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well what is there to discuss?

article seems pretty logical to me

raw materials are generally cheap. that applies to pretty much everything....cloth is cheap, but people buy expensive clothing

but try starting up a business building large amounts of something. there is a lot involved
 

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It speaks volumes when the manufacturer only gave the cost on a base level generic guitar. The cost difference between a base level guitar and something that costs thousands more is no more that 15%-20% by a large manufacturer. That's where they make their large margins and pretty much every mfr. does it from the guitar industry to the automotive industry.
 

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Not much to discuss. He pretty much hits the nail on the head. The only thing I disagree with is his comment about markups being 50-100%. Any dealer that is pricing competitively is getting a MAX markup of 20-50% for most well known products/brands.

Since the "race to the bottom" started thanks to the internet, no one is getting rich selling gear. For most stores, the profits from gear sales wouldn't even sustain the business. These days, the money made in music stores is primarily from lessons, rentals, and other services.
 

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It speaks volumes when the manufacturer only gave the cost on a base level generic guitar. The cost difference between a base level guitar and something that costs thousands more is no more that 15%-20% by a large manufacturer. That's where they make their large margins and pretty much every mfr. does it from the guitar industry to the automotive industry.
You are either just making that up out of thin air or have an agenda. I'm sure you can support the 15%- 20% somehow?

I know guys who build guitars and mahogany in an 8.5lb LP is significantly more than 20% more than mahogany in a 12 lb LP (both being solid woods). Then add the better electronics and hardware? 20% is fictional.

Same with good acoustics. The cost of AAAA and AAAAA woods is significantly more than a 20% upcharge, more like 100+ % higher cost. And then add in the higher end manufacturing costs of the builders that start with higher grade woods, investing 20% to make 200% is a fiction, IME. While builder reputation is a small factor as well, competition goes a long ways to making sure it remains only a small factor.
 

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“If I put actual USA-made boutique pickups in, they cost almost as much as the guitar itself. Even if they give me those pickups for $100, that brings my cost from $150 to $250, and I have to almost double my price to the dealer,” he explains. “Then the dealer has to sell it for almost $900 just because I added $100 pickups. It’s just the distribution model.
seriously? do they think no one can understand basic math here, or understand when someone makes a nonsensical statement? so, on top of the base guitar, anything you put on it you also have to charge double or more for? those "boutique" pickups install the same as any other pick up. there is no more labor involved in putting them in, how do they justify the huge mark up? i have no sympathy for any of the crybabies in the article boo-hooing about how tough it is. don't like it? go do construction, and then tell me how hard it is.
 

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You are either just making that up out of thin air or have an agenda. I'm sure you can support the 15%- 20% somehow?

I know guys who build guitars and mahogany in an 8.5lb LP is significantly more than 20% more than mahogany in a 12 lb LP (both being solid woods). Then add the better electronics and hardware? 20% is fictional.

Same with good acoustics. The cost of AAAA and AAAAA woods is significantly more than a 20% upcharge, more like 100+ % higher cost. And then add in the higher end manufacturing costs of the builders that start with higher grade woods, investing 20% to make 200% is a fiction, IME. While builder reputation is a small factor as well, competition goes a long ways to making sure it remains only a small factor.
I said most large manufacturers, not people who have a shop with a few individuals. You have no idea what the large manufacturers pay for wood. A lot less than any boutique builder. I used to work for a large international mfr. and the extra costs of a premium product over the standard one is minimal and we are only talking about a guitar with a handful of parts.
 

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I said most large manufacturers, not people who have a shop with a few individuals. You have no idea what the large manufacturers pay for wood. A lot less than any boutique builder. I used to work for a large international mfr. and the extra costs of a premium product over the standard one is minimal and we are only talking about a guitar with a handful of parts.
You worked for a heating and cooling outfit, if I remember correctly, not a guitar builder. Even if it wasn't furnace and AC's I think your skewed view of the world puts your opinions way far out than most and the need for some hard evidence sourced to back up the claims you make is necessary.
 

