Firearm industry in chaos


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RockyMtnTactical
January 31, 2013, 10:30 AM
http://www.gunsandammo.com/2013/01/30/industry-report-rise-in-gun-sales-prompting-industry-chaos/

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wooly bugger
January 31, 2013, 11:29 AM
I don't see how this could be a long term disaster for the industry, as mentioned in the last paragraph?

From what I understand, after the '08 panic, the market wasn't flooded with cheap used but never fired rifles. I don't see how this will be much different.

And even if it is, with major manufacturers having a 2 year backup, by the time they actually have something to sell, things should have normalized.

I think this can only be good. With more AR's out there, there will be more people who can't stop at just one, more market for accessories, and a permanently higher demand for .223/5.56.

silicosys4
January 31, 2013, 01:50 PM
Every five years or so there is a crop of last gen police and security surplus pistols that come onto the market.
Glock is still chugging along selling a few brand new G22's, along with plenty of brand new G17's and 19's despite the huge surplus glock market...and I'm constantly amazed at how a used G22 keeps its value despite there being literally tens if not hundreds of thousands of surplus G22's out there.
S&W still sells plenty of brand new revolvers, despite the cheap as heck used m64's and m10's out there.

Old Dog
January 31, 2013, 02:09 PM
S&W still sells plenty of brand new revolvers, despite the cheap as heck used m64's and m10's out thereAgree with the first part ... but not the second ... Last night, local gun sale forum reflected a $500 10-5 (no mention of condition, but photo wasn't that impressive) ... stainless Smiths seem to be collecting a premium. Another newsflash: used S&W revolvers AIN'T cheap as heck anymore, at least up here in the Pacific Northwest (perhaps there's just more of us who appreciate 'em up this way?).

As far as Glocks go, before the panic, there was a huge glut in this region, prices were reasonable, and guys who tried to sell 'em used at MSRP caught a lot of flack ... Best I can tell -- at least in my part of the country -- the only firearms that consistently hold their value are the better [production] 1911s, ARs, S&W revolvers and anything with a rampant Colt on it ...

Only thing that I agree with, as far as the article goes, is Fjestad's comment: "We'll see how the next six months go." The gun industry rebounded robustly from the last couple panics and (true) values re-asserted themselves. If there's one thing we should take away from all this, it's only that we can't predict the future.

Cosmoline
January 31, 2013, 02:19 PM
Maybe it's because I'm not an MBA, but how can a huge increase in demand be a bad thing?

Phatty
January 31, 2013, 02:40 PM
Maybe it's because I'm not an MBA, but how can a huge increase in demand be a bad thing?
Think about the last housing bubble we had in this country. Once the bubble burst, tons of home developers went out of business because they were constructing new houses as fast as they could possibly build them. They were hoping to take advantage of the huge demand and high prices, but were left holding the bag when demand tanked and there was an oversupply of homes on the market.

silicosys4
January 31, 2013, 02:46 PM
Agree with the first part ... but not the second ... Last night, local gun sale forum reflected a $500 10-5 (no mention of condition, but photo wasn't that impressive) ... stainless Smiths seem to be collecting a premium. Another newsflash: used S&W revolvers AIN'T cheap as heck anymore, at least up here in the Pacific Northwest (perhaps there's just more of us who appreciate 'em up this way?).

As far as Glocks go, before the panic, there was a huge glut in this region, prices were reasonable, and guys who tried to sell 'em used at MSRP caught a lot of flack ... Best I can tell -- at least in my part of the country -- the only firearms that consistently hold their value are the better [production] 1911s, ARs, S&W revolvers and anything with a rampant Colt on it ...

Only thing that I agree with, as far as the article goes, is Fjestad's comment: "We'll see how the next six months go." The gun industry rebounded robustly from the last couple panics and (true) values re-asserted themselves. If there's one thing we should take away from all this, it's only that we can't predict the future.

Not trying to argue, but I was at Cabela's up north of Everette a few weeks back, looking at used trade in G22's at $469 each....Online they are about $500...not including shipping or transfers. As a percentage of MSRP, Yea...glocks are holding their value better than a colt right now...and even prior, I was primed to pull the trigger on any G19 or G17 that I could get for less than $400...never saw one on the used market for less than $400...and bought multiple colts and S&W's for bargains during that time.

