Understanding Prices

[MandoTyro]

I was looking at different mandolins from various builders (Breedlove, Collings, Eastman, etc.)

The prices are given for each of the instruments. Then you look at stores/sites that sell the mandolins and they show the list price. Some say call or email for a price.

What is the expected 'discount' from the list price,would you expect, for the various mandolins? Is this a negotiation situation?

[sunburst]

There is a strange game that has developed over the years where a manufacturer assigns a price to an item, then sells it to dealers at a "discount" price. Many times, different dealers get different discounts, usually depending on how many units they move. Manufacturers, especially larger manufacturers with more weight to throw around, will often have "dealer requirements" in order for retailers to buy their products. Things like X-number of square feet of retail space, X-number of units bought per year, X-number of specific models bought, X-amount of inventory on hand, etc.. Sometimes the manufacturer will have a MSPR; that's "manufacturer's suggested retail price". By law, a manufacturer cannot dictate the price from their retailers, so they fell back on a MSRP, and ofter they require their dealers to not advertise below MSRP. If a dealer has low overhead or moves a lot of product or for whatever reason can afford to sell well below MSRP, yet they have agreed to not advertise below MSRP (dealer requirement), you will often find an ad with "call for price" or some such. It means the dealer can sell it to you at a better price than the dealer will allow them to advertise, so yes it is a negotiation situation to some extent. Since different dealers may pay different prices for the same item, some dealers may be able to sell it to you for less than others, but because of the "game" between makers, dealers, and customers, you have to do your best to figure out what your price actually is, and there is not necessarily a good way to know what the "discount" price may be. Feel free to make an offer to a retailer even if it seems to be "silly" low. The negotiations have begun at that point and the game is on.
Simple isn't it?
Strange, the things that happen when people in manufacturer's offices have nothing else to do but sit behind a desk and figure stuff like this out...

[Red_Label]

Some dealer's MSRPs are QUITE a bit higher than what you can find things for out in the real world. I get why they do it though. I always assume that I can buy stuff for substantially cheaper than the MSRP listed on the manufacturer site. But that usually depends on the demand that the particular item is experiencing at the moment.

I recently picked-up my Breedlove Voice CM steel string guitar for $2499 new. The MSRP on the Breedlove site was $3,333 or something like that. So that was over $800 off the list price that I saved. I've got a Breedlove KO mando on order through them right now. But I'm not expecting that big of a discount off of MSRP on it.

[MandoTyro]

Hey John, excellent response! It really helps.

Hey Red, why do you think that the mando can not be discounted as much?

[Red_Label]

Hey John, excellent response! It really helps.

Hey Red, why do you think that the mando can not be discounted as much?

I dunno. My dealer told me that it'd probably run me around $1400. MSRP is $1700-something. Still a nice discount, but not quite as big on the more expensive guitar.

[roysboy]

Good discussion here , folks . I can't add anything in the way of expertise or " inside " info on how selling prices are determined or arrived at in the instrument retailing business. My experience in the auto industry , however , is that volume plays a large role in what a dealer can sell a vehicle for . I'm quite certain this would apply to almost any item . Although APPLE products are generally considered overpriced ( and I'm not trying to initiate THAT debate ), I do appreciate their policy ( in Canada , at least ) of establishing ONE price for an item regardless of where it is being sold . Yes , you may see that item discounted once in a while but VERY negligibly so ( 5-10 dollars ) . Still it does take a lot of the guesswork and research and price-shopping time out of the equation . Most retailers price-match items in these times ...no questions asked ...or offer price guarantees for a period of time ( ie refunds where applicable on price drops ) . Now if we could just get the gas stations to subscribe to the same policy when the gas you paid 1.49 a litre for yesterday drops to 1.37 today . What the ???.
I'm afraid I may have seriously digressed from the concerns initiated by this thread . Apologies .

[Folkmusician.com]

Hamlett's explanation is so true. It does get even more complicated than this though.

There is honestly no formula to figure this out. At best it is a guessing game.

Throw in method of payment. Merchants pay a rather high percentage for accepting credit cards, PayPal and even depositing cash into the business bank account. Merchants have to negotiate these rates based on their volume. It can easily vary 1%. Keep in mind that this is a percentage of gross.

Shipping....
Again, based on negotiations with the carriers, type of packing, insurance, etc... Some dealers may pay double if their rates aren't great and they use more packaging.

