Another reason I loathe most gun shops


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rock jock
August 22, 2003, 11:55 PM
As I have related on another post, I won a NIB Springfield Mil-Spec last night at a Friends of the NRA dinner. Well, I am not a bog fan of the mil-spec features, so I'm thinking to myself that I might trade it. Now, the gun shop I picked it up from deals almost exclusively in used guns (they just handle the transfer for the prizes) and they don't really have anything I'm looking for. Anyway, 30 minutes after I picked the gun up I went to another gun dump and asked what they could do for me on a trade-up for a new loaded Springfield. Now, as I am asking the guy this and he is looking over my obviously NIB gun with the tag still hanging off it, I look down and see the exact same gun for $479, with the same box, same accessories, etc. I figured "hey, these guys will offer me $450, make $29 off my gun, sell it for $479 just like the one in the case (so it essentially like giving them $479 in cash), and then make a decent profit off the new loaded version I want to trade up for. All in all, a pretty good deal for them. This kid heads to the back to talk with the owner and comes back in a couple of minutes. "We'll give you $350 for it." I am astounded. "What??!! You have the exact same gun in this case for $479, plus you would be making profit off the loaded version." He just stares back, unblinking, and says nothing. I say no thanks and leave. What in the world are these people thinking? Do they actually not want to sell guns?

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2nd Amendment
August 23, 2003, 12:08 AM
Well, the "logic" is that they'll tell you they must sell it as a used gun. Technically true, of course. Thus they offer a low trade because they "won't be able to get new price for it". Of course the whole truth is they will tell any purchaser your exact story, that it actually IS a new gun, and ask new price or within a few dollars. It hinges on your believing they can't get new price for it, which most people will accept. You, wisely, didn't.

jsalcedo
August 23, 2003, 12:32 AM
$350 sounds generous compared to the lowball fire sale deals I've seen offered for NIB guns.

Some gunshops like to turn a profit more quickly than is deemed reasonable. A NIB gun would probably not be sold as used even if it was
2nd owner.

You would be much better off with a private sale

Redlg155
August 23, 2003, 01:22 AM
I'm with jsalcedo on this in saying that the price they offered you is a generous one. I've seen them on Gunbroker.com for 400'ish, so you know the dealer cost is around $325-$350 max.

Actually I'm surprised that he offered you that much. How much he is selling the one in his case makes no difference. What does is how much he gets them at his cost. He definitely will not offer more than his cost for a new one.

That's where private sales come to the rescue.

Good Shooting
Red

C.R.Sam
August 23, 2003, 01:43 AM
Red nailed it.

Why should he pay more than usual for an item to put in stock ?

Sam

El Tejon
August 23, 2003, 09:34 AM
I am outraged! How dare a gun shoppe even attempt to make money. Report this outbreak of free marketism at once!

It is widely known that gun shoppes are extensions of hobbies, not businesses. As such gun shoppes are required to crater to our expectations, not their bottom lines!

Do not put an ad in the paper and attempt to sell it for the asking price. Run into the nearest gun shoppe and demand that they lose money on a deal.

Prices are determined by what a centralized committee determines them to be, not the free market of a buyer and seller.

tommytrauma
August 23, 2003, 10:10 AM
So, you're upset that he only offered you wholesale price instead of retail? Why should he pay you MORE for a technicially used gun than a new one would cost him from his distributer?

Beav
August 23, 2003, 10:25 AM
Depending on how desperate you are its always best to skip the middle man and just do a private sell otherwise you're sure to get gouged.

Futo Inu
August 23, 2003, 11:09 AM
Wait a sec - you guys who say that "why should the shop pay more for this gun then their cost?" are partially right, but not taking into account the fact that it would lead to a SALE which they might not otherwise make on a fully marked-up Springfield loaded, making more profit. I agree that the gun shop does not have incentive to pay MUCH more than their cost, but a little more, partially splitting the difference, would be in order, IMO, given that this would lead to a sale with full profit. How much over cost depends on how laggy sales are on that particular Loaded model. Maybe paying $25-$50 over their cost would make sense, because of (1) the new sale it immediately leads to, and (2) saving shipping costs etc. on acquiring the other one. Dunno if what they offered already represents such an increase, but probably not. If they said "$350 if you want cash, but $390 as trade-in credit", that might make sense. Are you SURE it was clear that what you wanted included an agreement that it's only as trade in credit for the new one, or just essentially a cash transaction? Because big difference - how do they know for sure you'd turn right around and buy the new one?