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seriously? do they think no one can understand basic math here, or understand when someone makes a nonsensical statement? so, on top of the base guitar, anything you put on it you also have to charge double or more for? those "boutique" pickups install the same as any other pick up. there is no more labor involved in putting them in, how do they justify the huge mark up?
In the traditional distribution model, a small change in the manufacturing cost of a product has a BIG impact on the final selling price because of how it increases the price at every other level. In the real world (as I've experienced it in the industry), his example would break down more like this:

Scenario 1 (totally Chinese-made guitar)
Cost To Manufacture = $150
Manufacturer Price = $180
Wholesale Price = $240
Street (MAP) Price = $360
MSRP = $480

Scenario 2 (same guitar with discounted US boutique pickups added at the manufacturing level)
Cost To Manufacture = $250 ($150 + $100 pickups)
Manufacturer Price = $300
Wholesale Price = $400
Street (MAP) Price = $600
MSRP = $800

Note that the percentage of markup at every level is exactly the same in both scenarios, so it isn't about anyone adding a "huge mark up". The margins for every business in the chain from the manufacturer all the way to the dealer don't change between the two examples. Yet, you'll notice that the $100 increase in the manufacturing cost nearly doubles the street price and MSRP of the instrument in question.

To quote the author, "It's just the distribution model." And he's absolutely correct.
 

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You are correct in the margins being the same in most cases. But when you get into any guitar with bliing added to the the margins go up considerably. As for the pickups costing more, they may cost a little more to manufacture but very little. The cost of manufacturing a coil pretty well stays the same. Especially is this true when making them in large numbers (thousands). When they are purchasing them, the cost is a little higher but again when you are purchasing thousands, the pricing is very favourable to the guitar mfr. What they are charging for is a "boutique/custom" pickup or at least that is what they are calling it. There was a video posted here not long ago explaining the pickup game. There really is not secret to it. It's just the way that manufacturers market their products so they can put larger margins on the "premium" product.
 

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I said most large manufacturers, not people who have a shop with a few individuals. You have no idea what the large manufacturers pay for wood. A lot less than any boutique builder. I used to work for a large international mfr. and the extra costs of a premium product over the standard one is minimal and we are only talking about a guitar with a handful of parts.
Apples and toneswoods, buddy.

Those large manufacturers are competing with smaller builders to buy good woods. It is an extremely diminishing product and the custom shops are out there, looking for good materials along with the small builders. I live in an area where companies like Taylor and Gibson compete with Lowden and Santa Cruz and our local luthiers (of who I know a couple) for our dwindling supplies of high-grade cedar and maple. So I absolutely do know what they pay for the good stuff. You don't even understand how it works when you compare materials for heating and air conditioning to this type of raw material.

The average stuff isn't as limited and the prices are more uniform but when something special comes up, like 125 year old Cuban mahogany, you better believe the builders pony up and pay big for that. Supply and demand. The large manufacturers don't get a price break - they compete directly with everyone else. There is no price break for a huge order - because there is no huge order. That mahogany that an R9 is made out of is very expensive and limited in supply. I know this for a fact. You do understand supply and demand? This is just not the same thing and far from a premium man-made product that we can just make more of. Your analogy fails due to that. This is a special market and situation. Perhaps that's why you can't understand the costs of good guitars - because you can't go to Rona and buy all the parts for one?

The costs of rare, and in some case, never to be repeated woods is getting very expensive. You've heard of CITES, no? There's a reason for that. These builders aren't competing with just other guitar builders, they are competing with furniture builder for an ever-dwindling resource. Far different from getting better gaskets or heavier plate steel.

Ad to that the way markups work, as explained by @jbealsmusic explained, and you start to get closer to a real explanation, compared to a witch hunt.

But carry on with your agenda, fully unequipped with any examples or facts.
 

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Whatever, HD. I have worked for a large mfr. and you haven't and you simply don't or won't understand. That is your choice.
 

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It speaks volumes when the manufacturer only gave the cost on a base level generic guitar. The cost difference between a base level guitar and something that costs thousands more is no more that 15%-20% by a large manufacturer. That's where they make their large margins and pretty much every mfr. does it from the guitar industry to the automotive industry.
That is a correct statement
 

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Whatever, HD. I have worked for a large mfr. and you haven't........
Wrong!

That is your choice.
The only choice I am making is to understand not all large manufacturers deal with the same supply issues. You want to believe guitar builders, big and small, have exactly the same issues as plumbing equipment builders. The two aren't nearly the same. You are the one with limited experience, so you use your one example to think everything is just the same for everyone. It is simple to understand, if you try. If you really, really, really try.
 
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