2 others like this.

  16. Wrighty

    Wrighty Senior Stratmaster

    Mar 7, 2013
    Harlow, Essex, UK
    Then there’s the tax. In the UK, VAT is added at 20%. If the shop gives you £100 for a pax, they’d have to sell it for £120 to break even
    ukoldgit and abnormaltoy like this.

  17. fezz parka

    fezz parka The Wiggler of Sticks Strat-Talk Supporter

    All I know is that in 2007, I could have sold my 65 refin Strat for double what I can get for it now.

    download (1).jpg
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  18. RobZ69

    RobZ69 Strat-Talker

    Apr 22, 2017
    The Netherlands
    Pretending to offer a product for a 'can't do' price is one of the best sales tactics around (next to 'only three per customer' -- which of course would not work for guitars unless the buyer is the Mom and Pop shop doing the buying from either a wholesaler or producer)
    Ebidis and abnormaltoy like this.

  19. Kerry Brown

    Kerry Brown Strat-Talker

    Mar 5, 2014
    BC, Canada
    The key is it doesn’t cost Fender that much more to manufacture a $3,000 guitar over a $900 guitar. If you average across the whole line that is their gross markup. Then you have to factor in how many of each model they sell. It’s a complicated equation.
    velvet_man, RobZ69 and abnormaltoy like this.

  20. DickBanks

    DickBanks Strat-Talk Member

    May 2, 2017
    Olathe, KS
    ..And then there is the 1964 ES-335 going for $38K right now....
    abnormaltoy likes this.