rock jock
August 23, 2003, 11:36 AM
Yes, Futo, I made that very clear. I told the guy exactly the gun in their case I was interested in, which listed for $649. Now, I know for a fact that they mark up their guns 20%. So, even if they offered me $425 and then resold the gun as Unfired/LNIB for $465 or thereabouts, that's $40 profit off my gun and $130 off the new gun. However, even if they sold my gun for exactly what they paid me, that's still $130 they would make off a new sale. I think the problem comes down to either they are too greedy for their own good (and thus missed out on selling a gun), or they don't understand basic accounting.

Graystar
August 23, 2003, 11:38 AM
Wait a sec - you guys who say that "why should the shop pay more for this gun then their cost?" are partially right, but not taking into account the fact that it would lead to a SALE which they might not otherwise make on a fully marked-up Springfield loaded, making more profit. That depends on the desireability of the item you are trading for. The Springfields loaded seem pretty desireable, so if he didn't buy it someone else will. At that point, if doesn't make any sense to throw money away to make a sale.

I think $350 from a dealer is a good price. Clearly he viewed the gun as NIB.

Brad Johnson
August 23, 2003, 11:57 AM
I'm halfway in between on this one. I think it's way out of line to expect a dollar-for-dollar trade on a gun unless it's between you and a buddy, but I also think this particular dealer is trying to pull a fast one.

The dealer cost on a Springfield 1911 Mil-Spec is appx $419 plus freight which is an estimated $15-$18. The dealers that I do business with will usually offer you cost less 5-10% on a gun that is NIB (it has to be obviously NIB, just like the above example). The bottom line is they are getting a display gun for a little less than their regular cost, and they are still able to give me a decent price for the trade. We both win and everyone goes home happy.

Brad

Old Fuff
August 23, 2003, 12:00 PM
O.K. - The trade-it-in-at-the-gunshop idea didn’t work out. Rather then having a fit consider the second option you mentioned in your previous post. Pick out the accessories you like and rebuild the gun you have. Whoever you buy the after-market parts from may buy the old parts that you replace. If not, someone else will. I wouldn’t trade the gun until I worked out the numbers to see what it would cost to make it like you wish it was. If that number’s too high I’d sell the gun to a private buyer and go on from there.

Art Eatman
August 23, 2003, 12:01 PM
If you want retail or near-retail, find a retail customer. If you want to deal with a shop--or a table at a gunshow--you better know the prices in Shotgun News. The most a NIB critter is worth to a dealer is the Distributor price.

Philosophically, if my investment in something is near to zero, whatever I get is profit--so I'm not prone to complain that it's not as big a profit as it might have been...

:), Art

jacketch
August 23, 2003, 12:14 PM
The obvious answer is that you should never disinventory anything from your gun collection. Acquire, yes. Sell, no:D

SteyrAUG
August 23, 2003, 12:38 PM
Yes how dare those gun shops not offer you more than dealer price for your gun. Most reasonable gun shops would prefer to obtain their inventory from private individuals at a higher price than from wholesale suppliers.

Funny part about guys like you is when you sell your guns on the net or at gunshows you try and get full retail value.

GinSlinger
August 23, 2003, 01:11 PM
What if....
...You had asked the shop to cosign it for you? After they took thier 15-20% cosign what would you have gotten? Just a thought. I spent almost 30 minutes with a customer at my last job showing the false economy of buying somethings off the internet. The customer was going to spend 15% over our prices after fees and services; yet he just didn't get it...:banghead:

GinSlinger

rock jock
August 23, 2003, 01:13 PM
if doesn't make any sense to throw money away to make a sale.
How are they throwing money away??? Folks, this is simple math. Even if they sold my gun at the EXACT SAME PRICE they paid me and make zero profit from that transaction, they still get 100% of the profit from selling the loaded Springfiled to me.

Keith
August 23, 2003, 01:26 PM
If he's selling the same gun for $479, he probably bought it for $350. So, why would he buy a used gun for $100 more than he can buy a new gun?

And it IS a used gun, with all the warranty issues and "buyer beware" alarms that that implies.

