Margins on rifles

[VLT79]

...A good business person knows their operating margins...

• they know what their "target" Gross Profit Margin is
• they know what their "actual" Gross Profit Margin is at any given time
• they know what their projected sales for the year are
• they know what their fixed costs are
• they know what their variable costs are
• they know what those different costs represent as a % of the projected sales revenues
• they know if they are making or losing money
  

I'll add one more to that list and it's probably the most important one...


[*] they know a satisfied customer is a returning customer


Despite all the talk and definitions, the truth is that at the end of the day if you take a customer's offer and sell a firearm for $100 more than it cost you, instead of your expected $300, you are still further ahead than not making a sale at all...and having that customer drive 2 blocks down to your competition and making a purchase there!

 

[North Eastern Arms]

I'll add one more to that list and it's probably the most important one...


[*] they know a satisfied customer is a returning customer


Despite all the talk and definitions, the truth is that at the end of the day if you take a customer's offer and sell a firearm for $100 more than it cost you, instead of your expected $300, you are still further ahead than not making a sale at all...and having that customer drive 2 blocks down to your competition and making a purchase there!

I suppose that's a concern if you have the only one..

Often times you see someone come to you and get upset because you won't give them a "deal", and that they're doing you a favor buy buying this item. Products are a finite resource; if you don't buy it, the next guy will. So many retailers aren't willing, or able to give that deal because their margin's may already be thin on a product. A lot of shops can't afford to take a $200 hit because someone is 'doing them a favor'. The retail game is a cut-throat competitive business, and a lot of customers come in with their own best interests in mind, not necessisarily the retailer. When they're unhappy.. it's the retailer that bears the brunt of it. Especially today with the internet, if a product is $5 cheaper on the other side of the country that can be enough to lose the sale.

From someone on the other end of the line, as a manufacturer it's important to us that we price our products as close to our bottom line as possible. We make our cut, then we mark it up so our dealers can make enough. Many of our products.. our dealers make more than we do. But we offset that with volume. We don't want our dealers to reduce their margins to be competitive, we'll do it on our end. It's the retailers that do the grunt work and need to be provided a fair price because of it.

Do some shops have higher prices than others? Of course. It's the capitalist way, and it's the core of the commercial system we use every day. If Bob has high overhead and bills to pay and he can get away with making more on a product because his customers support that then good on him. If someone is unhappy with the price they will move on. But everyone with a business is not going to charge more than someone is willing to pay.

 

[Questar]

I'll add one more to that list and it's probably the most important one...


[*] they know a satisfied customer is a returning customer


Despite all the talk and definitions, the truth is that at the end of the day if you take a customer's offer and sell a firearm for $100 more than it cost you, instead of your expected $300, you are still further ahead than not making a sale at all...and having that customer drive 2 blocks down to your competition and making a purchase there!

At the end of the day "the truth is" that the person in business is there to MAKE A PROFIT because without that profit the business goes broke, the employees lose their jobs, the landlord loses their tenant, the city/town loses the property taxes being paid by the business, etc.. The customer may be happy but without the profit the business is out of business... it's that simple.

You suggest that it's better to take an offer and sell a firearm for $100 more than it cost you, but very few people (including many business people) truly understand and know what that item "costs". You are making assumptions and guessing.

I am also making some assumptions but I'm not guessing and my assumptions are based on real numbers and 40+ years of experience doing this. I know what my costs are... I know what I pay for an item... but more important I also know my annual sales (from last year and expected for this year), and I know my estimated operating costs, so I can come up with a pretty accurate estimate of what portion of my sales represents cost of goods, operating costs and NET Profit. My costs will be different than other dealers costs... they may pay more or less for the goods themselves, they may pay higher rents and utilities while I may have higher costs in other areas... every business will be somewhat unique but overall the numbers will all fall into a given range.

If I buy a rifle for $700 from the manufacturer and I retail it for $1,000 most people would tell me that an offer of $800 for that rifle represents $100 more than the rifle "costs me" but that is simply NOT TRUE.

I may have paid the manufacturer $700 for the rifle but I then paid $15 to $25 to have the rifle shipped from the manufacturer's door to my warehouse (more if it's being imported from the US). I may have currency costs as well. If it's an import then I have brokerage costs as well. I have export license costs... plus I have all of the other costs that go along with operating the business (rent, insurance, utilities, telephones, internet, wages, payroll taxes, etc.). All of those operating costs (as a percentage of annual sales) will be different for every business but as a percentage they will generally fall somewhere in the range of 15% to 25% of annual sales (it varies greatly from dealer to dealer and depends on many factors).

The point is this... you may think my cost is $700 so you figure I'm ahead if I take an $800 offer since a happy customer is good for my business. But from my standpoint, even though I paid $700 for the rifle it actually "cost me" somewhere in the neighbourhood of $900 to $950 and an offer of $800 is in fact a loss of $100 to $150 right out of my pocket. Happy customer or not I can't stay in business doing that.

