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Old November 8, 2012, 08:24 PM   #1
TXAZ
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Margin on guns?

I was at a LGS, where the sales guy was trying to tell me the Suggested Retail price is typically only about 10% above their cost. I can't see building a business on that, as it seems to be an extremely thin margin, or I'm not believing it.

Without getting into specifics or violating any agreements, does that seem right to you wizards who actually know wholesale vs. suggested retail prices?
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Old November 8, 2012, 08:33 PM   #2
5.56RifleGuy
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That really depends on the manufacturer. Some manufactures seem to put their suggested retail way high. As I'm sure you know, suggested retail and street price are two different things. Thanks to the internet, the mark up on most guns is pretty low. Lets say I know a guy that sells a certain type of handgun that has a name similar to the word BLOCK. Gets them at around $450 and sells them at about $499. There definitely isn't a lot of mark up. Sometimes you are lucky to get 10%.
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Old November 8, 2012, 08:36 PM   #3
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I think MSRP on those is somewhere around $600.
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Old November 8, 2012, 09:02 PM   #4
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I can confirm that margin on new guns, at least in competitive markets, is around 10%. Dealers try to make some of that up on accessories and used guns, which might be about 30%.

In the halcyon days of olde, when dealers got MSRP, margins were good. Nowadays, I can't see a shop surviving on gun sales alone. That's also why most dealers don't move on prices: to go any lower would be to lose money.
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Old November 8, 2012, 09:15 PM   #5
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Would those %'s likely translate to a $12,000 .50 BMG with associated $2,900 suppressor?
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Old November 8, 2012, 09:21 PM   #6
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Yea, "firearm" dealers don't really make that much of their money on firearms. The money is in the ammo and accessories. The guns are just there to get you in the door.
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Old November 9, 2012, 06:46 PM   #7
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it truly completely depends on the handgun.

there have been several posts on here that have been "yeah it sucks, ruger couldnt fix my redhawk/blackhawk but were happy to sell me a new at cost for a total of 400 bucks".

those are guns with a 9-1000 msrp via manufacturers website.

now if there is a mere 10% markup... it should cost ruger about 850 dollars to make a single blackhawk or redhawk revolver. with a profit margin of under 50 dollars per handgun, they would not have survived the clinton administration.
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Old November 9, 2012, 07:16 PM   #8
Don H
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Don't forget, most manufacturers don't sell directly to gun stores. Distributors get a mark-up also. Then there's shipping cost to the LGS that has to be covered.
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Old November 9, 2012, 07:16 PM   #9
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Presumably, the manufacturer marks up the price to the distributor who in turn marks it up for the dealer. The dealer may only be making 10% but that doesn't tell us what the manufacturer's margin is.
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Old November 9, 2012, 07:26 PM   #10
5.56RifleGuy
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A lot of the time, it is cheaper to get a gun through a distributor than from the manufacturer directly. I'm sure if you ordered a large quantity, that may be different.
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Old November 9, 2012, 08:03 PM   #11
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The shops I frequent are 10%-15% over their cost. I think that's why there are so many gun dealers that are pawn shops - they make more money on pawns than the guns. Plus, they make a bunch more on used guns. A local shop bought a used (never fired) Rohrbaugh for $850 and sold it a couple of days later for $1,299. Not a bad little profit.
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Old November 9, 2012, 09:21 PM   #12
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you guys are all neglecting the single most lucrative part to gun store profits besides ammo & gear....USED guns.

In most cases they offer HALF at best for trade-ins....which they turn around and put a sticker on it thats marked up about 25% or more in some cases. Most times I am there...they make front and back door profits on a transaction where a person is trading a used gun and purchasing a new (or used) one at the same time. And right now LGSs are busier than ever before.

*EDIT* Joe's post above nailed it ^
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Old November 9, 2012, 09:30 PM   #13
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Tom Servo also mentioned the margins on used guns and firearm accessories.
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Old November 9, 2012, 10:37 PM   #14
jmr40
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Quote:
I was at a LGS, where the sales guy was trying to tell me the Suggested Retail price is typically only about 10% above their cost.
10%-15% above their actual cost is about common. MSRP is usually a LOT more than 15% above cost and very few guns are actually sold at MSRP.

There are other ways dealers can make a profit. Often a distributor will offer a special deal. I've see things like giving the dealer a Rossi revolver for every 3 Colt 1911's they buy. For big dealers who might buy 50-100 guns at a time deals like this make a difference.

Most of the profits are on accessories, but that is true in almost any buisness from cars to computers. Depending on the item profits could easily be 300% or even much more.

Used guns are a lot harder to figure, and it varies with dealers. One LGS owner does not want to deal with trade ins. If you bring one in to trade he tells you up front he does not want it and will offer by far the least trade value of anyone I've ever seen. But he prices them cheap to. They move out fast when he gets a used gun.
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Old November 10, 2012, 10:33 AM   #15
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Also FFL dealers have to pay for shipping too...unless they invest their money in quanities of guns from the wholesaler.
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Old November 10, 2012, 01:01 PM   #16
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To have a business that does more than just sustain itself, the invester needs somewhere between 35% and 50% margin average, depending on the business. Some businesses work on higher margins, lower than 35% and you need very high volume and low shrinkage to cover your fixed costs.

This is not to make a profit, this is to cover your fixed costs and just break even.

Consider things like shipping. when I had my company I had a graduated scale on shipping. You pay all (or part) of the shipping up to 5 items, over 5 I will cover the cost of shipping...depending on the value and margin some places want thousands of items before they will cover shipping. I had one supplier that never covered shipping, but he had great prices too...