Dealer: "It's never been fired!"
Customer: "Oh yeah, sure..."

Does the warranty cover the second owner? I doubt it.

Even with the trade up to the loaded gun, he's still out that initial $100. In effect, you were asking him for a $100 discount on a new gun. Or, asking him to pay retail for a used gun he can buy at wholesale cost.


Keith

Okiecruffler
August 23, 2003, 01:34 PM
I don't think people realize how slim the profit margin is in any retail business. Making $29 on a $475 dollar item isn't worth the hassle of paperwork. I used to tell people bring guitars into my shop to trade that they would be better off selling it personally or letting me put it on consignment. But most people don't want to wait for their stuff to sell to get their money. Well, guess what, the merchant has to wait for the stuff to sell before they see their money, and as long as it's in the shop unsold, it's just more merchandise you have to pay taxes on.

El Tejon
August 23, 2003, 01:44 PM
Okie, you can't fool us. Transaction costs do not apply in the Worker's Paradise. Overhead does not exist.

Retailers do not recieve their money from customers, but are paid by the People's Committee on Profit. The check arrives on the 15th of each month.

rock jock
August 23, 2003, 02:13 PM
Even with the trade up to the loaded gun, he's still out that initial $100. In effect, you were asking him for a $100 discount on a new gun. Or, asking him to pay retail for a used gun he can buy at wholesale cost.
OMG. I can't believe the mathematical illiteracy on this thread. Absolutely frightening. **Sigh**

OK, folks, I'll break it down for you:

Let's say they offer me $450 for my gun. I agree and they take possession of the gun and give me $450. Right next to me is another customer who sees this take place and says "hey, I'd like to buy that gun." As a matter of expediency, the gun shop flunky says "fine, I'll sell it to you for cost - $450". The guy looks at it, sees the tag hanging off it, sees the plastic bag it is in, sees the warranty card, and says to himself "that's a great deal since its $29 less than the identical gun in the display case that is in the same condition." (BTW, Keith, the warranty would apply because I had not filled out the warranty card. As far as Springfield is concerned, the second customer is the one who took initial possession of the gun) So (keep up with me here), the customer gives the gun shop $450. NOW, what has occurred? The gun went from my possession to the gun shop's possession to the customer's possession. $450 went from the customer's hands to the gun shop to my hands. The customer has a new gun at a good discount and I have $450. The gun shop has lost NOTHING, except for the 5 minutes it takes to fill a yellow form out for the second customer and to record the serial no. in their logs. They simply have been a middle man. At this point, they have made zero profit, but again, they have lost nothing. NOW, immediately following this, I take $199 out of my wallet, combine it with the $450 the gun shop just gave me, and buy a new loaded 1911. The gun shops records this as a profit, just like any other profit they would make from any other gun they sold. The net total from this entire series of transactions is 100% profit from selling a new gun.

The above scenario represents worst-case for the gun-shop, i.e., they make only 100% profit from a new gun. In this scenario, I am assuming that the gun shop sells my gun immediately. I think this is a very reasonable assumption since they can put it in their display case showing the gun with the tag, warranty card, etc. and sell it as LNIB with a $29 discount over the exact same gun in the New Gun display. If they do not, they lose the time value of money, which is very slight for a large store like this. They also incur the opportunity loss of not selling their own new Mil-Spec (and thus realizing full profit on that gun) the next time someone walks in and wants to buy a Springfield Mil-spec. However, two factors mitigate against those being really big issues. The first is that this store sells a lot of guns and they get a pretty quick turnover on their inventory. The second is that Springfields are, as Graystar points out, fairly popular items. So, they will sell their own Mil-Spec at full profit, it just may take them another week instead of three or four days. However, I realize this and, given the above risks assumed by the gun shop, I am perfectly willing to have them offer me, say $415-425. That way they can sell it for $450-$460 and still make at least $25-$45 profit. Under this scenario, they make the 100% profit off the loaded 1911 PLUS $25-$45 off my gun.

The real net result of all this is they would sell more guns. However, that makes entirely too much sense for a gun shop.

Brad Johnson
August 23, 2003, 02:21 PM
At this point, they have made zero profit

Exactly. Next question?