The revolvers...They are around, and you can still find them cheap if you look. I don't consider anything newer than about 1995, and I forget that others do...so I don't even consider the prices of new S&W revolvers, they don't exist to me....For good deals on used S&W's though, look online, where the market is more even....the local market in the PNW is high for revolvers, that's true.
The last 3 months price increases do not reflect overall value of S&W revolvers increasing, they reflect the overall panic in the market bleeding over, imo....they will go back down in price.

OP, if by "chaos"..you mean raking in money hand over foot, selling every item before it comes in as raw material let alone before it goes out as product, and not having to worry about excess inventory for....well...ever,
I think they will do Ok.

gossamer
January 31, 2013, 02:48 PM
Are people financing their gun purchases and going to default on the loans, because that's the only way I could see a comparison between the two.

Could excess inventory be a bad thing for gun mfgs if the bottom falls out? Yes. But excess inventory of guns is different than excess inventory of houses.

For starters, if I'm a home developer with a few hundred extra houses sitting around Colorado, I can't very well ship those houses to South America to sell them there.

Not every country is feeling the hit in gun sales that we are because they don't share our political climate. The world is a big place, and other countries buy guns too. The excess inventory problem you site is a real one, but I don't see it being nearly as debilitating to the industry as houses were.

Guns aren't real estate. The barriers to entry for buying them are not - despite what many would like to believe - as insurmountable as they are for a home, car, etc..

rbernie
January 31, 2013, 02:50 PM
Think about the last housing bubble we had in this country. Once the bubble burst, tons of home developers went out of business because they were constructing new houses as fast as they could possibly build them. They were hoping to take advantage of the huge demand and high prices, but were left holding the bag when demand tanked and there was an oversupply of homes on the market.The real issue with he housing bubble was that the expansion of supply (new construction of end user items) was financed. Without the demand keeping pace with construction, an awful lot of builders wound up not paying on loans and a lot of folk who bought speculatively wound up tens/hundreds of thousands of dollars upside down.

I don't think that is analogous to either the firearms industry or consumer base, excepting perhaps a gun manufacturer who heavily finances a production expansion.

mgmorden
January 31, 2013, 02:50 PM
If what I've heard about the actual costs of producing some modern firearms is true, I don't think they have much to worry about.

IIRC correctly it costs Glock about $75 to make one of their pistols. I'm sure many others aren't too much above that (I say above as typically the larger the company the more automated and refined their production process, and hence the cheaper the price).

They (rightly) sell it for a lot more than that because its worth a lot more to consumers, but the perceived value could PLUMMET and they'll still have more than enough wiggle room the price them competitively and still profit.

Same with magazines. I can't imagine that it takes more than a couple dollars to mold a polymer AR magazine. They charge whatever the market will bear and if it turns out in a few years that it will bear less my guess is that they'll still be able to sell them at a profit.

I don't see the current situation as being anything but positive for the industry.

Bubbles
January 31, 2013, 02:55 PM
I don't think that is analogous to either the firearms industry or consumer base, excepting perhaps a gun manufacturer who heavily finances a production expansion.
Which is exactly why no firearm or ammunition manufacturer is expanding in the face of this artificial spike in demand. That spike will go away overnight, and backorders will quickly become cancelled orders, once gun control legislation dies in Congress.

mrvco
January 31, 2013, 03:04 PM
Maybe it's because I'm not an MBA, but how can a huge increase in demand be a bad thing?
Ramping up infrastructure and staffing to meet a short-term spike in demand is problematic when the spike subsides (and it will, probably before you are done with the expansion). You invested a bunch of money (bank loan or otherwise) so you are able to produce 1,000 widgets a month instead of 100, but it is hard to pay the bank loan, salaries, etc. on a 1000-widget-a-month factory when you go back to selling 100 widgets-a-month.

You also have to deal with the expectations from your debt and/or equity investors who are all excited about selling 1,000 widgets-a-month and anything less is now unacceptable.

Ryanxia
January 31, 2013, 03:07 PM
Think about the last housing bubble we had in this country. Once the bubble burst, tons of home developers went out of business because they were constructing new houses as fast as they could possibly build them. They were hoping to take advantage of the huge demand and high prices, but were left holding the bag when demand tanked and there was an oversupply of homes on the market.
While you're right I don't think this insanely high demand will last longer than the time it will take to catch up with what's already been ordered (even if 1/4 of them are cancelled because they were ordered by speculators).

va1911
January 31, 2013, 03:16 PM
If the firearms mfg's went out and acquired new plant and equipment assets as a result of this panic, yes, they could end up in a lot of trouble. I don't know of one who has done that, and instead they are writing huge backlogs. Completely different from the construction industry.

mrvco
January 31, 2013, 03:27 PM
Even if you don't add capacity, when you run a large back-log, stop taking orders and are running at 100%+ capacity, that doesn't leave much opportunity to develop, market and manufacture new products. This can create a window of opportunity for new competitors to enter the market and add capacity to the industry.

