Pickup pricing for dealers

[NightWinder]

I have some locals and not so local stores that want to stock my products. What would be the proper percentage the Dealers should pay for products, and at a minimum order(5 sets, or 10 pickup minimum)? FOR EXAMPLE:
If you normally sell a humbucker for $200.00 ( easy math?) on your website.....and have an opertunity to stock a well selling store.....how much do you knock off from full price to make it presentable to the store that can possibly sell the shit out of them? What percentage should the store make on your products without selling yourself short?
Also, is it always nessisary to have a contract agreement that the store is not aloud to sell your product for under an xxxx amount?, and should that be a written agreement(contract). This is not a consignment deal, so the store will own the pickups, but to control value.........and not hore out??????

[Spence]

This whole concept of stocking shops is 20th century stuff. The shops will will not demo your gear. They'll just keep them all behind glass counters and make 20% off your back for doing nothing. Stores are closing down all over the UK because the internet is killing them. Certainly here in the UK. Here's an example. I drive into town, ( gas is nearly $8 a gallon here...start shitting yourselves...) park somewhere near the city centre ($10.50) wander around the music stores and find they're out of stock or not interested or closed down. No it's easier to just search the net and pay the shipping charges.

I only stock one shop in London. Bollocks to the rest. They can all carry on selling commonplace average crap.

Stock shops at your peril. Do not get excited because they show some interest.

[kevinT]

Man...sounds pretty rough over in wales. It's not that bad yet here in the US. A lot of brick and mortar stores have adapted since the introduction of the Internet and are selling products in their stores as well as over the Web. Those businesses that don’t or won't adapt to this new way of doing business generally go out of business. If you go to NAMM you hear a lot of this. The B & M shops complain about how Musicians Friend, ZZounds, and the others have taken away a lot of their business and that they can't compete with them.

Pricing is one of the four “Ps” of marketing and is a more complex topic than just slapping a price on a product. Obviously cost is the first major factor for setting a certain price. But you also want to consider how you want to position your product with your competition and how you want customers to perceive your product in the marketplace. For example, do you want to position your pickups as being exclusive like Loller and Fralin or are they bargain basement pickups like GHS or other cheapo pickups made in Asia. Pricing can say a lot about your product. It’s all about branding it.

Your target market is also important. Are your products geared towards 20 or 30 year old shredders? If so, then you may have to set the price according to what they can afford.

Marketing is interesting stuff. If you’re in business, it may be a good idea to buy a book on the topic and learn the basics.

Case Study.
Take a look at how Dave (possum) does business. I think he has an excellent business model and pricing structure that justifies how much he charges. He offers one-to-one consultation with a customer, he researches info (specs), and custom designs pickups based on a person’s specific preferences/needs (hence, the customer perceives that he is paying for personal attention. Dave also may have calculated this service into his price). In essence, he works with the customer through the entire process. Additionally, his target market reflects more seasoned players that are financially established to afford his product. Anyway I hope you get the gist of it. (possum, I hope you don’t mind me using your business as an example).

My s*%t is getting deep in here…Pardon me for a moment so that I can get my boots….

“how much do you knock off from full price to make it presentable to the store that can possibly sell the shit out of them?”

For the musical products industry you generally sell your products to stores at 50% off your retail price and the retailer can set their own price from there (unless you stipulate MAP pricing).

“What percentage should the store make on your products without selling yourself short?”

There really is no set percent/amount for this. It is generally based on what you charge the retailer. However, the more profit the retailer can make on your product, the more willing they are to purchase and push your product in their stores. Remember, the retailer, in order to sell them, will have to price according to what the market will allow to move your products. Making 100% profit is rare when offering your products to retail stores.

There are a number of ways to price your product…but here is a hypothetical formula similar to something that I use.

