Jump to content

So, what is "fair price"? How much profit is too much?


DaveAronow

Recommended Posts

  • Members

Is there a point to which the amount someone makes on a product, used guitar for example, versus what they paid for it becomes unfair, or immoral or obscene?

 

if you paid ten grand for a historic vintage instrument and felt you got a fair deal, would it change your opinion if you found out the seller had almost nothing into it?

 

This is just one hypothetical situation dealing with buying selling trading used gear, but I do see enough arguments about the supposed "moral" variable to the equation that I am interested in what is actually fair and when does profit become obscene?

Link to comment
Share on other sites

  • Members

Corporate ideal profit margin is 33-35% of final cost, basically if it cost you 200$ you sell it for 300$. Anything over that is immoral in my opinion, immoral but profitable... and how most shops make money on used gear.

Link to comment
Share on other sites

  • Members

Pay what you think its worth. If you dont think its worth it, keep holding out for one that you do.

 

Applies to anything used, if you know the market and what things sell for you can snag the deals but if you're not so keen into things, you might become a big fat

 

all-day-sucker-jason-chase.jpg

Link to comment
Share on other sites

  • Members

 

Corporate ideal profit margin is 33-35% of final cost, basically if it cost you 200$ you sell it for 300$. Anything over that is immoral in my opinion, immoral but profitable... and how most shops make money on used gear.

 

 

Why is that immoral? What's your criteria?

 

And you do realize that MOST used guitar that goes through something like Guitar Center/Sam Ash is usually a profit margin of 50%? That's more the industry standard.

Link to comment
Share on other sites

  • Members

I don't know if immoral is exactly the right word for this kind of thing. Immoral if, maybe, you have the only one of something, someone NEEDS is (like food or medicine or water or fuel) and jacks up the price. If you have something rare and it's a luxury item like a vintage guitar? Well, you might be a jerk but i don't think that's necessarily immoral.

Link to comment
Share on other sites

  • Members

 

supply and demand determine the price. if the asking price is too high, it won't sell. how much money the seller invested is completely irrelevant and not really your business as a buyer.

 

 

not necessarily true. Take the oil companies for example. Supply is high, demand is low but the price(and profits) keep rising.

Link to comment
Share on other sites

  • Members

 

not necessarily true. Take the oil companies for example. Supply is high, demand is low but the price(and profits) keep rising.

 

 

Well, like I said, it depends on whether or not the commodity is a necessity. If it is, like gas, then that principal doesn't apply in the same way.

Link to comment
Share on other sites

  • Members

 

not necessarily true. Take the oil companies for example. Supply is high, demand is low but the price(and profits) keep rising.

 

 

while i hate gas prices so high, there's more to it than that. demand is high right now (summer coming, people traveling) actually, so prices are going up. there's also the overhead in the hundreds of millions (billions?) they have to account for. not to mention they don't drill for oil just for gasoline....they use oil for all sorts of consumer products that are constantly in high demand.

 

like i said...it {censored}ing sucks, but oil company profit margins are MUCH lower than Apple, Google, cosmetics, clothing and dozens if not hundreds of other industries. just because the profit dollars are high doesn't mean {censored} when the margin is low. If I make a profit of $101 billion, but had to spend $100 billion in costs, my profit is high, but the margin is {censored} and no company can thrive on that.

Link to comment
Share on other sites

  • Members

 

I don't know if immoral is exactly the right word for this kind of thing. Immoral if, maybe, you have the only one of something, someone NEEDS is (like food or medicine or water or fuel) and jacks up the price. If you have something rare and it's a luxury item like a vintage guitar? Well, you might be a jerk but i don't think that's necessarily immoral.

 

 

I agree with this statement completely, immoral isnt the right word and i shouldnt have used it but was referencing the OP. For it to be immoral in my eye's it would have to be an overpriced copy being sold as an original kind of deal.

Link to comment
Share on other sites

  • Members

I picked up my '74 Jazz bass at a pawnshop for $65. Am I going to sell it for $200-$300 if I want to get rid of it? NO ! I'm going to get what the market will pay right now. I bought my '88 PRS Goldtop for $ 1900. One of my good friends found it in a pawnshop for $700 w/ OHSC. He tried listing it on e-bay and craigslist for $4000 for a while and then ended his last listings for $3500. He finally got gas for a guitar he HAD to have. I figured the guitar was well worth what I thought it was worth.;)

Link to comment
Share on other sites

  • Members
Corporate ideal profit margin is 33-35% of final cost, basically if it cost you 200$ you sell it for 300$. Anything over that is immoral in my opinion, immoral but profitable... and how most shops make money on used gear.



So your moral compass is dictated by what a corporation thinks is fair :confused:

Link to comment
Share on other sites

  • Members

Corporate ideal profit margin is 33-35% of final cost, basically if it cost you 200$ you sell it for 300$. Anything over that is immoral in my opinion, immoral but profitable... and how most shops make money on used gear.

 

 

That's RETAILER profit margin. They're the guys who have to sell to one customer at a time.

 

Distributor profit margins are more like 20% to 25% above what they paid. They buy in bulk from the manufacturer and sell in smaller lots to retailers.

 

Manufacturer profit margins are usually in the neighborhood of 10% to 20% above their costs.

 

There are costs associated with each sale. If you can sell the same number of units by making fewer total sales then you can afford to sell at a lower margin. Manufacturers usually move a large number of units with each sale. Retailers usually move one unit with each sale, hence the larger margin.

Link to comment
Share on other sites

  • Members

 

That's RETAILER profit margin. They're the guys who have to sell to one customer at a time.


Distributor profit margins are more like 20% to 25% above what they paid. They buy in bulk from the manufacturer and sell in smaller lots to retailers.


Manufacturer profit margins are usually in the neighborhood of 10% to 20% above their costs.


There are costs associated with each sale. If you can sell the same number of units by making fewer total sales then you can afford to sell at a lower margin. Manufacturers usually move a large number of units with each sale. Retailers usually move one unit with each sale, hence the larger margin.

 

 

You are exactly right on all points. I didn't think the OP was thinking any of us were distributors though, which is why i referenced the retailer markup, as that is the markup and profit margin most of us deal with when purchasing new gear. Used gear fluctuates too much to try and come up with an acceptable profit margin, like others have said in this thread what ever someone is willing to pay is acceptable, no matter what the cost actually was. Look at Klon's everyone bought them new for 300$ and they sell on ebay for $1k plus even though all the buyers know that they originally cost 300$.

Link to comment
Share on other sites

  • Members

Whatever someone is willing to pay for an item is a fair price. Sometimes you'll make a loss, sometimes a profit. The original purchase price has no bearing on fair market value - that goes both ways too, the amount of times I see someone trying (and failing) to sell something for more than it's worth just because they paid over the odds on the original deal and they feel they should get 70% of what they paid or whatever.

 

I've only ever made mega profit on one item, which was a Yamaha Magicstomp I bought for

Link to comment
Share on other sites

  • Members

Just because you got a deal on something doesn't mean you're morally obligated to pass those savings on to the next buyer. I mean, what if you had originally received a guitar as a gift, then decided to sell it a couple years later; would you be expected to give it away for free? Of course not.

Personally, I've never purchased a piece of gear solely for the purpose of turning a profit...but that's just me. I hold no grudge against horse-trader types who are constantly buying and selling instruments. I'm just pissed that I didn't find that great deal before they did. :)

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...