Cosmoline
January 31, 2013, 04:07 PM
Remember back in the days when there were warehouses actually full of things people might buy? And the vendors didn't try to keep every bit of inventory in transit?

I think the solution is a lot simpler than building a bunch of new factories. Just quit trying to roll out firearms on a just-in-time basis like bread loafs. Get some back stock of them. In fact this is a problem that comes up ALL THE TIME, not just during these panic periods. Vendors from Midway to Track are constantly short of everything from components to firearms. With a return to the old style of actual warehousing, there could be a lot more flexibility in responding to market flux. Because trying to predict exactly what's going to be bought when appears to be impossible. I realize nobody likes to actually warehouse anything anymore, but it's not going to break anyone's bank to rent storage space and put up some racks.

Owen
January 31, 2013, 04:20 PM
I think the big problem is going to be smaller stores going out of business or laying off their staff, becaue they have nothing to sell.

Ken70
January 31, 2013, 04:32 PM
From the article it's obvious the gun makers are using the Harley-Davidson, Mercedes, Porsche marketing model by not making enough to fill 100% of demand. Always be 5-10% short of demand. That way there is no/very little discounting, the factories most important customer, the retail dealers, can make good money. Gun companies have seen the yo-yoing of demand, so they run at a level that works most of the time. They could put on a second shift and run the machinery they all ready own, but they don't know what the govt is going to do, so they probably don't.

Cypress
January 31, 2013, 04:35 PM
It was interesting with the last panic to see what might be described as almost "Wartime Production". Instead of large companies buying more tooling and equipment. They simply contracted out some parts to small companies not usually connected to the firearms industry. Especially in the AR market anyone with a good CNC and the programming can make these parts. I heard of several companies down here in the south doing this with great success. After the demand subsides the smaller company can go back to making widgets instead of gun parts or they can get liscensed and rebadge their lower and we have another company to choose from. I can't see where any of this is bad for us. On top of all that the more little companies that crop up in TX the more I will have to choose from if the Feds force themselves on the rest of the nation with their BS bans!;)

Sam1911
January 31, 2013, 04:36 PM
I think the solution is a lot simpler than building a bunch of new factories. Just quit trying to roll out firearms on a just-in-time basis like bread loafs. Get some back stock of them. In fact this is a problem that comes up ALL THE TIME, not just during these panic periods. Vendors from Midway to Track are constantly short of everything from components to firearms. With a return to the old style of actual warehousing, there could be a lot more flexibility in responding to market flux. Because trying to predict exactly what's going to be bought when appears to be impossible. I realize nobody likes to actually warehouse anything anymore, but it's not going to break anyone's bank to rent storage space and put up some racks.Actually, it sure does. Without getting too far off our main focus here, I've been doing some studying of globalization and supply chain issues recently, and the benefits of just-in-time inventory are crucial to firms succeeding in a competitive market in the modern world. Inventory is wasted money, warehouse space is profit going up in smoke. I don't know how many manufacturers are operating in a JIT supply chain model (or if it would even matter if they were, these days) but if not, they SHOULD BE. They'll bank more profits and guns will be less expensive if they can.

As Bubbles and others pointed out, there is no problem for manufacturers if they just keep rolling those production lines. Sure there's a backlog. That's awesome! There's really no benefit to them in sitting on thousands of guns (especially LAST year's guns...or the years' before) waiting to fill some rush. Take the orders and fill them when you can. If you can get a 3rd shift up and running without too much investment, that's great, but the better bet is just to use market price and your price point to maximize profit at your maximum production rate.

joeschmoe
January 31, 2013, 04:37 PM
Temporary instabilty causes shakeup, and makes the pencil pushers squirm. Now is the time for the aggressive players to take thier chances and the timid to get eaten. Some will win, some will lose.

Welcome to capitalism. Overall, too much demand is a problem most businesses/industries would kill for.

The market will correct itself. No one knows who will be the big winners and the big losers. Most will do fine.

GEM
January 31, 2013, 04:38 PM
That's what I've heard from store owners. It's cash flow. If the guns don't exist you don't get customers in to buy other things. Those others can be the big money support of the store.