Cost of materials (including product packaging)=$30
Time to assemble (including potting)= $10
(you may value your time more and raise this amount to $20 or an amount you’re comfortable with)

Your cost to make pickup=$40

Lets say you want to position your pickups in the marketplace along with DiMarzio and SD. You price your pickup at $79 (manufacturer’s suggested price $79)
You set the retail price at $125
Offer it to retailers at $60
You make a profit of $20
Retailer sets price at $79
Retailer makes profit of $19
You set MAP pricing at $79 (they can’t sell below that price). If they want, the retailer should have the option to sell it at a higher price.

I would also consider offering retailers quantity discounts (i.e., a % off a certain number of pickups purchased) based on what you feel comfortable with.

When dealing with distributors… its worse. You sell to them at 75% off retail. It’s best to sell your product yourself to retailers and avoid the middleman. However, it may be necessary to use a distributor if you sell overseas.

“Also, is it always necessary to have a contract agreement that the store is not aloud to sell your product for under an xxxx amount?, and should that be a written agreement(contract).”

Not permitting the retailer to sell your product below a certain amount is called MAP pricing. A written contract is not necessary for this. You can have a verbal agreement with the retailer or better yet, spell out the terms in a price sheet or catalog/brochure. If they violate the agreement, you just won’t sell to them anymore.

In terms of minimum quantity purchases, that would be up to you.

Just my 2 cents.

[NightWinder]

Your 2 cents is well taken, and appreciated. Most of the stores will be Mom And PA stores. Nice stores that have been around, and cater to the customer, not like GC etc. So basically , its nessisary to have a brocer of some kind with MSRP, along with a minimun order for authorized dealers, complete with your warrentee.
I already have stores in different areas of my state that stock on consignment. One guy is really cool, 10%, which works out awsome for me, and he actually sells 4-8 pickups a week. It probably helps that he also uses my pickups, and has some in guitars at the store. He makes me $$$$, and is really cool about everything. This guy I like. Another guy takes 15%, so I adjust the price acordingly to his %, which is higher, But he also has a bigger store....BLAHBLAH. But....He sells more too......He has more business. I want to offer them Dealer Pricing. That way I get paid right away in a lump sum, and they make more, so Its actually making them money and worth it to them. Anything else you think of KEVin....Feel free.
Thanks for reading

[David Schwab]

Back when I used to be a dealer for some stuff like GHS and OnStage gear, wholesale is half of list price, and the retail is somewhere in the middle. Assuming a dealer gets wholesale prices. So pretty much you give them the pickups for the price you feel comfortable with, and they will mark it up for retail. If you want to extend a discount for a certain number of pickups ordered, then it's up to them to sell them.

I just looked at what competitive pickups go for and priced accordingly. Obviously, the more time it takes to make something, and the more the materials cost, the less you get in the end, unless you price much higher.

That's my take on it.

[WolfeMacleod]

This whole concept of stocking shops is 20th century stuff. The shops will will not demo your gear. They'll just keep them all behind glass counters and make 20% off your back for doing nothing.

All of my shops display my work prominently, and will even gladly demo my stuff. They have them placed in demo guitars in the shops.

My wholesale pricing starts at approx 50% of retail price, and drops a bit from there, with a maximum quantity discount being reached at 20 pieces, except in the case of Fernandes, who's maximum is reached at 200 pieces because they order so dang many.

[NightWinder]

So basically 50% off what I would sell from? With a 20 piece minimum? I really don't like the Consignment Thing, altough its great for me, It can be discourging for small shops that are making 10-15%. I'm not one to ride the witches wheel, and the guys at the shops really promote my stuff so I am thinking of what is going to be fair in terms of They perchase at a dicounted price, and make more, and I get paid at once for 20. Riding the witches wheel too long.......Somebodys gonna set it ablaze!!!

[kevinT]

yeah...the cosignment thing, even though based on trust, can be time consuming...monitoring the retailer's sales of your pickups and everything.
Plus you have your money instead of the retailers funds tied up in their store...where as if they paid you up front, you could use the money for additional stock and other materials to keep you going.

[NightWinder]

Word!!!!!!