Brad

Keith
August 23, 2003, 02:36 PM
As a matter of expediency, the gun shop flunky says "fine, I'll sell it to you for cost - $450". The guy looks at it, sees the tag hanging off it, sees the plastic bag it is in, sees the warranty card, and says to himself "that's a great deal since its $29 less than the identical gun in the display case that is in the same condition."

OK, then the dealer makes $29 on a gun that he could have made $100 on if he'd just bought it wholesale. And in reality, he makes nothing after the time put into two transactions, overhead, etc, etc.

From your point of view it's a great deal. From his point of view, it's paying retail for an item he can buy wholesale. Even considering the purchase of the new gun you're buying - from his point of view, it's a gun he'll sell anyway and without offering somebody a "deal" that eats up most of the profit.

The gun shop has lost NOTHING, except for the 5 minutes it takes to fill a yellow form out for the second customer and to record the serial no. in their logs. They simply have been a middle man.

Wrong! He lost the sale of the other gun he has in his inventory - the one he bought wholesale with the comfortable profit margin - the one the customer would have walked out with if yours wasn't there! And when he sells that he can order another at the wholesale price.
He's not in business to break even or facilitate trades for his customers. He's in business to buy wholesale and sell retail - and that's the only way he can stay in business!

Trust me, I've been on both sides of that counter. From the dealer side, I've had to turn down a lot of such "deals". And the customer can never appreciate the fact that a gun store (or any business) can not afford to buy at retail. Open a copy of the "Book of Gun Values" and see what a used 100% condition Springfield Milspec is worth. Now knock 1/4 to 1/3rd off that price (so you have a profit margin) and see what you have left to offer the customer. Now watch the customer walk away mad because he didn't get offered what his gun is worth...

If you want retail value for a gun, a car, a set of golf clubs, then put an ad in the paper and sell it. You can't expect a business to pay you that price.

Keith

cordex
August 23, 2003, 02:59 PM
The real net result of all this is they would sell more guns.
At about half the profit each, all told.
More work with less profit == not as good of a deal.

rock jock
August 23, 2003, 03:19 PM
He's not in business to break even or facilitate trades for his customers. He's in business to buy wholesale and sell retail - and that's the only way he can stay in business!
Yes, and that is exactly what he would be doing by selling me the Springfield loaded at full cost.

Wrong! He lost the sale of the other gun he has in his inventory - the one he bought wholesale with the comfortable profit margin - the one the customer would have walked out with if yours wasn't there!
I already addressed this. I would also say that a NIB gun at a small discount in the used display could very well entice a customer that wasn't considering buying.

Keith
August 23, 2003, 03:37 PM
Yes, and that is exactly what he would be doing by selling me the Springfield loaded at full cost.

Nope, he'd be selling at a discount because he just bought your rifle for $100 more then he could buy it wholesale.

I already addressed this. I would also say that a NIB gun at a small discount in the used display could very well entice a customer that wasn't considering buying.

A $29 discount on a used gun is hardly a huge enticement! The customer would just as likely ask for a $50 discount and not get it - then walk away mad because the gun store owner is a "jerk".

Keith

repsychler
August 23, 2003, 04:23 PM
OMG. I can't believe the mathematical illiteracy on this thread.

That's OK. Anyone that's ever run a gun shop (Or any retail) can't believe the business illiteracy on this thread.


Right next to me is another customer who sees this take place and says "hey, I'd like to buy that gun."

Funny you didn't mention this "customer" before. He wasn't there, the point is moot.

At this point, they have made zero profit, but again, they have lost nothing.

How? Did you go into the shop on some special day where he doesn't have to pay rent, taxes, payroll, electric bill, phone bill, insurance, and everything else his business requires?

NOW, immediately following this, I take $199 out of my wallet, combine it with the $450 the gun shop just gave me, and buy a new loaded 1911. The gun shops records this as a profit,

As yourself and others have said, this is a desireable gun. He's going to sell it anyway. This profit zeroes out of the equation and we are left asking:

Why should he pay you more for a (technically) used gun, than he'd have to pay his distributor for a brand shiny new one?

:banghead:

hksw
August 23, 2003, 05:03 PM
OMG. I can't believe the mathematical illiteracy on this thread.

Hmmm. I don't thinks there is much mathimatical illiteracy here as there is more business illiteracy.