So, let's say shipping is $20. The item shipped is $500, and the retailer will sell (on average) one of them month, but may sell 3 a month, or none...at what point would you purchase 5 at a time to just get free shipping? How many would you keep in stock so you would always have one available for sale?
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Old November 10, 2012, 03:18 PM   #17
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MSRP includes a margin of 25-35%, but nobody sells at MSRP. Most new guns go for 10-15% above cost, which isn't enough to keep the business afloat by itself. But you can't have much of a gun store without guns, so they are in effect a promotional item to draw people into the store and get them to buy clothing, supplies and accessories which do have enough profit margin so you have a chance to turn a profit.

Most ammo is even worse. The local Walmart sells some ammo retail at less than a small shop's cost, and the rest just above. The only ammo you can sell at a profit is the more obscure loads they don't carry.
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Old November 11, 2012, 08:38 AM   #18
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My experience when I owned my gunstore was as the other posters described. Gun sales alone will not make it. Accessories, trades and gunsmithing provide the real income.
A single dealer often cannot match high volume stores. The K-Mart near me could sell H&R guns for 20% less than I could buy them for direct or through a distributor.
To compete I provided service and tried to focus on better guns than K-Mart would handle.
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Old November 11, 2012, 10:34 AM   #19
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Quote:
To have a business that does more than just sustain itself, the investor needs somewhere between 35% and 50% margin average, depending on the business. Some businesses work on higher margins, lower than 35% and you need very high volume and low shrinkage to cover your fixed costs.

This is not to make a profit, this is to cover your fixed costs and just break even.

Consider things like shipping. when I had my company I had a graduated scale on shipping. You pay all (or part) of the shipping up to 5 items, over 5 I will cover the cost of shipping...depending on the value and margin some places want thousands of items before they will cover shipping. I had one supplier that never covered shipping, but he had great prices too...

So, let's say shipping is $20. The item shipped is $500, and the retailer will sell (on average) one of them month, but may sell 3 a month, or none...at what point would you purchase 5 at a time to just get free shipping? How many would you keep in stock so you would always have one available for sale?
most business models today focus on about a 20% profit margin on most items due to internet sales and people being able to know what a fair price is. As state many times a 10-15 % markup on NORMAL STOCKED items in a gun store is about average where special order or custom will carry a heavier markup or a pay before its ordered to make sure they dont get stuck. Most of the gun community knows what a firearm is actually worth before buying. Where a gun store is able to survive today is based on many factors that the internet/wholesale cannot touch

#1 (the most important) a place to visit, hang out, tell war stories and generally bs. no one at walmart cares about your sweet new firearm.

#2 the ability to look before you buy and the first hand knowledge of the owner if its a good store.

#3 if its a well stocked busy store the prices are inline anyways or people would shop elsewhere.

#4 repeat business****** how many people own just one???

#5 ammunition accessory's and gunsmithing.

#6 TRANSFER FEES (most dealers make almost as much on a transfer fee than they would off the gun)

With gunbroker and all the other auction sites out there for a gun store to be competitive they cannot rely on firearms alone to stay in business
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Old November 11, 2012, 10:25 PM   #20
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Wow didn't realise that KMart-Sears Holding is still selling guns in Arkansas...please tell a location..
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Old November 12, 2012, 07:27 AM   #21
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Profit??

The Kel Tec PMR 30 is a hard to get gun. They sell in the gun store as soon as they come in, the store even has a waiting list to get one. On gunbroker they sell anywhere from 500.00 to 600.00 and when the gun store has one they sell them for $425.00. When these guns come from the distributor they cost $278.00 shipping and all. There's even more profit in S&W's, Colts,Sigs,Glocks and Rugers.
The next time you're at a gun show, arrive early and see what kind of vehicle the dealers drive. If you have a fairly large and established store you can make a comfortable living. Most dealers will tell you they are barly making it, it's a sales pitch. I sell guns on the internet and you never know how bad someone wants that gun, some days are pure gold and others silver but it all averages out as good sales. I do posess a FFL.
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Old November 12, 2012, 09:38 AM   #22
Lawmaker
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Selling guns is all about selling used guns. You as the dealer can set your own buy and sell price.
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Old November 12, 2012, 09:47 AM   #23
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That dealer is not being truthful. The m.s.r.p. on almost all guns is way, way more than 10% over the dealer's cost. My local dealer sells guns at 10% over HIS cost from the distributer, including shipping, and he will show you the paperwork. Ask that dealer to do that if he is really honest.
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Old November 12, 2012, 10:00 AM   #24
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I agree, and I always wonder why stores don't cator to folks wanting to sell their firearms to them. But frankly, they really don't cator to these people at all and often offer 50% of value (often begrudgingly it seems). I can understand that on guns that don't sell, but I can't understand that on guns that move off the shelves.

I go into large gun shops with hundreds of new guns but maybe only 20 used guns on the shelf. I look at the price of the used guns and they approach new gun prices if they are in good shape.

My take on that is that they simply don't pay folks a reasonable price on a used gun. The price offered is almost insulting. Like cars, most people take the path of least resistance and with cars that usually means you trade as well as buy. I told one gun shop I would rather landfill the gun then sell it to them for the price they offered.

I do understand profit. But I also understand sales is all about volume for most stores.
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Old November 12, 2012, 01:49 PM   #25
RickB
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I was about to order a gun online, and decided to give a local dealer a shot at the sale. When I quoted the online retail price, the local guy told me that it must be a used gun, as it was less than his wholesale. That's a pretty weird business model.
I bought a new gun last weekend, paid $595 (full retail), see reports on the 'net of people getting them for $535, and if the retailer is making any money, then wholesale must be 10% less than that? So, mark-up, from dealer wholesale to full retail, would be more like 20%.
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