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Typical dealer mark-up on guitars? Anyone know how much?


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A question to anyone who's in the know, or has worked in a music store or been in a similar situation...

 

I'm wondering what the typical markup is on guitars. I know it varies from brand to brand and high-end to low-end, but I'll ask the question, using specific middle of the road examples.

 

For example, a new Ibanez bass or guitar that's priced on the floor at about $499. What would a dealer actually pay for this?

 

And how about a $299 model. What would a dealer generally pay for these?

 

I'll take any other examples you got. I'm just curious, mostly because I often talk dealers down at least a little bit, and I'm always wondering how much of a sacrifice they are actually making when they agree to let it go out the door for less.

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Typically the wholesale price of mass-produced guitars and gear is 50% of MSRP. Most retailers discount 30%-33% off of MSRP, but you should be able to find retailers who go 40% of of MSRP (for the retailer, approx. 20% gross profit over wholesale, before overhead). That was the norm where I grew up, until GC bought up the regional chain, and I would never consider paying more.

 

Gibson has been an exception for years and Fender followed suit this year. They wholesale is usually closer to 40% of MSRP, so the best dealers to discount up to 50% off of MSRP on these brands.

 

Other brands like Mesa and smaller guitar companies keep wholesale and MSRP much, much closer, so sometimes there is no room to discount at all.

 

For the Ibanez, whatever the MSRP is (not the asking price), the retailer probably paid 1/2 of that.

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Guitars and amps are typical A-list markup and retail for twice what the dealer pays. Effects and recording gear is tyipcall B-list which means the dealer paid 40% off of list price. Of course, the market is different these days since almost every company now has MAP (Minimum Adervtised Price). This used to be reserved for the Mesa/Boogies of the world.

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Guitars and amps are typical A-list markup and retail for twice what the dealer pays. Effects and recording gear is tyipcall B-list which means the dealer paid 40% off of list price. Of course, the market is different these days since almost every company now has MAP (Minimum Adervtised Price). This used to be reserved for the Mesa/Boogies of the world.

 

Really? I always thought guitars were the loss leaders with a lower markup and accessories were the money makers with higher markup. Go figure.

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Really? I always thought guitars were the loss leaders with a lower markup and accessories were the money makers with higher markup. Go figure.

 

Well, accessories means strings, picks, and cables. The markup on those is HUGE! When I was selling ProCo 10 years ago, a cable that retailed for $50 would cost the store closer to $10.

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Guitars and amps are typical A-list markup and retail for twice what the dealer pays. Effects and recording gear is tyipcall B-list which means the dealer paid 40% off of list price. Of course, the market is different these days since almost every company now has MAP (Minimum Adervtised Price). This used to be reserved for the Mesa/Boogies of the world.

 

I don't know what other dealers pay wholesale but I have a pretty good idea of what my buddy pays for major brand name guitars in his store. The MAP price depends on brand and model but it is fairly safe to assume roughly 75% of list price (MSRP) For grins and giggles, let's assume MAP price is effectively the "retail price". It is for the big retailers anyway. Mom & Pops and boutiques maybe higher.

 

Based on that I would argue strongly with the claim that the retail price is twice what the dealer pays. That would imply 100% dealer markup but that isn't eve close to true. The dealer's actual purchase price (including freight etc) on the major brands I see in my buddy's store is about 80% of the MAP price. Doing the math, the actual dealer's purchase price is therefore (80% of 75% (i.e. 60%)) of MSRP. And the dealer's markup is (100%-80%) = 20% of MAP and a much lower percentage of MSRP, again largely irrelevant with MAP pricing.

 

Now those numbers can wobble all over the place, so it is hard to say on any given item what the potential margin is other than that, for relatively big ticket retail goods, these are not big margins at all. It gives you an indication of why smaller dealers aren't so willing to haggle on price. They don't have a lot of wiggle room.

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A dealer has to make 5 to 6% net net profit to keep his doors open. That's after paying the rent/mortgage, employees, benefits, the inevitable losses due to "shrinkage", advertising and promotion, maintenance, the accountant, his bank interest and so much more. if they aren't making 50% on accessories and 25% on instruments, then they will be out of business.

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  • 4 years later...
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I own a small music store in NH.  Most have been correct that guitars list price is at 30-50% mark up.  No one sells for list though.  Most stuff is sold at MAP  (Minimum advertised price)  which we are lucky to make 20 %.  I only encourage people to pay a little more for the service of a small music store.  I will tell you it is very difficult to compete with Guitar Center, Musicians Friend. Which is why many small stores go under.  Many times they are below what I can purchase for.  Guitar Center, Musicians Friend, Music and Arts is owned by Bain Capital.  One of Mitt Romneys Companies.  Visit your local music store!  Thanks www.pmc101.com   (28) Peterborough Music Company, llc

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Simple equation...

When I was a Fender dealer, I got 40% off of their fake inflated list price.

But then to actually sell a USA made product, you had to sell for the same price as Musicians Friend.

Translation.... we would pay (as a dealer) almost $1,200 for Clapton/SRV/Malmsteen/Beck strat....Musicians Friend were selling them $1399.00 at the time.... so you would make $208.00 if they sold.

BUT.... the buyers of the guitars typically tried to haggle that price.... bitched and moaned that as a dealer "ya'll probably didn't pay $500 fer it."....and would want to know what else you can "throw in."

Accessories have a higher markup, but as sad as making $200 on a $1,400.00 guitar is.... you have to sell a shitload of strings to make $200 profit.

The money in a music store comes from.....LESSONS.

I had 2 teachers that each at 60+ students each.

I had 40 students myself.

Each student paid $70 for (4) half hour lessons

So.... we had no less than 150 students paying $70 a month--- $10,500....This was how we kept the store afloat.

Lessons are to a music store what the mechanic shop is to a car dealership...... Mark up on new cars blows....dealers only have them to lure you in. A dealer will pay $37,500 for a Lincoln marked $39,800....just as I paid $1194.00 for a Clapton strat marked $1399.00..... the real money not made where most consumers think it is.

 

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When I was in high school, I would go to the used CD shops all the time. Now, you can find used vinyl, and some used CDs at used book stores. The local record shop (only two that I know of in my county) deals almost only in vinyl. CD looks dead to me. Physical music purchases are dead, really. It's just the vinyl enthusiasts that actually buy physical product anymore. At least that what I see.

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kayd_mon wrote:

When I was in high school, I would go to the used CD shops all the time. Now, you can find used vinyl, and some used CDs at used book stores. The local record shop (only two that I know of in my county) deals almost only in vinyl. CD looks dead to me. Physical music purchases are dead, really. It's just the vinyl enthusiasts that actually buy physical product anymore. At least that what I see.

Correct, as the liner notes of the vinyl are the appeal.

I was at a neighborhood garage sale over the summer where several of the homeowners had very good used cds at a dime each..... I picked up 11 cds at one place (mostly Rush)...and the lady took a buck.

How there are cds stores at the mall with $16.99 on cds still with their doors open is beyond me.

I once owned a new & used cd/record/instrument store...and I don't even buy cds hardly.

(unless they are a dime each)

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