What I just realized about Sam Ash

[CeeAre]

Well, not just Sam Ash.  Pretty much all music stores, particularly the "big guys".

They are capitalists.  Filthy, rotten capitalists.  How dare they insult us by trying to make a living?!

So two days ago I traded in a Squier CV for a Taylor 324ce at my local Orlando Sam Ash and during the negotiations it was revealed that they use a formula predicated on allowing a trade in value of 60% of what they professionally estimate they can get for the instrument/amp/pedal.

That's a 66% markup (or "markdown" in this case), about a 40% Gross Profit - not unreasonable for a retail operation with that level of sobering overhead.

But one can infer more from that.  One can easily assume that this margin is not arrived at by accident, that it is a corporately established formula that would translate not just to trade-ins, but to all products on their floor as well.

In other words, if they are going to PAY you for something predicated on a 40% GP, then they are going to get that same 40% GP when the SELL you something.

Meaning that they likely paid somewhere in close vicinity to $1325 for that instrument (sounds about right, right?) and they are STILL going to end up with that 40% profit on it even after discounting the MSRP a bit by virtue of recouping that loss on the sale of the trade in.

No real point to this.  It's fine, it's not usurious, just interesting to me to see how the sausage is made once in a while.

Still, it would be nice if maybe some music store would be opened by missionaries, give me that Martin D (fill in the highest number you like here) for free.

Dang capitalists.  No D45 for me...

(Note:  I used a Martin instead of a Taylor in that example 'cuz ain't nobody givin' no Taylors away fer free.)

[TaylorGirl]

My local favorite music store (family owned, but big and well-known and highly respected in the world of new and vintage instruments) has gotten quite a few instruments from me in trade in the last 40 years or so. I know, I know, they are profiting on the sale, and I could get more selling it myself outright. I've done my share of that too (in addition to consignment sales). But in each transaction,  I have considered; what I had, what I wanted, the time frame, etc and made the best decision for me. A few things I always find value in, when I've chosen trading in:
1. Getting the transaction done quickly.
2. Getting a fair price.
3. Not having to deal with a buyer, shipping or returns.
4. Giving the store a decent profit, so they continue doing what they do.

In the end, you're the only one that has to be happy, right!?

[Strumming Fool]

My local favorite music store (family owned, but big and well-known and highly respected in the world of new and vintage instruments) has gotten quite a few instruments from me in trade in the last 40 years or so. I know, I know, they are profiting on the sale, and I could get more selling it myself outright. I've done my share of that too (in addition to consignment sales). But in each transaction,  I have considered; what I had, what I wanted, the time frame, etc and made the best decision for me. A few things I always find value in, when I've chosen trading in:
1. Getting the transaction done quickly.
2. Getting a fair price.
3. Not having to deal with a buyer, shipping or returns.
4. Giving the store a decent profit, so they continue doing what they do.

In the end, you're the only one that has to be happy, right!?

Well stated - I'm in total agreement with you, TG - that's how I've rolled over the years as well. Thanks!

[Earl]

deleted partial incomplete post -- what happened???

[Earl]

It is pretty normal to have those kinds of retail markups in most businesses.  Storefronts, labor, utilities, employee benefits, etc -- it all adds up.  I once knew the owner of an independent mall store.  In addition to the normal rent, part of the lease was that they had to pay 8% of sales to the landlord for being in the mall.

The few times I have been able to sell guitars on consignment at local shops, the 20-25% that they charge seemed like a bargain compared to the hassle of tire kickers, spam-bots, and scammers when using Craigslist.  And that does not even count the time and effort of meeting up with them to make the sale.  unfortunately, none of my local shops do consignments any longer.  The one shop that did consignments exclusively for guitars and amps only lasted about 2½ years before closing.  They did not have money tied up in inventory, but the 25% cut obviously was not enough to survive on.

[roadbiker]

My local favorite music store (family owned, but big and well-known and highly respected in the world of new and vintage instruments) has gotten quite a few instruments from me in trade in the last 40 years or so. I know, I know, they are profiting on the sale, and I could get more selling it myself outright. I've done my share of that too (in addition to consignment sales). But in each transaction,  I have considered; what I had, what I wanted, the time frame, etc and made the best decision for me. A few things I always find value in, when I've chosen trading in:
1. Getting the transaction done quickly.
2. Getting a fair price.
3. Not having to deal with a buyer, shipping or returns.
4. Giving the store a decent profit, so they continue doing what they do.

In the end, you're the only one that has to be happy, right!?

It is said that the definition of a successful sale is when both the buyer and seller are happy with the transaction.

[SDTaylorman]

Well, not just Sam Ash.  Pretty much all music stores, particularly the "big guys".