Operating costs for small business owners in Canada are brutal... FAR HIGHER than costs are in the US. Everything from labour costs, rent, insurance, shipping is cheaper in the US and so the operating costs are far lower... this allows US dealers to work on much small margins and still end up with a profit... that and the fact that they have much higher sales volumes makes it work. Here in Canada it's a very different formula.

 

[8 ball]

There is so much fail here I hardly know where to start! However I know ANY Remington dealer would gladly take all the 700 SPS you could supply at that price. The invoices that I have seen are all around 500 bucks for a dealer cost.

A friend of mine is a Remington dealer and his cost for a Rem 700 SPS Varmint was around $135. Add in shipping and a minimal $50 profit for him and my price is perilously close to the $620 price at Wholesale Sports.

$50 profit on a $600 rifle isn't exactly a lot of money not does that leave a lot of room for haggling.

 

[TheUnprofesional]

I suppose that's a concern if you have the only one..

Often times you see someone come to you and get upset because you won't give them a "deal", and that they're doing you a favor buy buying this item. Products are a finite resource; if you don't buy it, the next guy will. So many retailers aren't willing, or able to give that deal because their margin's may already be thin on a product. A lot of shops can't afford to take a $200 hit because someone is 'doing them a favor'. The retail game is a cut-throat competitive business, and a lot of customers come in with their own best interests in mind, not necessisarily the retailer. When they're unhappy.. it's the retailer that bears the brunt of it. Especially today with the internet, if a product is $5 cheaper on the other side of the country that can be enough to lose the sale.

From someone on the other end of the line, as a manufacturer it's important to us that we price our products as close to our bottom line as possible. We make our cut, then we mark it up so our dealers can make enough. Many of our products.. our dealers make more than we do. But we offset that with volume. We don't want our dealers to reduce their margins to be competitive, we'll do it on our end. It's the retailers that do the grunt work and need to be provided a fair price because of it.

Do some shops have higher prices than others? Of course. It's the capitalist way, and it's the core of the commercial system we use every day. If Bob has high overhead and bills to pay and he can get away with making more on a product because his customers support that then good on him. If someone is unhappy with the price they will move on. But everyone with a business is not going to charge more than someone is willing to pay.

Sometimes the gesture of meeting half way etc and good service is enough though. Ive often avoided online sales in exchange for better service in person and paid that $5 dollar difference you quoted as a reason for lost sale. For me its all about barriers if i go to a store and cant get anybody to help me or have had bad experiences with returns or defects with them in past, and i see it at an online store and get someone on live chat on site right away to talk to etc well then i might go with them. Another one is i use to always have sundays and mondays off and some business would be closed sometimes on those days or they never stay open late when im getting off work etc, that can drive you online as well. Same goes for restaurants we've never minded paying a premium for good fresh and local food if it tastes great as well, versus the mega chain food restaurant. Another thing for me is that trust factor if i can look in sales person eye and believe he is only making the amount he says he is, or is giving me best discount he can etc. Ive got so many store employees in lies before, more so at big box type places and chains.

 

[bjs7293]

For me it boils down to price and how fast can I get the product. For the most part other than firearms I think most dealers have a failing grade. As far as firearms it is mostly a captive market so they can charge what they want. I think also what effects the bottom line and profits is the "Supply and Demand" of a product. One dealer has the only supply of a product the product price is through the roof, I have seen it time and time again. That is why I will shop outside of Canada.

 

[50calshooter]

For me it boils down to price and how fast can I get the product. For the most part other than firearms I think most dealers have a failing grade. As far as firearms it is mostly a captive market so they can charge what they want. I think also what effects the bottom line and profits is the "Supply and Demand" of a product. One dealer has the only supply of a product the product price is through the roof, I have seen it time and time again. That is why I will shop outside of Canada.

Hahaha aren't you just a real asset to this board and Canada's economy...


For some reason I get the feeling that you're that guy as a customer and most stores would probably prefer if you avoided shopping there. I guess it doesn't matter though, you already know it all and import stuff yourself.


Nice attitude.

 

[Martin248]

At the end of the day the dealers need to charge enough money that they can make a reasonable living being dealers. If you think they are "further ahead" charging less think again. Ultimately if they aren't earning enough as dealers to make a living they will decide that they would be "further ahead" going into another line of work. Then where would you buy your guns?

The only way a dealer can give you a better deal in a sustainable way is if they can drive their own costs down lower than other's, so that they still make a good living selling at the lower rate.