Since it seems that an AWB or mag ban isn't going to happen (I think :uhoh:), there will be dump of more expensive guns that will deter new sales in the future. Getting a lightly used AR, mags, Glocks, etc. will be nice for us but not stores.

But - hey - if they make NICS mandatory for private sales - maybe the guns will flow back to stores as used items for resale - Unintended Consequence.

:eek:

wooly bugger
January 31, 2013, 04:38 PM
Think about the last housing bubble we had in this country. Once the bubble burst, tons of home developers went out of business because they were constructing new houses as fast as they could possibly build them. They were hoping to take advantage of the huge demand and high prices, but were left holding the bag when demand tanked and there was an oversupply of homes on the market.
I think there are a couple of differences from the housing market:
1) Home purchases are largely financed, leading to large market distortions in the form of manipulated and subsidized interest rates and tax incentives.
2) Most people own only one or possibly two homes. Each of these has significant carrying costs. Compare this with those of us who own >10 firearms, each of which sits quietly in the safe not demanding taxes, upkeep, or interest.

I think there will be a bunch of buyers' remorse among people who really need the money and will try to offload them later, but a lot of us will end up with guns we might not have bought otherwise, but once we have them... oh well. Might as well keep them.

wooly bugger
January 31, 2013, 04:42 PM
Even if you don't add capacity, when you run a large back-log, stop taking orders and are running at 100%+ capacity, that doesn't leave much opportunity to develop, market and manufacture new products. This can create a window of opportunity for new competitors to enter the market and add capacity to the industry.
That would be awesome, and great for the industry as a whole

Cosmoline
January 31, 2013, 04:42 PM
Since it seems that an AWB or mag ban isn't going to happen (I think ), there will be dump of more expensive guns that will deter new sales in the future. Getting a lightly used AR, mags, Glocks, etc. will be nice for us but not stores.


Well maybe. But nobody really knows who's buying. I can tell it's not me or my gun nut buddies around town. We universally scoff at $2500 AR's. Which makes me suspect this isn't a hoarding by the usual suspects but rather a dramatic expansion of the market. People who have always thought about buying an AR but put it off. Now they have one. They'll shoot it and do you think they'll just try to sell it off at a loss because Dianne's bill fails? I don't think so. I think they'll want more.

Old Dog
January 31, 2013, 04:48 PM
Very good points. If this panic got a whole bunch of fence-sitters off their butts and they bought up a butt-ton of black rifles -- well, we all know that once you go black rifle, you don't stop -- they're addictive.

Perhaps this whole scare really did create a whole lotta new gun-owners and shooters. Good for us, as pointed out, by Cosmoline.

Batty67
January 31, 2013, 04:48 PM
I think the big problem is going to be smaller stores going out of busxiness or laying off their staff, becaue they have nothing to sell.
I agree. Anecdotally: it appears one LGS that has had a sign on their door for a month "closed due to extremely low inventory" is closing shop. I revisited a once-thriving larger LGS by where I work and the inventory of firearms was pitiful. And ammuntion. I actually thought they had way too many employees on-hand. Maybe 8 in the store when 4 would have been plenty. I did ask about inventory coming back in and the employee (who showed me a Browning Buck Mark) said it is slowly getting better.

LemmyCaution
January 31, 2013, 04:48 PM
The current shortage is a market distortion engendered of panic. Manufacturers are wise not to indulge in it. There is no downside. If there isn't a ban, they haven't foolishly invested in increased capacity for a market the bottom will fall out of when the speculation gambit goes bust. If there is a ban, they haven't foolishly invested in increased capacity for products they can't legally sell.

gossamer
January 31, 2013, 05:06 PM
Even if you don't add capacity, when you run a large back-log, stop taking orders and are running at 100%+ capacity, that doesn't leave much opportunity to develop, market and manufacture new products.

Except for maybe the smallest, tiniest companies, do you think the employees manufacturing the weapons are the same ones working in Marketing, Research and Development? I've worked with only a few but I've never known a company on the scale of a Ruger, SW, Colt, or Bushmaster where this is the case.

The manufacturers I've worked with (Sony, Valspar, etc.) have R&D teams and Marketing teams who are far ahead of where manufacturing departments are. One worries about tomorrow, quite content to let the other worry about today.