Lets say this shop owned by Mr. Owner is into selling guns. He can get gun S from his regular buddy, Mr. Distribute, at $350. In walks Mr. Ron V and says 'Say, I got this here gun S NIB I'd like to sell off, what'll you give me for it?'. Mr. O says, '$350.' Mr. RV says, '<Hudson voice> Are you $%^&ing crazy <Hudson voice>? I want $450, you're selling the same gun for $475.'

Two options for Mr. O.
1. Buy gun S from Mr. D for $350, sell for $475. => $125 for bills, labor, profit.
2. Buy gun S From Mr RV for $450, sell for $475. => $25 for bills, labor, (essentially) no profit.

Which would you choose?

BigG
August 23, 2003, 05:12 PM
Ha ha. Rock Jock, give it up. The numbers are running against ya! You go into business running it like you say they should treat you and you will soon join the ranks of the failed small businesses of America. :o As Keith said, the other guy would have probably bought a gun the dealer had in stock. 2 sales = 2 profits. :p

MountainPeak
August 23, 2003, 05:14 PM
Sorry, but I agree with several previous posts. I'm surprised you were offered that much!

Kenneth Lew
August 23, 2003, 06:14 PM
rock jock,

I'll side of you whining when you have the balls to:

1. Find a retail location
2. Purchase necessary displays counters and shelves.
3. Obtain the necessary local and state permits.
4. Obtain your FFL.
5. OBTAIN SUFFICIENT INVENTORY WITH YOUR MONEY OR CREDIT (over $20,000)
6. Sit and watch every single person touch their grubby hands and whine about how CDNN, J&G, Cheaper than Dirt, Shotgun News, has it cheaper than you and smile while they purchase nothing.
7. Then pay your rent/mortgage, lights, gas, water, estimated taxes, inventory, interest, etc and see your bank account go downward because you made $25 on a $479 gun.

I'm tired of all the people complaining about gun stores ripping them off. If these people were to buy an accounting book and read it, maybe they will learn instead of complaining. BTEW guns are a luxury item, not a necessity. Look at how many gun stores compared to everything else in your locality. That should indicate how much the market will bear.

Kenneth Lew

rock jock
August 24, 2003, 10:50 AM
I'm tired of all the people complaining about gun stores ripping them off. If these people were to buy an accounting book and read it, m+aybe they will learn instead of complaining.
First, no one ripped me off. I did not accept their offer. They are free to offer me anything they want. I am free to refuse to do business there. Second, I understand accounting and business very well. I also understand that there are two ways to make a profit - either sell a few items at a high markup or sell a lot at a lower markup. This particular gunshop obviously chooses to do the former. However, the few highly successful gun shops I have been to follow the Wal-Mart approach.

Rob62
August 24, 2003, 12:10 PM
rock jock,

I feel your pain. Unfortunately the fact of the matter is we are talking about **2 totally separate transactions** here. Not one, as you insist. Its the same when purchasing a new car and trading in an old one.

Deal 1. What is a fair price for the gun shop owner to give you for your basic model Springfield. While I personally believe $350 is about $20-40 less than you should be getting, it is reasonable considering the wholesale price on that new gun is about $350. To re state what has already been said. Why should a dealer pay more for a gun than he can get that same gun for at his wholesale price. He wouldn't, and quite frankly if I was a dealer I wouldn't either. I know you don't like that answer but its a fact of doing business. It is not realistic to tie these 2 deals together. Each has to be looked at in its own light.

Deal 2. What is a fair cash price to sell the loaded Springfield for?? You said its sticker price is $649. While I don't know for sure, I would guestimate that the wholesale price on that gun is $499-$529. Lets say for the sake of arguments its $529. What would be a fair cash sale for that gun? Considering dealer shipping costs at $15 that brings the cost to the dealer of having that gun sit on his shelf at $544. Now what is a fair profit on $544. Some folks will say that 10% is fair. I’ve talked to dealers who will absolutely NOT even consider taking a gun in on trade or selling a gun that they can not make at lease $75 profit on. I believe considering everything a 20% profit to the dealer is fair.

20% of $544 is $108.80 so that brings us up to $652.80. The gun is already stickered for slightly less than that. So that seems to re confirm to me at least the previous numbers I cited. I’m guessing that the loaded Springfield is tagged at about 20% over the dealers actual cost and he doesn’t have much room to work with you on a cash price on that gun. However many dealers will even cut into a 20% profit margin to turn over inventory.