 

[Ar180shooter]

For me it boils down to price and how fast can I get the product. For the most part other than firearms I think most dealers have a failing grade. As far as firearms it is mostly a captive market so they can charge what they want. I think also what effects the bottom line and profits is the "Supply and Demand" of a product. One dealer has the only supply of a product the product price is through the roof, I have seen it time and time again. That is why I will shop outside of Canada.

Through the roof? Compared to what? The U.S., which is a different country? The fact is that markup on Firearms in Canada is very low. Sure, it is higher than in the U.S., but operating a business is more expensive up here too. Compound that with the fact that you have a smaller market selling almost exclusively imported goods, and prices are bound to be higher. This is simple economics, and quite frankly, Questar explained it very well... but it looks like you haven't bothered to read his posts.

 

[Onagoth]

Seblantics Ricky!

 

[Onagoth]

FWIW...you guys are talking apples and oranges. Markup is a pricing strategy whereas profit margin is a measure of performance. The two aren't related....necessarily

Markup only means that you're selling a product based on its landed cost to you. Ie. A $50 item that is marked up by 50% sells for $75.

Gross profit margin is a reflection of your profit after factoring in inventory costs, obsolescence, impairments, etc. Ie. Gross profit divided by revenue. Its extremely important to monitor gross profit percentage as it can help make you aware of problems with inventory, problems with pricing or other problems. A declining gross profit margin is worrisome, and could be an indicator that your haven't yet responded to rising costs.

Net profit margin is a reflection of your profit after all costs are factored in. Ie. Net profit divided by revenue. This figure doesn't mean much IMO but can be an indicator of overall business success.

Operating margin is a reflection of your profit after all operating costs are factored in. Ie. Operating margin divided by revenue. This one is also an important one because it demonstrates how well you recover not only your direct costs, but also you're indirect costs. If your gross profit margin is 30% but your operating margin is negative, sorry to say, but you might be bleeding money on some salaries/wages, rent, other employee benefits, etc.

At the end of the day, you're revenues have to cover all your costs, though not necessarily in the same time period. The argument doesn't end there though. Pricing depends on the industry, the availability of supply, the elasticity of demand and buyer confidence, amongst other things. Especially firearms which are a non-essential good. You can also have the best margins is the world, but if you can manage cash-flow, you risk becoming insolvent. If for some reason you pay your suppliers in 10 days (because you're a good guy) but your customers pay you in 60 days, well guess what, you're gonna have downstream problems or costs (ie, interest costs on a line of credit, etc)

 

[bjs7293]

Through the roof? Compared to what? The U.S., which is a different country? The fact is that markup on Firearms in Canada is very low. Sure, it is higher than in the U.S., but operating a business is more expensive up here too. Compound that with the fact that you have a smaller market selling almost exclusively imported goods, and prices are bound to be higher. This is simple economics, and quite frankly, Questar explained it very well... but it looks like you haven't bothered to read his posts.

Once again you are wrong. I did read Questar's explanation of his practices and agree with them for the most part. You and I went through this before with the "Snake Slayer pistol". Two online dealers same distributor $250.00 difference in price. The bottom line people want a fair "consistent" pricing from the people they are giving their money to, and if not they will go somewhere else, I know I did.

 

[PrairieSniper]

Especially firearms which are a non-essential good.

In who's opinion? I consider all my guns essential

 

[wmd]

everyone needs to eat, i would rather pay a bit more for great service from the small guys that i have bought from (wolverine, wanstalls,hical,budget shooter supplys) then save 10 buck to buy from the big guy. Service means a ton to me and if the service is great and price is close i buy from them.

 

[50calshooter]

everyone needs to eat, i would rather pay a bit more for great service from the small guys that i have bought from (wolverine, wanstalls,hical,budget shooter supplys) then save 10 buck to buy from the big guy. Service means a ton to me and if the service is great and price is close i buy from them.

^ yup, sometimes a guy just needs to be sold on the stuff he buys. Great customer service is always high in demand...

 

[Ar180shooter]

Once again you are wrong. I did read Questar's explanation of his practices and agree with them for the most part. You and I went through this before with the "Snake Slayer pistol". Two online dealers same distributor $250.00 difference in price. The bottom line people want a fair "consistent" pricing from the people they are giving their money to, and if not they will go somewhere else, I know I did.

So one dealer has a firearm for a fair bit less than another and according to you, "most dealers get a failing grade".

I'm not saying "don't shop around", that's fine, and I think everyone does the same thing; however, you always seem to be under the impression that basically every Canadian dealer is trying to rip everyone off, when the truth is they work on a razors edge trying to eek out a half decent living. This is not to say that this is universally the case, and no reasonable person would argue that I was trying to say every single dealer conducts business that way. I'm speaking in generalities, so of course there are a few bad apples. This is likely why we seem to often butt heads on the issue. The majority of gun dealers are; however, good, hard working people just trying to make an honest buck.