Mayo
January 31, 2013, 05:57 PM
Easy fix----maintain the lower cost of selling the new guns instead of raising them during this nonsense. That way, when the flood(and there will be) of used guns hitting the market at cheap prices hits the consumer can then buy a used gun or a new gun at the same price! Which would you choose. But they won't do that. They have raised their prices sky high because of the panic. They will profit short term and suffer long term ala housing.:cuss:

larryh1108
January 31, 2013, 07:19 PM
That's why the gun industry is more stable than autos or housing.... we can buy as many as we can afford (meaning 10, 20, etc) instead of 1 or 2. Like others have said, those who ran out and bought that AR they always thought about but never did anything about it are now in the grasp of the illness of guns reproducing in the safe. Consider that many paid $2500 for their AR and in 6 or 9 months they see some for $1000 or $1200. Well, their personal inventory will expand. With cars and houses we usually sell one to ge another one. Not with guns. Some will sell for a loss but a lot will buy more and these new people to the gun world will also vote our way when it comes time to put the anti-gun politicians out to pasture.

BullfrogKen
January 31, 2013, 07:39 PM
Easy fix----maintain the lower cost of selling the new guns instead of raising them during this nonsense. That way, when the flood(and there will be) of used guns hitting the market at cheap prices hits the consumer can then buy a used gun or a new gun at the same price! Which would you choose. But they won't do that. They have raised their prices sky high because of the panic. They will profit short term and suffer long term ala housing. :cuss:

Not an easy fix.

When companies put on an extra shift, the O/T pay premium increases the cost. When companies stay open longer, use more energy at night, all the things that add up with increased production to churn out more product around the edges . . . . all these things increase cost.


And you're looking at small shops who have less to sell, but the overhead doesn't go away. Again, increased cost spread across a smaller amount of inventory to sell.

This is economics. And while it would be great to hire up some of these unemployed people, the cost of laying them off in a recession means they won't find another job again for a long time. Which means your company's unemployment insurance premium goes up. So, pay the overtime and mark up the product to cover the premium.

A buddy of mine opened up his shop just before AWB 1.0. He said he had a great business right up to and shortly after the ban.

Followed by several lean years where nothing sold, because people hurridly spent a few year's worth of their "gun budget" in a short period of time, and didn't start buying again for quite a while after.

And when little shops go out of business, they're hard to replace. Getting an FFL and setting up shop is not an easy thing to just go out and do. When the dust settles there will be fewer shops after all this plays out, and fewer places to buy the capacity of the manufacturer's output.

Mayo
January 31, 2013, 10:09 PM
Whoa, whoa, whoa. Are you seriously trying to tell me that their profit margin has stayed the same and the increase is simply due to added expenses? The same guns they were selling for $650 are now triple or more at $1800-$2000! If they simply passed on the added cost to the consumer to their actual cost they would be about $800-$900. But that is not what they are doing. They are feeding into the craziness and charging as much as they can get away with. After the madness goes away, the market will be flooded with guns at cheap prices causing the manufacturers to lose business. A better economic approach would be to charge the $800-$900, make a good profit with a vast increase in volume. Then when the market becomes flooded with used guns, people will then have the chance to buy a used gun at $650 or go back to the companies and buy new ones for the same price---what would you choose?

Owen
January 31, 2013, 10:24 PM
mayo, some of their expenses may have not have increased, but instead of turning the same $900 five or ten times, they are only going to be able to do it once or twice this year, but still have the same overhead.

Sam1911
January 31, 2013, 10:25 PM
Whoa, whoa, whoa. Are you seriously trying to tell me that their profit margin has stayed the same and the increase is simply due to added expenses? Partially, but not wholly. Hopefully they are using the market to set price point in such a way as to balance/control demand. That's how market capitalism works. The price is whatever folks AGREE to pay in order to be able to acquire a limited resource. Now all of the large price increase we're seeing right now is not entirely in the hands of the manufacturers. These price "corrections" to meet the market happen at each stage in the supply chain, from materials suppliers right out to the end consumer.

After the madness goes away, the market will be flooded with guns at cheap prices causing the manufacturers to lose business.Surely. As supply increases, demand pressure decreases and all sellers reduce prices to meet the new market levels. It's a natural phenomenon, like water rolling down hill and finding its natural level.

A better economic approach would be to charge the $800-$900, make a good profit with a vast increase in volume. And, if they COULD drive their production to "vastly" increase volume (and they're doing all they can, without overextending in the long view) they would do so. They'd then make all the money they could make on volume alone. As it is, they can't meet demand, so price rises. With or without their input, price rises.