I know that it can be very frustrating trying to work deals with gun shops. I only rarely get what I believe I should out of used guns I’m trading in on other guns. But the fact is that with shop overhead, utilities, insurance, employees, license costs, and what have you, gun shops in general and gun shop owners specifically don’t make a heck of a lot of money. They are a business and if they want to stay in business they have to look at the practical side (bottom dollar) of each and every gun they purchase and sell.

Regards,
Rob

deguello
August 24, 2003, 12:58 PM
How much profit do they need? [This is partly a complaint and partly a real question, because I don't have any experience running a business]
If he paid the guy $390 and sold it for $450, that's a little over 15%. If he paid $350 wholesale for the other one in the case and marked it $479, that's 37% profit! I like to support the indie gunshops instead of WalMart, but not if it's that much.

C.R.Sam
August 24, 2003, 01:17 PM
Cost of goods sold includes...
Cost paid to supplier.
Insurance
Rent/lease
Utilities
Labor paid
Advertising
etc etc.

Gross profit is one critter.
Net profit is a much smaller critter.

Net profit is difference tween price paid to supplier + cost of goods sold and the amount paid by the customer.

Sam

Valkman
August 24, 2003, 01:28 PM
Seeing how I paid $399 for my Mil-Spec, I thought the offer was pretty good. Despite all the "mathmatical wizardry" being shown, you're not going to do better than that unless you sell it yourself.

rock jock
August 24, 2003, 03:11 PM
OK, I'll concede that there are some good points made. I still think the offer was too low and they would have benefitted from bumping it up another $50-60. I may return in another few weeks to see if they have sold the loaded version (not to buy it, just out of curiousity.



Valkman,

Are you sure we're talking the same gun? I know the WWII version of the Mil-Spec is a lot less. I scoured the 'net for the one I have and the best price I saw was around $460.

Keith
August 24, 2003, 03:20 PM
http://www.gunsamerica.com/guns/976376978.htm

jsalcedo
August 25, 2003, 12:48 AM
If you think gunshops are bad take your gun to a pawnshop with an FFL.

Your NIB $479 gun will turn into about $120 whether you sell it or pawn it.

Even in trade for another gun you would be lucky to get $200.

The only time I sell things to gunshops is if I acquired the item at a ridiculously low price and the gun is worthless to me or the shop has an item I'm willing to trade for. Sometimes I can turn my gun into a bartering tool to save cash on hand.

Gunshops always come out well ahead on every transaction or they fail.


I have also seen gunshops that have ridiculous prices and will not haggle.
Ruger P90 for $550
Used commerical Hipower for $899
Beat up police positive for $399

Sometimes these folks stay in business because of customers that do not know any better. They can stay open selling 4 overpriced guns per day.

There has to be a happy medium for retail firearm sales and fortunately for us 80% of the gun dealers out there realize this.

The best deal you get at a gunshop is free advice, personal service and hopefully someone who will take care of you when you are unhappy with a purchase.

Goaltender66
August 25, 2003, 09:50 AM
It might be instructive to look at this from a pure accounting standpoint. There are two separate transactions here (the trade in and the purchase of the new gun) and it's probably best to look at them as such.

rock jock, basically you are negotiating the purchase of a pistol that costs $649. You wish to purchase the pistol with a different pistol (your trade in) and an unspecified amount of cash. The gun shop has an identical pistol to your trade in that they are carrying for $479.

The regular joe would look at that transaction and conclude that his trade in is "worth" $479, so he would simply hand them the pistol and $170, and walk out with a new pistol, with everyone happy. But we are dealing with the twisty world of retail accounting, where, albeit madness exists, it often has a method to it.

Let's look at how the gun store records the purchase of regular inventory (I'll ignore LIFO and FIFO for now so as not to complicate the issue, and just show it as a regular low-volume-type transaction.). The store buys a mil-spec from their supplier. The credit is to cash and the debit is to inventory. In other words, the carrying cost is the purchase price. Now let's look at a purchase. The debit is to cash and the credit is split...one portion zeroes out the inventory entry (carrying cost) and the remaining credit goes to Revenue.

