Low Retail Markup on guns

[makattak]

http://booksbikesboomsticks.blogspot.com/2016/01/thin-margins.html

Tamara mentions in here that she isn't aware of any similarly priced item with so small a mark-up in retail.

I'm going to bet there's a reason for that- AND I'm going to bet the mark-up on guns is similar, percentage-wise, to vehicles.

Those are the two items that are in direct competition with used versions of the same model.

No one going for a new washing machine or dryer (or any other major appliance similarly priced to guns) is seriously considering a used one. However, given that guns last many many years through significant use (with proper care... and sometimes even despite a lack of care), the difference between a new gun and a used one (even 40 years old) is not significant.

So, my theory is that more durable items (like guns and cars) will have a lower mark-up than less durable ones, due to pressure from the used market. It's something of a paradox- the item that lasts longer sells at a lower premium than the ones that must be replaced more often.

[lee n. field]

http://booksbikesboomsticks.blogspot.com/2016/01/thin-margins.html

Tamara mentions in here that she isn't aware of any similarly priced item with so small a mark-up in retail.

Margins on HP hardware, between what HP lists them for on their site, and what we could get them for, are about that bad.

[MechAg94]

All that as well as many gun enthusiasts are notoriously cheap. 

I imagine there is also pressure from 1) internet sellers that go off volume, but don't show shipping and transfer fees, and 2) volume dealers at gun shows.  There is one sizeable gun shop locally that has a number of guns in the store, but is always at least 10% cheaper at the local gun shows, sometimes a good bit more. 

[MechAg94]

Considering a brand new one retails at our shop for $499.95,

I don't see Glocks this inexpensive in stores very often.  The used price mentioned is common.  Most used Glocks I see at $400 or below sell pretty quick. 

[Fly320s]

She says the Glock has a low markup, but she never mentions how much.  I've heard that dealers make about $40 on a Glock sale. If that is accurate, then a $500 Glock costs the store $460, which equals a 8.7% markup.

As a comparison, I've heard grocery stores make around 2%.

[dogmush]

She says the Glock has a low markup, but she never mentions how much.  I've heard that dealers make about $40 on a Glock sale. If that is accurate, then a $500 Glock costs the store $460, which equals a 8.7% markup.

As a comparison, I've heard grocery stores make around 2%.

She says that it retails for $499, and her employee discount saves her $10 about 10%.  I doubt the store is selling it at a loss, even to employees.  I'd bet $489that $450ish is cost to the store.

ETA: She also says that $499 is Glock's MAP. For what that's worth.

Edited again, because apparently I can't read before the second cup of coffee.

[makattak]

She says that it retails for $499, and her employee discount saves her about 10%.  I doubt the store is selling it at a loss, even to employees.  I'd bet that $450ish is cost to the store.

ETA: She also says that $499 is Glock's MAP. For what that's worth.

10 dollars, not 10%. Ten dollars off of $500 is 2%.

[Fly320s]

She says that it retails for $499, and her employee discount saves her about 10%.  I doubt the store is selling it at a loss, even to employees.  I'd bet that $450ish is cost to the store.

ETA: She also says that $499 is Glock's MAP. For what that's worth.

Right.  So $50 markup on a $450 gun is 11% markup.  Is that thin?  

[Perd Hapley]

I was expecting an article from Slate, about how the low mark-up is an NRA plot to sell more guns.

[makattak]

Right.  So $50 markup on a $450 gun is 11% markup.  Is that thin? 

Faulty analysis based on misreading the original post.

BUT, even if that analysis is correct:

http://www.entrepreneur.com/article/193986

Even though there is no hard and fast rule for pricing merchandise, most retailers use a 50 percent markup, known in the trade as keystone.

AND: http://www.nps.gov/commercialservices/docs/concessioner%20tools/2012_Convenience_Store_Markup_Percentages.pdf

Most of those have greater than a 50% markup. So, 11% markup would be extremely small.

Keep in mind, the markup is where they then have to start paying for all the other costs over the price they paid for the good: employees, rent, utilities, etc... before they can even begin to think about profit. The markup most definitely is NOT the profit off an item.

(Note: the entrepreneur article has a confusing explanation of markup which can be figured from cost OR from selling price. Nonetheless, the 50% number is a good number.)

[dogmush]

Yep I read her blog incorrectly.

2% seems kinda thin unless it's a high volume seller.  I've heard it said a lot that gun stores don't get much off guns, but do much better in ammo and accessories. Online sellers and slickguns can't be helping.

[tokugawa]

It is interesting to look at a comparison- my gut feeling is the cost of modern firearms is heavily driven by factors outside of manufacturing costs.  Take the dewalt cordless drill, count the parts, the injection molded plastic parts, the motor, gear train, etc etc- it is a vastly more complex item than a glock. Yet it sells for 1/4 the price, at a major retailer- and they seem to change the design every year or two, so it is not as if the tooling has been amortized since time began, either. And glocks volume has to be way up there, it is not a boutique manufacturer by any means.  It is not as if there are a row of guys behind benches, carefully hand fitting parts anymore- these things are cranked out with injection molding and CNC machine tools.
 The fire arm may have more costly materials, but the amount used in each is minimal. There is something else going on, maybe regulatory or insurance costs.  My guess, if the price of the gun was directly related to manufacturing costs, is that it should sell for well under $100. 

