# Musical Instrument Markup?



## elwood (Feb 17, 2008)

I'm in the process of designing a guitar amp that I hope to eventually market and sell either online and/or through music stores. But of course part of designing the right product is determining the right price. I have no knowledge of the retail music instrument business other than the research I've done and my experience as a buyer.

Does anyone have an idea of how this works, at least in Canada?

- Do stores buy directly from manufacturers or do they only buy from distributors?

- What are the general payment terms and price paid to the manufacturer vs. the selling price?

Part of me just wants to sell my stuff online like most of the smaller makers, but nothing beats being able to go and try out gear at a store. I'm just figuring out how realistic my plans are, and if it's a viable business to get into.


Any insight into this would be great!


----------



## suttree (Aug 17, 2007)

well, since you haven't established a brand as of yet, you most likely won't be selling to distributors.... to be competitive there, you'll need to be making enough product to lower your costs to the point there can be a double margin.. typically the distributor wants about 10% for an established product (that they won't have to warehouse in big numbers), and more for a specialty product. the retailers (driven by long&mcquade) are running makups in the 30% range, much more on accessories, slightly less on stalwart brands (fender, jbl, etc). the retailers in canada buy most of their stock from distributors. you'll at first probably try and work out a consignment type agreement with some local stores, they'll pay you 20-25% of the sale after the product is sold. online is probably the way to go... james peters would have some excellent insight on this topic, if you can get him to talk, right james? 

oh another thing to mention is independent sales reps. they may pick up your product for a commission, as they're already out in the stores every day trying to sell stuff, a deeper catalog never hurt. if you get there, let me know i know a few of the good ones.


----------



## Hamm Guitars (Jan 12, 2007)

I don't know anything about the amplifier market, but I will tell you that the guitar market is tightly guarded by the two biggest names in the business. 

When I started selling guitars, I tried knocking on just about every music store door in Southern Ontario. The only places that would take new instruments on consignment (10-15% of the sale prices goes to the store) were small shops with no Fender or Gibson Authorization. All of the authorized dealers will not deal with you for fear of loosing their dealership status, I'm not sure that they have a contract that warns them about dealing direct with small suppliers or not, but it is a common fear amongst many of the shop owners that I have spoken to.

Selling online is a tough go, as you can imagine how many questions you will get that would not have to answer if the consumer could actually try the product for themselves. Referals and reviews are the like gold if you are selling online.

Also, if you are not a web designer, you end up with a second or third rate site (like mine, as I did it myself). Hiring out a photographer and a good web designer might cost a few grand, but it is definately the way to go, as you will likely never have time to work on the website.


----------



## suttree (Aug 17, 2007)

i should mention the MIAC show. it'll be this summer in toronto by the airport, and it's a great way to find a captive audience for your questions, lol..


----------



## Steeler (Oct 31, 2007)

> All of the authorized dealers will not deal with you for fear of loosing their dealership status,



This is exactly what happened to Musicman Amps.

They had an excellent product, a strong petagree (Leo Fender made them), but major stores wouldn't carry them for fear of loosing their cash cow..

I have a friend who was a respected Fender Rep, and changed to Musicman to follow Leo. He said this practice was well known.


----------



## Geek (Jun 5, 2007)

Ah, competition :wink:

To add to what has been said,



elwood said:


> - What are the general payment terms and price paid to the manufacturer vs. the selling price?


30% minimum, or they will likely and sometimes very rudely to tell you to head right back out that door. Doing the same door-to-door here near Vancouver.

30% is the minimum the big names are giving them and the generic junk they're getting from overseas is closer to 50% and one is even 75% (name escapes me, little transistor jobbie that usually comes with guitar w/amp-in-a-kit).

Online reatilers is 10-15% and American retail shops are happy with 15-20%.

Cheers!


----------



## elwood (Feb 17, 2008)

Thanks to all that have responded so far. The numbers are not quite as bad as I was expecting, which is a relief.

Geek: Do you have a website with the stuff you're building?

After looking at a lot products both mass-produced and boutique I've decided to take a somewhat different approach. I hope that it works out.

Also, that MIAC conference sounds good... I'm going to see about getting a booth there in August. It gives me a deadline for finishing this thing anyway. (hobbies take a long time when you have a day job too)


----------



## suttree (Aug 17, 2007)

Geek said:


> 30% minimum, or they will likely and sometimes very rudely to tell you to head right back out that door. Doing the same door-to-door here near Vancouver.
> 
> 30% is the minimum the big names are giving them and the generic junk they're getting from overseas is closer to 50% and one is even 75% (name escapes me, little transistor jobbie that usually comes with guitar w/amp-in-a-kit).
> 
> ...


this is not in keeping with my understanding, with over 10 years experience working at major music retailers. american margins are actually slightly higher than canadian margins, due to long&mcquade's reliance on their financing to generate higher profits. online retailers advertise at what is known as "MAP" (which isn't legal to set in canada) or "minimum advertised price". the brick and mortar stores will usually give you a better deal cash, but i've found that i can always do as well here (when i include the duties i'd pay at the border, which these days they're being very tight with).


----------



## Geek (Jun 5, 2007)

Hi,



suttree said:


> this is not in keeping with my understanding, with over 10 years experience working at major music retailers. american margins are actually slightly higher than canadian margins, due to long&mcquade's reliance on their financing to generate higher profits. online retailers advertise at what is known as "MAP" (which isn't legal to set in canada) or "minimum advertised price". the brick and mortar stores will usually give you a better deal cash, but i've found that i can always do as well here (when i include the duties i'd pay at the border, which these days they're being very tight with).


I was going by my chit-chats with a couple of small stores in Bellingham, WA. and an email to a couple in Seattle.




> Geek: Do you have a website with the stuff you're building?


I design for CKAmps.com, but that website is a quickie (I have to update that). My baby is classicvalve.ca :smile:

Cheers!


----------



## Glasstone Amps (Feb 27, 2008)

You need to give the dealers room to work with the price. There's usually 3 prices: List (MSRP), Street, and Wholesale. The list price is always the highest, and the street price is what a dealer would typically sell for, with a 30 - 40 point markup. The dealers like to be able to put the list price on an item, cross it out, and put their street price on to make it look like they're giving the customer a discount.

I've found that dealing with small independent shops is pretty good. They're usually quite receptive to new stuff.


----------