Now let's look at your transaction. First, the store would have to carry your trade in at purchase price (that's not me, that's GAAP) in some manner. He thus has to true it up between the difference of the carrying cost of the other pistol in inventory and what he's giving you for it. Let's assume the carrying price (ie inventory value) of this pistol is normally $350. Since it's clear you were asking more for the pistol than the carrying price of the one already in inventory, the store would have had to eat the remainder in some kind of contra-asset account which is the equivalent of goodwill (which is amortized out over time as an expense on the income statement, as it's not a real asset...were I the store's accountant I'd insist on expensing it all immediately due to the nature of retail.). The entry thus becomes a credit to "Due To rock jock" for $479, a debit to inventory for $350 and an expense item for $129.

Now the gun store has an inventory item they MUST sell at $479 in order to break even. Assume they find such a buyer. The entry becomes a debit to cash for $479 and two credits: one to inventory for $350 and one to revenue for $129. However, that revenue entry is offset by the expense of the earlier initial trade, so there really is no profit in the deal.

The second part of the transaction becomes a little more convoluted. You have a credit with the gun dealer for $479. You want a $649 pistol. So you give him $170 and walk out with your pistol. The dealer would have to record the entry as a debit to cash for $170, a debit to "Due to Rock Jock" for $479, and a credit to inventory for the carrying cost of the pistol, with the remainder going to revenue. The dealer just turned a profit, right? Well, no because we're forgetting about the expense the dealer incurred in order to make the deal...$129. In other words, it cost the dealer $129 to sell the pistol to you, whereas if someone walked in off the street and bought it with cash they wouldn't have incurred any extraordinary expense in the deal. Now the dealer is assuming the risk that they could sell that pistol at $479. Is this a risk the dealer wants to take? I don't know anything about the pistol in question, but it seems to me that in retail there is very little that's guaranteed. Further, the profit margin of the pistol already in inventory may have a little (or a lot of) wiggle room built in that allows the store some flexibility in pricing...flexibility that's lost in the pistol they took in trade.

So how can they erase that expense? By offering you the carrying cost of the pistol they already have in inventory. There is still risk that they won't sell the pistol, but the risk is the same that they normally incur, and there isn't any extraordinary expense associated with that risk.

I know this is a long post and I'm probably being unnecessarily complicated, but the concept is that a trade in, unless made at carrying cost, will result in an expense to the dealer in the short term. Whether that expense is recouped eventually is the risk the dealer must be willing to make. rock jock, in your case the dealer didn't want to take that risk.

Goalie

(edited to add): rock jock, when you visit the store, it would be more revealing if the store sold the pistol they had that was comparable to yours, since that 's the transaction on which everything else hinges. If they sold the $479 pistol then that tells you they would have been able to sell your trade in and (assuming a little here) erase that expense.

Erik
August 25, 2003, 04:20 PM
While I understand your frustration, having been there before, you are well advised, along with others, to re-read the folks trying to explain the dealer's position.

They are correct, and their points transfer well to other areas of capitalism.

kenehsr
August 25, 2003, 04:33 PM
Urghhhhhhhhhhhhhh!!!!!!!!!!!!!! :what: :banghead: It's so confusing:confused: :D

Valkman
August 25, 2003, 04:48 PM
Valkman,

Are you sure we're talking the same gun? I know the WWII version of the Mil-Spec is a lot less. I scoured the 'net for the one I have and the best price I saw was around $460.


Yea, I saw one at a gun show here for $510 then found a place called Wild Sports had it in their ad for a while at $399 so I grabbed one. The WW2 model wasn't out yet, I don't think. Either way, it's spent most of the time since at back at SA - guess it likes it's home!:p

AZ Jeff
August 25, 2003, 05:31 PM
RockJock, in all the variants of the scenario you presented, an implied assumption on your part is that a customer would come along VERY SHORTLY after said dealer took your "new/used" pistol in on trade, and would immediately snap it up from said dealer, thus netting the dealer a quick profit of $29, or thereabouts.

Let's change the scenario slightly--to one where, instead of the customer coming along quickly, the dealer ends up displaying this new-gotten merchandise for MONTHS, instead of a few days or weeks.

The cost of carrying that item of inventory is not insignificant, I think we all agree.

Now, given that carrying cost, which pistol is the dealer more interested in carrying:

1. the one he just bought from you, for $29 under retail, or
2. the one he buys from his distributor, for $75-100 under retail.