Then when the market becomes flooded with used guns, people will then have the chance to buy a used gun at $650 or go back to the companies and buy new ones for the same price---what would you choose?This is an overstated point. 1st, as I said manufacturers (and distributors, retailers, etc.) won't hold these prices when the demand slacks. They wouldn't sell anything. So in a few months or by next year, you'll be able to buy a new AR-15 again for $800, and probably less. 2nd, not every -- or even very many, in truth, of the current buyers will sell off those "panic" guns. Last time this happened, everyone expected that to happen but it wasn't the flood predicted. The market was pretty saturated, but it hit a bottom around $600 or so and held there. 3rd, not everyone is willing to buy a used (even a "lightly" used) rifle when they can get a brand new one for ~$100 more.

Mayo
January 31, 2013, 11:00 PM
1. I submit to you that the great majority in price increase by the maufactureres is NOT due to extra shifts and OT. I have no problem with increases with demand and expenses as you said but not to overkill the profit. If you had a profit margin of 20% and keep the same percentage after expenses or a little higher--fine. But to get a margin of 200% when the expenses went up 25%(say) is wrong.

2. IF that were truly the case they would be better off doing the Disney approach and hire part timers to fill hours without paying benefits or OT.

3. IMO, this drive is much different in that I believe this time the majority of gun owners(and even newbies) aren't ending up with 1 AR in their collection...they are accumulating guns, ammo and mags in multiples. Therefore when there is a sell off people will be getting rid of excess instead of the 1 panic gun buy---but I could be wrong.

Ragnar Danneskjold
January 31, 2013, 11:09 PM
Seeing as I'm deploying again in about a month, I'm really hoping that the increased production met with falling demand as the AWB/Mag ban hopefully doesn't happen will mean a significant decrease in price for things like PMAGS. Just in time for me to be making some decent money for a year with no bills. I have 16 PMAGs now and 10 mags for my M&P9. If prices do drop and the mags become available, I plan on doubling or tripling those amounts. The only reason why I didn't have more before now was lack of funds. That won't be a problem soon, so I hope the mags actually become available.

Sam1911
January 31, 2013, 11:48 PM
But to get a margin of 200% when the expenses went up 25%(say) is wrong.Why is it wrong? What is wrong about it? To whom is it wrong?

To the people who AGREE to WILLINGLY pay that much money?

No one is going to die if they can't buy an AR-15 right this week or this year. This is a discretionary, luxury purchase. Why would it be "wrong" in some universal sense (or even in a small, personal sense) to get as much money for the product as someone will willingly pay to have it?

That's the point of running a business. The only thing that holds prices down in a free market is competition and natural public demand not outpacing supply. When supply is grossly outpaced by the demand for the products of all manufacturers in a niche, the price can go as high as folks are willing to pay.

I don't see where that is wrong. If someone wants an AR-15 more than they want the $100,000 bill in their pocket, is it WRONG to sell it to them for that price? Of course not. If 10,000 people want AR-15s more than they want $3,000 they each have available to spend on it, is it WRONG to sell them all rifles for $3,000 each, even if you paid $0.30 a piece to have them made? Certainly there is no case to be made that it is.

2. IF that were truly the case they would be better off doing the Disney approach and hire part timers to fill hours without paying benefits or OT.Many, if not most, undoubtedly are. They still can't fill the demand with the equipment they have. Buying more equipment and facilities in order to meet an obviously quite temporary demand is very bad business, so they make all they can and the market sets the price wherever it will fall based on the supply the manufacturers can provide.

3. IMO, this drive is much different in that I believe this time the majority of gun owners(and even newbies) aren't ending up with 1 AR in their collection...they are accumulating guns, ammo and mags in multiples. Meh. Maybe. I hear that sometimes. Usually with a resounding absence of any solid data to illustrate that it is actually true.

And who cares if they're getting rid of excess? What if they're breathing a sigh of relief and socking those guns away to be ready for the NEXT crisis?

BullfrogKen
February 1, 2013, 12:01 AM
Mayo, have you tried to go buy a bolt carrier group? They've been tough to get for months.

It's not simply a matter of adding more staff to the assembly line.


This is business. And when you're looking at your raw materials, or parts, or inventory going away, but you need raw materials, parts, inventory to sell to cover your fixed costs . . .

You must make your fixed costs - which were once covered by selling 1,000 of a product - pay for themselves over a much smaller volume of product.

Ergo - prices goes up.


Lord we really need to teach economics in high school again.

