What's the profit margin on new guns?

JcMack

JcMack

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I've had some FFL holders tell me they make as little as $25 on the sale of a new gun. I realize that the margin would depend on the cost paid to the distributor. I rarely buy new guns. Prices are so high, and newer guns are clearly inferior.
 
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JcMack said:
I've had some FFL holders tell me they make as little as $25 on the sale of a new gun. I realize that the margin would depend on the cost paid to the distributor. I rarely buy new guns. Prices are so high, and newer guns are clearly inferior.
Click to expand...

$25 is bad if you are a legitimate business.... My LGS told me he trys to make about $80.00 per gun. I like that when it comes to the used guns I've purchased as he tends to add 60-80 to the price he paid. If he buys the gun for cheap, he sells it for cheap.. most guys would add the difference to the end price..:)
 
I suppose it depends on the dealer. A friend of mine is a kitchen table dealer with a FFL. He pays more for guns than what they can be bought for at chain stores.

A man I went to school with owns a sporting goods store and I will occasionally buy a gun from him. He will usually lower the price for me about $75.

I went to GA a few years back and bought a new Model 686 for $140 cheaper than the local store wanted for it. Had it shipped to my local friend and the store paid shipping.
 
I’m more concerned with how many times it has been marked up. First the manufacturer has to mark it up to make a profit, then the distributor has to mark it up to make a profit, then the LGS has to mark it up to make a profit. Why do we have the middle man???
 
Maximumbob54 said:
I’m more concerned with how many times it has been marked up. First the manufacturer has to mark it up to make a profit, then the distributor has to mark it up to make a profit, then the LGS has to mark it up to make a profit. Why do we have the middle man???
Click to expand...

I am not sure you could call the manufacturer's price as being "marked up." There are set costs in the manufacture of anything. The factory knows what it cost to make any given item and price it so it covers the entire process from raw materials to labor to profit. The price was set before the item was made.

But then you have the cost of shipping, delivery, stocking and a lot of other things that add to the price.

There is an item made in south Louisiana. The union requires it be sent to another town for shipping to other locations. There is an additional cost to shipping it to a place 100 miles away so it can be shipped to stores. That cost is $1 per item. So the item could be bought a dollar cheaper if it were shipped directly from the place of manufacture. Yet the unions demand it be shipped elsewhere for shipping.

Now what I want to know is about gun makers. Are they union?
 
You always see the term, "Street Price". The MSRP is a full 40% mark up, but you seldom see a gun selling for that. The competition forces the dealer to come down to the "street price" which is around a 15% mark up. Often there is more profit in used guns than in new guns if you can buy right. What is even worse is reloading components. One small local dealer carries no reloading components, because the mark up to be competitive with on-line sellers is a pittance. Unless you can buy in very large quantities to get price breaks, the "dealer" price is pennies off.
 
m657 said:
"Why do we have the middle man???".....
Click to expand...

The middleman often play an important role for companies that do not have a shipping department. Forty years ago the ability to get stuff shipped two or three days anywhere in the 48 states was SUPER EXPENSIVE (listen to Priority Mail from USPS adds). Distributors covered the "Flooring Costs" (cost of holding stock) thus improving the manufacturer's cash flow and were better at shipping as and receiving were 90% of thier job.

It also allows for a dealer to combine all thier orders of multiple manufacturers providing some easy to prove level of volume and potentially discount.

Need or want, on our side of the equation perhaps not. But, on the manufacturer's side they might be.

While we have USPS, FedEx, UPS and others how many different rules from state to state (county to county) are there out there that manufacturers have to monitor (e.g. CA, Cook County, NYC)? Might be a large part of the job for a distributor.

B2
 
from my experience (i use to work at a gunshop) guns are marked up anywhere from 15-20%, ammo is marked up around 45%, small, inexpensive items, like cleaning rods, jags, oil, etc(are you ready??)...........over 50%
 
15 to 20 percent? That's a heck of a bargain compared to electronics. I remember when an Apple IIE had a dealer cost of $247.00 and retailed to the public for about $1200.00.
 
When I worked Apple the margins were around 40 %. Now it's much lower.

The ammo mark up would explain how Wallmart is so cheap.

B2
 
You have suggested retail and "dealer" pricing which varies. One example is years back my S&W distributor had different price structures depending on how much you were buying (when I had an FFL). If your a volume dealer you got jobber cost which was normal dealer cost minus 4%~5%. This allowed some dealers to sell closer to normal dealer cost and make an extra margin. They sold some models at shows for less than I could get them an my dealer cost at the time.

You have the big box stores like Walmart & K-mart that purchased Remington 870's and Marlin's at a pretty low "dealer" cost direct. I sold at cost to get more people shooting and for my own cheap supplies and firearms.Since there are fewer FFL holders now and less competition and your stuck for a cheap transfer now.

My last transfer (Silencer) my class 3 dealer charged $50. That's reasonable in my eyes but pretty steep for a normal 4473.
 
Cost must vary with quanity purchased. When I need an FFL I use my buddy. My buddy is small time and keeps very little inventory in his shop. His cost is always higher than what I can purchase the same item for from one of the larger jobbers at the gun show. So, unless I can't find it at the gunshow, or used, I seldom by from a traditional gun store.

Out
West
 
It's been my experience that the dealers have a different markup based on whether it's a stock gun or a special order. If it's a stock gun, he has no idea how long his money is going to be tied up in that gun, and will mark it up to get the return on his money that he needs to stay in business. On special orders they usually add around 10%, because they know their money isn't going to be tied up. They'll get paid for the gun before they have to pay for it. They actually get to use the money for a little while before the invoice is due.

Also we need to remember that ALL the store's costs and profit have to come from the markup. If a store pays $150 for a gun and sells it for $200, the original 150 goes to the distributor or whoever the dealer bought the gun from. His phone bill, electric bill, rent, any real estate and employment taxes, maintenance, any other cost, and his paycheck at the end of the week comes out of the $50.

If we like having local gun stores around then we need to be willing for them to make a decent living from us so they can stay in business.
 
I used to own a gun shop - note the use of past tense. Dealer discount on guns ranged from 10-20% off list price, varying with make and, sometimes, model. Practically no profit margin, and a LOT of money tied up in slow moving stock. New S&W, Colt, and other quality guns were only available through distributors, and I used distributors all over the country, as the local distributors played games, including requiring purchase of hundreds of dollars of stuff you couldn't sell in a hundred years in order to get one desirable gun. Now, wit internet sales by distributors, a small gun shop just can't make overhead on new gun sales.
 
A couple of the shops I frequent have told me that the margin they make on new guns is very small...varies somewhat with the make/model, but generally $50 or so. Of course, some shops price one model higher than another shop, and that affects their margin...or maybe not. If the shop that prices the item lower pays less for it initially (if they are a master dealer, or a high volume dealer, they may get a discount) then the margin may well be the same. In any case, they have all told me that they really make their money on used guns.

I know they have all made a ton of money from me trading so much! :p or really :(
 
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