It does not take a rocket scientist to see that buying your "new/used" pistol at $29 under his retail price forces the dealer to assume a larger risk in carrying costs over what buying that same pistol from the distributor would entail.

BigG
August 26, 2003, 10:14 AM
To look at this even handedly, you need to realize whatever the dealer allowed you on the trade ($350-450) was money he had sunk in the pistol. In other words it was money he had tied up that could have been in the bank drawing interest or used to buy something else to sell. To determine the cost to carry the pistol would entail how much overhead was incurred during the time it sat there until it sold. Salaries, rent, advertising, FFL, utilities, insurance, etc. all these and more would have to be spread evenly over the dealer's stock for a given period. As CR Sam said, the gross profit of say $129 sounds enticing but when the net profit of maybe $25 is actually netted it ain't so great. See why the dealer is not going to pay you $29 less than retail?

hd1.
August 26, 2003, 01:31 PM
rock jock,

You know what a good gun shop looks like from the customer's point of view. Please open up a gun shop in my neighborhood. ;)

Partisan Ranger
August 26, 2003, 04:39 PM
Why I hate most gun shops:

At Shenandoah Sports in Winchester, this past weekend: $540 for a new Glock 27, NO night sights, plus tax :what:


Uh, guys, I do want to support my local gun sellers, but sheesh, I'm not gonna grab my ankles for you.....I'll take the Internet, thanks. I can get a Glock 27, with night sights, for a little over $500 online.

Double Naught Spy
August 26, 2003, 04:42 PM
Rock Jock, I am afraid that you are the one who is challenged in the area of math skills, specifically math skills related buying and selling new and used low profit items such as firearms.

First of all, don't be pissed because the gun shop would not give you the amount of money you wanted for a gun you didn't want. You have absolutely no concept as to how that gun shop perceives that very product which you noted they had for sale for $479. That particular model maybe something of a dog seller for them, meaning they don't move fast and spend a lot of time on the shelf.

You also don't know just how many of those guns they had in stock and what they paid for them. Why would they pay you $450 for a gun they get for $425? Now that would be a mathematically-challenged decision. More over, as noted, your gun would have to be sold as used and would not get full price.

You noted that the gun shop would get 100% of the profit on the other gun. Just how much profit were they making? Do you know? It will likely be between 5 and 15% is all. So they are going to get 100% of the profit for that sale? Nope. That assumes that they are going to get at least the $450 out of the sale of your gun, the trade in value you desire. If they don't get at least that amount, then they will NOT be getting 100% of the profit. On top of that, you are assuming that they profit on the sale to you is immediately beneficial to them. It isn't. They won't realize profit until your gun sells, if and when it sells.

In your scenario, for the gunshop to get that mythical 100% profit on the gun you trade and pay cash for, what you are really failing to realize is that they are going to be doing triple the work for that profit. First is the purchase of your gun and all the FFL crap that goes with it and the risk that the gun they purchase from you is stolen. While you know it isn't stolen, they don't. Having receipts isn't definitive either. They assume risk on the deal from you as the seller and as a seller they don't know. You aren't their wholesaler. Next, they selll you the gun you want and go through all the paperwork crap with that. And finally, they have to sell the used gun you traded in. Without your transactions, they are still looking to make 100% of the profit on the gun they have for sale that you want and will likely get it in just one single transaction, not 3. Because of the multiple transactions, time, overhead, and as of yet unrealized profit, what you are talking about is NOT a good deal for the shop.

As a closing comment, remember it is YOU that took a gun into the shop, a gun that you did not want, and offered it up for sale. You seem incredulous that the gun shop is not letting you do such a big favor for them since you have nothing but their interests at heart and so you can't understand why they won't give you what you want. The explanation is simply and blatant and the funny thing is that you can't see it. You don't have the gun shop's interests at heart. You aren't mad because they won't let you make them 100% profit on a sale (like that was going to happen). You are mad because you could not unload the gun you didn't want at the price you wanted.

As the seller, you have no reason to be upset that they did not give you what you wanted when you were the one who walked into their store and tried to unload the unwanted gun on them. They offered you what they thought was proper given their own circumstances which you know nothing about. If you didn't like the offer, then you say "Thanks anyway." and continue your door-to-door gunshop selling at the next store.

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