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"How much?" asks Jaden.
"However much you want, starting at $75."
Because I won't spend 2 grand on a guitar without trying it first. I'm not the only one.
They are made of wood, and they vary. You can get two of the same model with the same CNC cut bodies, the same pickups wound by computer controlled machinery, and they will not sound the same.
The article suggests middle man costs are a large part of the high price - so if you can cut that down and get your product out there at a lower price whilst maintaining the same margin, why wouldn’t you? Those who want the ‘middle man’ experience can pay a premium for it.....
FWIW, one project I was involved with ended up with a landed cost of a solid body electric guitar (minus electronics - they were EU installed and not boutique made) of less than £18. The quality of the build was similar to that of a Squier Affinity (nb - wasn't a Fender product) and the only real issues we had were poorly seated frets from time to time. Obviously the necks could be *massively* improved by a proper fret dress, rounding of the fret ends and rolling of the boards - which was outside the remit of what we were doing. I smile when I see them for sale today for significantly more than that of an Affinity Strat...
Anyway, as I keep saying... the Far Eastern factories will build to *ANY* price point. WE dictate the market/quality of them. They could build stuff to rival the best of the well known US mass production factories but nobody would buy them.
However, thanks to distance selling rules if you ordered one and didn't like it you can always send it back.
I've not bought a guitar unseen so far that didn't sound like a guitar ;-)
If they undercut their dealers, there will be no dealers. Those of us who want to try a guitar first, will go elsewhere.
Very few dealers would survive.
Can it be called undercutting when it’s your own product? The manufacturer ultimately sets the price in establishing it’s minimum acceptable margin. Shouldn’t it be a manufacturer led strategy rather than worrying about what your dealers might think?!
To pose the question another way - and ignoring the actual product for a minute - if you can get your product to your consumers (whatever it is) without the aid of a middle man taking a cut...why wouldn’t you?
If I could buy a Strat from Fender for £800 or PMT for £1,000 then depending on my needs at the time, I may do one or the other. Consumer choice. Fender get the same amount of profit either way.
The good dealers would survive because there will always be people who want the store experience and on demand knowledge that you should get with a specialist dealer.
Surely all businesses - if they could - would prefer to get their product to market without the aid of a middle man taking a cut?
Plus, when you sell to a dealer/distributor you sell *quantity* for the same (or less) input as selling a single item to an end user. Much better profit vs time.
For example, the claim that $100 dollars in added manufacturing cost equates to about $900 on the price at the dealer is about right, being pretty much in line with a generally accepted rule in manufacturing that unit manufacturing costs should be no more than 10% of an items retail price. This means that a $1000 retail US-made guitar should cost no more than $100 to make, not $1000.
Apart from economies of scale another issue that the build cost figure obscures is that, proportionately, manufacturers charge a much greater premium for prestige models and features, with the retail price of many US made guitars been boosted by 'added value' features that actually cost very little in terms of manufacturing cost. Even the 'made in the US' badge is just such an added value feature for many buyers. Some added value features that command a high price actually cost nothing, or not far off. Just look at how much of a premium a 'long necked tenon' can bring - which is a standard feature on a Harley Benton. Similarly, just look how much of a premium is often charged for a guitar with hide glue and slightly different plastics. It's just the same with other products, from cars to washing machines. Hence the difference in manufacturing cost for a basic model washing machine from a given manufacturer will be hardly any different for one of its feature-packed top-of-the-range ones, but the retail price and profit margin will be very different.
Chinese built guitars generally don't benefit from these 'added value' features (the latest one being those highly priced 'relic' finishes) so their manufacturing cost is likely to be a much greater proportion of their retail price than a US-built guitar, especially one that has a lot of 'added value' features, and the more 'added value' features a manufacturer's marketing team can dream up, the bigger the margin will be. Hence if a US-built guitar retails for $1000 and costs $100 to make, then we might expect a $4000 guitar to cost proportionately less to make, perhaps $300, and that $6000 super-duper genuine copy of an original Gibson with 'hide glue and using the same crappy plastic for the pick up surrounds as the original' proportionately less again, perhaps $350.
The comments about differences in labour costs are also rather misleading, given that Gibson especially is notorious for expecting the maximum amount of work for the minimum amount of pay, whilst Chinese labour costs are rising in line with the increased expected standard of living in China.
I do agree with whoever said Gibson should consider offshoring the sub-1k stuff. Cut all of those prices by 100 quid, increase margins by 50 quid and move the really good instruments further up market, with an expectation to sell fewer at higher margins.
The other thing is the support network - this is what manufacturers like about having dealers - they handle a lot of pre-sales and after-sales care (in fact, in Europe, only the dealer has any legal obligations to the consumer - a whole level of liability is shifted). The manufacturers presumably will need to up their customer service game and invest in that if they run with this... I'm sure they can do the volume they are doing now but what if that increased tenfold?
In 5, 10 or 20 years? Who knows. Dealers may only exist as "showrooms" where you go try something, then go to the website, order it, tell the manufacturer where you tried it and dealers gets commission based on that. They only have to stock one of every current product, then they can sell them off at half price every year when the new ones land.
The nukes may land well before than anyway, so nbd...
Granted an in store Apple showroom has far greater overheads - but if Apple sell a product at £1000 direct to the consumer, then their margin is higher than selling the same item at cost price to a dealer/other retail outlet - Therefore if Fender/Gibson adapted a similar policy then no reason to say prices would fall, the supplier/manufacture just increases their margin
Granted there are a few exceptions (Martin, Mesa Boogie are 2 examples) many major guitar brands/products are now sold into EU/UK via their own distribution outlets - PRS, Gibson, Fender, Boss, Roland, Yamaha etc etc - So other than admin costs of running a unit in the EU/UK, there is no 3rd party costs involved regarding an independent distributor who has to make a profit as well as paying operating costs - ie PRS UK/EU is now the same as PRS USA
I'm not saying this will definitely happen but we are already seeing the seeds of this being sown.