And we wonder why the high street is going down the tubes...

sev112

Reading the chap from near Chelmsford’s website earlier, I was reading how much he makes it absolutely clear that, whilst he buys and sells hundred of guitars, he is not a company, nor is he based in the UK.  I presume this has to do in some way with paying less tax or something like that ?

what about the big online companies - are they also cheaper because they don’t pay as much tax because they base themselves offshore?  

gregm

I was a sales manager for some large companies in a previous life, it is illegal under Euro law to sell at favorable prices to retailers based on random factors including sales figures. So the cheap beer in the supermarket, the computers/printers in large retailers, the products in duty free shops are not being sold at a lower margin in most cases or without VAT. This is fact and from personal knowledge, you get around the laws by offering rebates and marketing budgets. Volume is king, I was part of a 1 million Sterling rebate to a large retailer that had been given 3 cars to the best sales people the week before.

On the reverse Apple have strict contracts with retailers and the same with Xbox, Playstation etc. The expected margin is 5-7% for the retailer but if you reach targets you get rebates and other incentives. This is not technically legal or fair but the larger electronic companies do this and always have which allow them to sell at lower prices.

Fact is if guitar manufacturers decide to offload surplus stock to a large online retailer then they are doing damage to the retail and block and mortar businesses. For most products online suits, I personally think yes there is an arrogance in some guitar shops that stop you from trying out a guitar but holding it and playing it is a decision easier to live with rather than a picture of same online. Distance selling regs don't stop certain retailers from posting abusive youtube videos and causing problems that in my experience will mean I now only buy in a store or 2nd hand.

RonnieHotdogs

sev112 said:

RonnieHotdogs said:

In a previous life  I worked in hi end HIFI retail. The few shops remaining are only still there because the manufacturers are really good at protecting the prices, if anyone discounts, they lose the account, it works, and you can't buy cheaper online.

Richer Sounds model?

No, not at all, Richer sounds sold last years model at cheap prices, I worked in HiEnd, £20k turntables etc 

Snags

@guitars4you Apple margin is only 7% if you're Apple approved. To be approved you have to turn over a significant (100s of thousands, if not a flat million) amount of Apple product - not general turnover, just Apple. It's a very closed shop unless you're already a serious player.

Otherwise you buy from Jigsaw 24 trade and get a few %, or standard distribution and pay more than you would buying retail at John Lewis ...

On the DSR thing, I'll put my hand up to ordering multiple items when buying clothes, knowing I'll send some back. But that's only because of the huge inconsistency in sizing, and needing to do the equivalent of taking two pairs of trousers into the changing rooms etc.

57Deluxe

one thing I learned years ago is to always open up the discussion about any spec any make/model you may be looking for with a retailer. Often they can do a do deal for items they don't always stock. You can always walk away from any offer but at least you have given them a chance.

guitars4you

Snags said:

@guitars4you Apple margin is only 7% if you're Apple approved. To be approved you have to turn over a significant (100s of thousands, if not a flat million) amount of Apple product - not general turnover, just Apple. It's a very closed shop unless you're already a serious player.

It is not uncommon for products that are sold in such high volume to have a small margin - Not applicable to all products in all market places, but certainly a trend - It is a point to consider - Yet how many ipads can be found in one house ? - Then add a 2-5 year exchange/obsolescence for many buyers - Margins will be significantly higher on accessories, extended warranties, any tutorial offered, any additional software etc

A plus point as an 'Apple' stockists is the stock turn/return on capital and stock holding - Take an Ipad and the main options are colour and memory size - Allow the dealer to have a quick stock replenishment. almost on a day to day basis and the stock level will be low compared to the size of sales - Exact opposite for a guitar dealer - Take a Custom Shop Strat alone - Obvious options of colour, but add 50's or 60's models, fret size, radius, nos/journeyman relic, relic or heavy relic, pick-up options - It gets to the point that if you don't have 40-50 new C/Shop Strats on your wall you have only a mediocre offering - Yes margin is better than an Apple, but I'd be amazed if any dealers have a sales to stock turn ratio any better than 2 - Many won't even make 1 - So a far high stock ratio to sales is achieved - Not having a go at this, just the nature of our trade

I know there are different accounting terms to consider when talking about stock turn/return on capital etc etc etc - But as a simple exercise - 50 C/Shop Strats in stock and it would be nice to sell 100 in a year - Many won't achieve that 2:1 ratio - The Apple model will be far superior - Big business, venture capitalist etc hate stock and certainly hate poor stock turns/return on capital 

It is one reason big players have not moved into our sector - It is a 'lifestyle' business for so many - Richer Sounds opened a store once and quickly finished the experiment - Richard Branson looked at it, with an initial plan of 10 stores, but shut the idea down before it started - It appears as though the Amazon/Gibson relationship did not last long, for whatever reason

Snags

I think I'd argue that Apple are a lifestyle product too, just with a much larger catchment and lower barriers to entry for the consumer. The iPod was a gateway drug

But yes, totally understand the economics and practicalities of it all, and shifting iThings is a very different proposition to shifting guitars, amps etc., with the possible exception that it's another scenario where in order for it to make economic sense, you have to be a pretty big player in the game. The small guys more or less have to treat them as loss leaders because there's no money intrinsically in shifting the kit itself.

crunchman

Snags said:

I think I'd argue that Apple are a lifestyle product too, just with a much larger catchment and lower barriers to entry for the consumer. The iPod was a gateway drug

But yes, totally understand the economics and practicalities of it all, and shifting iThings is a very different proposition to shifting guitars, amps etc., with the possible exception that it's another scenario where in order for it to make economic sense, you have to be a pretty big player in the game. The small guys more or less have to treat them as loss leaders because there's no money intrinsically in shifting the kit itself.

The fundamental difference between iThings and guitars is iThings of the same model will be the same.  There are often noticeable differences between two guitars of the same model because wood is organic.  That's why I want to be able to try a guitar before buying - which is getting very difficult to do with a lot of shops disappearing.

gregm

There are rules and there are ways around them, if off-license drink companies convince themselves the supermarkets sell the same product at a loss then this is not true, they are being rewarded for the volume. In airport duty free there are no vat free sales. All I am saying is that if a retailer is selling the same guitar for hundreds less, then the rebate or marketing budget was planned for this. It is unfair to the block and mortar people that are trying to make a living. Guitars are the few products that cannot be white fenced, so to lose the one on one experience is damaging the instruments future. 2 rules in retail that are important, if you are selling cheaper i.e. change the box or brand (aldi/lidl) or invent a rebate or marketing budget to rotate stock. Apple are not comparable as a product but it was an example where major brands can influence the price and market to the point where consumers are fooled into thinking that it is somehow fair etc. If shops have old stock that is being sold online at huge reductions then the company deserve a backlash and unfortunately shops left out of this rotation will suffer.