They are capitalists.  Filthy, rotten capitalists.  How dare they insult us by trying to make a living?!

So two days ago I traded in a Squier CV for a Taylor 324ce at my local Orlando Sam Ash and during the negotiations it was revealed that they use a formula predicated on allowing a trade in value of 60% of what they professionally estimate they can get for the instrument/amp/pedal.

That's a 66% markup (or "markdown" in this case), about a 40% Gross Profit - not unreasonable for a retail operation with that level of sobering overhead.

But one can infer more from that.  One can easily assume that this margin is not arrived at by accident, that it is a corporately established formula that would translate not just to trade-ins, but to all products on their floor as well.

In other words, if they are going to PAY you for something predicated on a 40% GP, then they are going to get that same 40% GP when the SELL you something.

Meaning that they likely paid somewhere in close vicinity to $1325 for that instrument (sounds about right, right?) and they are STILL going to end up with that 40% profit on it even after discounting the MSRP a bit by virtue of recouping that loss on the sale of the trade in.

No real point to this.  It's fine, it's not usurious, just interesting to me to see how the sausage is made once in a while.

Still, it would be nice if maybe some music store would be opened by missionaries, give me that Martin D (fill in the highest number you like here) for free.

Dang capitalists.  No D45 for me...

(Note:  I used a Martin instead of a Taylor in that example 'cuz ain't nobody givin' no Taylors away fer free.)

Next time you're ready to lighten your guitar load send me a message. I could always use a free one from such an anti-capitalist. 

[jrporter]

Not sure how old the OP is, but I sure hope it didn't take too long to figure out that a business exists to make a profit and only stays in business as long as it does make a profit. The alternative is buy and sell used guitars with other individuals...

[mgap]

Not sure how old the OP is, but I sure hope it didn't take too long to figure out that a business exists to make a profit and only stays in business as long as it does make a profit. The alternative is buy and sell used guitars with other individuals...

Or trade a goat and two chickens. 

[SDTaylorman]

Not sure how old the OP is, but I sure hope it didn't take too long to figure out that a business exists to make a profit and only stays in business as long as it does make a profit. The alternative is buy and sell used guitars with other individuals...

Which then simply turns you into the filthy capitalist. 

[Guitarsan]

Well maybe the capitalist part is tongue in cheek, but it is good to realize the tradeoff between trading in and selling, as it were.

Why would you trade it rather than sell it yourself? That's right, to avoid the hassle and effort. Guess what? The dealer has at least the same amount of hassle. No you say? They don't have to ship? Yeah they might in this online day and age. And suffer wear and tear in their store potentially. And pay for storage/store space. Etc etc etc.

Don't like the "hit" you take on a trade? Then learn to sell it yourself. See, that's part of the power of capitalism, you've got choices!

Me, I've sold every one of the guitars I've let go. And kept a bunch of money in the process. Only traded in once, and that was because I didn't want to bother with shipping expense for a heavy amp. And the store had what I wanted in trade. But your mileage can and should vary.

The dealers are not making a ton of money, more likely barely enough to cover their expenses. Benefit for them is primarily selling you the new thing.

[Earl]

"We lose a little on every deal, and make it up in volume".  Yeah, right.   

[otis66]

You can get 20% off up to $500. Plus points.
The Last Taylor guitar I bought I got $389.00 off plus $170. In points.
   I knew what guitar I wanted. Then I waited.
  Know what you want, You have to be patient, wait for the sales. The next big sale will be July 4. That gives you six months to find your guitar.
 Part of the fun is negotiating the best price.
It’s hard to negotiate when you go to the local guitar shop and pick up your holly grail. They can see it in your face.
  I’ve already scoped out my next Taylor. My next Taylor will be a Taylor 317Ce. It’d be nice it the 317ce had a completely gloss body…hint hint.

[Earl]

Off topic, but I went past my LGS today for the first time in many months, since I was working in the area across town.  I played an urban ash GT (just so-so, had nothing over a GS Mini to my ear and hands) and also a truly lovely 517BE.  Good thing for my wallet that I'm not in the market these days.

[CeeAre]

Okay, as the OP, I've been striving for new heights of mediocrity in guitar playing since Johnson was president (uhhh, Lyndon, not Andrew) and am a proud to be a cog in the capitalist system.

The point of the original post wasn't that guitar dealers make a profit (well, er, duh, right?), it was the fact that their trade in policies expose perzackly what that profit matrix is.

Or such is my assumption anyway.

My background is kitchen design, and retail kitchen dealers aim for a 50% markup (33% GP).  Not surprising that guitars (a lower ticket item) might be a bit higher.



CeeAre