Mayo
February 1, 2013, 10:25 PM
As a quite successful business owner, I think I know economics pretty well. ;) I think your definition is different then mine though. You want it both ways for the gun and ammo industry. Sell for triple when "opportunity" knocks but they should also be able to gripe when the market gets flooded and nobody is buying from them then! Yeah, you want to sell something for $1800 that cost $650 then go ahead---not good business though(see CTD). Again, demand goes up and your costs rise--fine pass it on to the consumer and keep your profit margin. Not costs go up, pass on the consumer AND increase profit margin from 20% to 200%! Now you become the model industry for housing---great short term but cutting your own throat down the line. Tell me this----if these gun and ammo companies are so smart and "economic" savy, then how did they not(unlike most gun owners here) see these dramatic run on guns and ammo coming? Wouldn't a smart business be a leader ahead of the curve and not reacting after the fact? A smart company would have increased production ANTICIPATING what was going to happen to the market.:banghead: Plain and simple most are gouging consumers---you say fine, good for them----just don't whine when times get lean---which they inevitably do. Can't have it both ways.

Sam1911
February 1, 2013, 10:39 PM
If they could see this coming ahead of time, they should have mentioned it to the PD over at Sandy Hook. :scrutiny:

Do they scream when prices fall? Not such that I've seen. They sell. They sell when the market hits $2000 and they sell when it drops to $600. Markets fluctuate. It isn't a matter of "having it both ways." It IS both ways whether they want it or not.

They can sell their guns at cost (which went up on them as Ken has explained) when the market says 3x cost, but that just means their buyers will rake in those markups. If the buyers don't, then the retailers will. If the retailers don't, the first consumer in line will buy 50 and sell them for profit. All of that is bad business.

larryh1108
February 1, 2013, 11:35 PM
Personally, I don't see the gun makers raping the public. Before the election, they were all at max capacity and many stopped taking orders. If they wanted to gouge they could have sent notice of a 50% price increase when they saw the backorders, but they didn't. Then the tragedy hit and talk of new laws and gun bans was all that was talked about. The gun makers were already backlogged before the tragedy so all this did for them is give them a 2 year waiting list, which they knew would drop down when the buying furor dropped. There are many FFLs here and I didn't read about any of them saying that Gun Maker XYZ doubled his prices. None.

So, who is making all this profit if not the gun makers? The small gun dealers buy from a middle man or distributor. Is this guy doubling his prices? Is Davidsons raping the public and the small gun dealers? I don't know who the big distributors are but if they've been around for a while they know what happens when the panic ends and it's back to business as usual. They are in it for the long run so they keep their margins in place and if they get a price rise of 10% then they'll mark it up to cover their profit margins and do business as usual.

What about the big gun dealers like Bud's, etc? Do they buy direct from S&W, Ruger, Colt, Kimber, etc? I don't know but if the makers aren't doubling their prices (and I doubt they are) then the retailer is making the huge profit margins. Someone is. If it isn't the maker and it isn't the distributor (although both had modest increases) then the retailer is the only one left. They probably blame the maker and middle man but they are lying.

Many do say that the small LGS needs to make his profit on what he does have to sell because his shelves are empty and he still has his fixed expenses. While that may be true, what happened to his year of sales he experienced in a month with double and triple profits? Where is that money when you consider he can't use it to buy more inventory because it's not out there. This always seems to go unaddressed. He pulled in a year's worth of inflated profits in one month and now is out of stock.

However, with all of this being said, the retailer has every right to charge what he feels is the best price for him. He is taking the gamble on running his business, his neck is on the line, his future is in our hands. There is a fine line between being a savvy businessman and raping your customers. Many retailers have been thru this enough times to know how to handle it. Retailers who are on their last legs will grab all they can and then shut down and the new guys will make good decisions and bad decisions and we'll know who they are in a year when we see who is still standing and who closed their doors. The guy who has been around the block will offer fair pricing and won't alienate his customers for a short term profit and long term dissention.

Free enterprise is also a slippery slope. They need us more than we need them but the best of both worlds is when both parties make it work. Pigs get fat and hogs get slaughtered. Always been true, always will be true.

Mayo
February 2, 2013, 09:55 AM
Sam1911...Really, Sandy Hook? I hope you aren t being serious? You know exactly what I mean. Most people here had the foresight 4 years ago to knpw another AWB under Obama would be coming. Many started buying the guns and ammo they wanted ahead of time. Doesn t seem the memo reached sme supposed smart businesses!

Sam1911
February 2, 2013, 10:05 AM
Yes, I'm completely serious. Putting themselves in a negative position to be ready for some political action that MIGHT be coming in the next ??? years really doesn't make much sense. And certainly we have evidence right here in THR of just how many folks were convinced that the current President "just wasn't interested in..." and "never did anything to promote..." real gun control measures and wasn't "coming for your guns." Probably 100 threads argued that point and how his opponent had done more to make an AWB happen than he had. So, nope. Going against your own business and production strategy because you're concerned that there might sometime be a ban & run on guns just isn't smart.