 

[cordex]

I've heard it said a lot that gun stores don't get much off guns, but do much better in ammo and accessories.

And used guns.

[brimic]

It is interesting to look at a comparison- my gut feeling is the cost of modern firearms is heavily driven by factors outside of manufacturing costs.  Take the dewalt cordless drill, count the parts, the injection molded plastic parts, the motor, gear train, etc etc- it is a vastly more complex item than a glock. Yet it sells for 1/4 the price, at a major retailer- and they seem to change the design every year or two, so it is not as if the tooling has been amortized since time began, either. And glocks volume has to be way up there, it is not a boutique manufacturer by any means.  It is not as if there are a row of guys behind benches, carefully hand fitting parts anymore- these things are cranked out with injection molding and CNC machine tools.
 The fire arm may have more costly materials, but the amount used in each is minimal. There is something else going on, maybe regulatory or insurance costs.  My guess, if the price of the gun was directly related to manufacturing costs, is that it should sell for well under $100. 

 

Plus we often see details of .mil or large police department acquisitions where the unit price is approximately 1/2 of the retail price.

[cordex]

Plus we often see details of .mil or large police department acquisitions where the unit price is approximately 1/2 of the retail price.

With the cop shops that is often due to trading in the old guns which reduces the cost.  The local department will let their guys keep their old guns if they pay what the department would have gotten for the trade in.

[Brad Johnson]

Right.  So $50 markup on a $450 gun is 11% markup.  Is that thin? 

Yes, it is. Firearms in general have skyrocketed in popularity the last 8 years. Retailers' per-product cost hasn't changed appreciably but internet vendor competition has made retail pricing very near a loss-leader proposition if they want to keep customers coming.

Brick and mortar locations shave margins to be price-competitive with nonstocking Drop-Ship internet sellers. Some FFLs welcome the business, using the $25-$50 transfer as a zero overhead profit center which reduces their need to carry expensive inventory. Others are fighting it tooth and nail.

Brad

[Monkeyleg]

Margins under 10% are almost the norm online now. A few years back, wholesale price on a $500 Glock was $450. I don't think most online retailers make that now.

For as far back as I can remember, gun margins have been extremely low compared to other industries. I remember a friend who owns a gun shop complaining in the 1980's that he had a hard time getting 20%, and was usually stuck at 15%.

I know that margins on clothing, furniture, jewelry and other goods are astronomically higher

[Tamara]

"A few years back, wholesale price on a $500 Glock was $450."

Wholesale price on a base model small-frame (Gen 3 17/19/22/23/26/27/31/32/33) Glock is slightly less than that. It hasn't changed in at least fifteen years.

Minimum Advertised Price is $499.

[Tamara]

As a comparison, I've heard grocery stores make around 2%.

They carry a lot of $500 groceries at your local Food Lion?

[French G.]

My favorite shop that I pseudo-worked for had a 10% mark-up on any new firearm. Their ammo prices were not internet good but decent since they owned a shooting range and wanted to move a lot of it. Great money was had by all on flashlights, accessories, used guns brought in on trade and such as that. No shop no more, the managers at both locations and I got on well, the owner however was a well known irritant who had worked his magic on many people, including the ATFEIEIO. They finally got even. lots of my 4473s in their hands now. 

[birdman]

"A few years back, wholesale price on a $500 Glock was $450."

Wholesale price on a base model small-frame (Gen 3 17/19/22/23/26/27/31/32/33) Glock is slightly less than that. It hasn't changed in at least fifteen years.

Minimum Advertised Price is $499.

And that's how it's suppose to be...and why we shouldn't fear "deflation"

[Tamara]

And that's how it's suppose to be...and why we shouldn't fear "deflation"

Oh, price on all their accessories has trended steadily upward, and I will bet that Glock's actual net profit on each gun has shrunk over that decade and a half of holding the line on price. It's an indicator, if anything, of how cheap the gun must actually be to produce.

[MechAg94]

Question:  Have any of you seen Glocks for sale at $499 in your area stores?  I haven't.  That might be a sale price, but generally they are at least $550.  I might see $499 with one of the big dealers at a gun show. 

[roo_ster]

Not a Glock(1) fan, but that is a whole lot of gun value/utility for $500+. 





(1) OK, I will admit I have a soft spot for the G29.

[Monkeyleg]

Question:  Have any of you seen Glocks for sale at $499 in your area stores?  I haven't.  That might be a sale price, but generally they are at least $550.  I might see $499 with one of the big dealers at a gun show. 

https://grabagun.com/glock-26-9mm-subcompact-fixed-sights-10rd.html  Some as low as $413.