Return policy. A return can easily cost a dealer $100.00, not including the instruments that come back scratched or otherwise. Do they recoup any of this from the customer? The longer the trial period, the more chance of a return for whatever reason.


Levels of service will be directly related to prices in most cases.
Toll free numbers start eating up profits, not just based on the fees, but customers will talk longer requiring more labor.
Warranty claim policies. Most warranties require you to go through the dealer, some may help with shipping etc..
Setup work... this is a big one. A streamlined big-box warehouse may have less than 5 minutes total time into your order, from receiving, to shipping it to you. Shops that inspect the instruments more than once, talk to you in depth on the phone and then do extensive setups may have 3+ man hours per instrument invested.
The list goes on and on.... Operating expenses will be all over the place.

For the most part, you don't need to concern yourself with the dealers expenses, what they pay, etc... Only they know what they can sell it for. Talk to a few dealers, ask them what they can do for you and you should get a pretty good idea of what an average cost/service balance is.

[Stephen Perry]

Low price shoppers are some of my best service customers.

Assume ex-works is X. Get it shipped & through customs, if that's a concern, and it's X+SC. Then add overhead etc at the importer. X+SC+OH. Add intended net profit. X+SC+OH+INP. Let's call that wholesale. WH. Importer sets MSRP at 2x WH. Retailer pays WH+Shipping. Retailer adds OH, to get his out the door cost = WH + SH + ROH. Then he adds INP. WH + SH + ROH+INP = Actual Price. Ideally MSRP is somewhat above AP. Some dealers will come in below a reasonable AP. Sometimes they are selling undisclosed seconds, have reduced OH (e.g., no setup), have a sweetheart deal, are scammers, or whatever. Sometimes (more than you would think) they are folks who will go out of business because of their pricing.

This model ensures efficiency in pricing, but does tend to have the unaware buy things that have minimum OH and minimum post-sale service. That works for potatoes, not so well for mandolins.

Add onto this the minimum advertised price aspect, and we're really getting somewhere. That is legal, although it seems anti-competitive to me. Even worse, Leegin Creative Leather Products v. PSKS seems to indicated that a minimum sales price can be imposed by distributors. This is very anti-competitive.

There you go!

Oh, and some nasty people like me will lose money on sales for a while to kill off a local competitor. Sometimes real deals happen that way.

[OldSausage]

Oh, commerce.

[allenhopkins]

When I was working, very part-time, selling stringed instruments, the rule of thumb was that the "suggested retail price" was about twice what the dealer paid for the instrument. So if the dealer paid $500 for a "$1000 guitar," he/she could knock 35% off the "list price" and still make $150 on the transaction.

However, this was in the Pleistocene Epoch (I rode a woolly mammoth from my cave to the store), or at least in the '70's. Credit cards were rare, computerized pricing matrices as well, and my dated knowledge is probably not very applicable now.

Which, of course, never stops me from sharing it on the Cafe.

[Stephen Perry]

$500 cost guitar sold for $650 does not make $150. Have to cover WH+SH+ROH and INP. I expect INP is more like $50 on such a sale with that type of discount. A small glitch in the other terms and NP goes to zero or below.

[KEB]

Since we're talking about price, don't discount the cost to the general consumer of low price-- there are plenty of places to buy things really cheaply, but for them to stay in business they have to minimize expenses, so you're left with people who do no setup and are uninterested in the welfare of their customers. On the other hand you have people like my local store that sell at MSRP, provide fairly poor service, and do no setup because they're the only ball game in the (admittedly small) state.

On this site, we have a unique thing-- there are people like Robert Fear and Stephen Perry who provide some amazing service in terms of educating us on what's unique about various instruments and give top service for really competitive prices. They may not be quite as cheap as the big vendors, but when you get someone with quality intentions that makes sure you get the right instrument for you, it's worth an extra couple bucks.

[rb3868]

The basic deal here is, if you want to buy a mandolin, you are far better off going through the stores you will find here than the big box guys. Heck, you might even bump into them on discussions here!

Mr. Fear, thanks for the details in your post!

and just for fun, I once worked at a Brooks Brothers. The store invoice for a $750 suit was...$35. and it was made in some factory in Mexico. the same suit, with different lining and label, sold at JC Penney for $200.