Remember, while we're all a teensy bit concerned, of course, they aren't HURTING. They're currently selling every gun they can make and have back-ordered sales for months or a year to come. That's a great thing. They might have made even more money if they built a new production line JUST at the right time to catch this trend, but doing so before might have further saturated the market and depressed the prices they were getting then.

As I said elsewhere, sitting on inventory, warehousing and so forth, is just not a good place for any modern company to be. That's not how they shave the margins to be competitive, that would be wasted money.

vito
February 2, 2013, 10:14 AM
I've often wondered how many guns the U.S. market can absorb. With approximately 280 million guns (if that number is correct), and a sizable number of people not interested in owning a gun (in addition to the reality that children will not be buying guns) maybe we are approaching real saturation. I own a number of guns, and these guns meet all of my current needs so I while I have purchased several new handguns in the last few years I doubt that I will be buying any in the foreseeable future. We have now been through two Obama based panic buying sprees, and maybe when that fully runs it course we will find that there is just not a big demand for the volume of guns that could be sold. And guns are not things that wear out like cars or TV's, so most guns, I surmise, will be around for virtually forever. Just thinking.

Sam1911
February 2, 2013, 10:26 AM
Ha ha! Maybe. It does seem that more folks (by number, if not percentage of population) are buying guns than ever before, and more of them are buying more than one gun, and a great many are getting their kids into shooting as well, which bodes well in the future. And, of course, manufacturers make shiny NEW stuff all the time, primarily to get us all to buy the latest and greatest.

Saturation? Maybe someday, but I don't expect to live to see it.

larryh1108
February 2, 2013, 10:30 AM
It seems that most new guns are designed with an eye to the CCW crowd. There are a few combat style pistols coming out but the majority are small and smaller as well as lighter. I believe the new group of gun buyers are those looking for small, SD guns for carry.

The new models introduced since the last election have been mostly small and plastic. 98% of my collection is steel but I believe the new generation will stick with the plastic line. Steel will never fall out of favor with collectors but I can see the market being satisfied with new owners having a different plastic gun for each day of the week, for each season and for each type of dress. Gun sales won't slow down but what they buy will change. Hopefully the steel guns will become cheap and plentiful when the older generation passes on and the new kids on the block sell them off for the newest tiny guns.

Of course, long guns are a different story as the AR type platform will continue to be popular and if they pass some sort of AWB, the next generation of ARs will be filled by the gun makers that will be catered to any new laws we may see. Hopefully we won't have to go that route but a lot of states feel they know what's best for us.

gossamer
February 2, 2013, 12:33 PM
As a quite successful business owner, I think I know economics pretty well. ;) I think your definition is different then mine though. You want it both ways for the gun and ammo industry. Sell for triple when "opportunity" knocks but they should also be able to gripe when the market gets flooded and nobody is buying from them then! Yeah, you want to sell something for $1800 that cost $650 then go ahead---not good business though(see CTD). Again, demand goes up and your costs rise--fine pass it on to the consumer and keep your profit margin. Not costs go up, pass on the consumer AND increase profit margin from 20% to 200%! Now you become the model industry for housing---great short term but cutting your own throat down the line. Tell me this----if these gun and ammo companies are so smart and "economic" savy, then how did they not(unlike most gun owners here) see these dramatic run on guns and ammo coming? Wouldn't a smart business be a leader ahead of the curve and not reacting after the fact? A smart company would have increased production ANTICIPATING what was going to happen to the market.:banghead: Plain and simple most are gouging consumers---you say fine, good for them----just don't whine when times get lean---which they inevitably do. Can't have it both ways.

1) You seem to be conflating retailers, wholesalers, and mfgrs. And they are not the same. how much of this "gouging" is retail profit taking or wholesalers like Simmons (in my area) taking more profit rather than mfgrs gouging? Where is evidence that the big mfgrs are increasing their wholesale pricing? I would need to see this before I solely faulted the mfgrs of gouging.

2) how were they supposed to anticipate a mass shooting in a school? Because honestly, that's what started this run.

From the perspective of someone who's also run a successful business for 18 years, the fact is, you can't anticipate everything. You are in the position of reacting as often as you are in anticipating.

Comparing specialized commodity manufacturing (guns) to the building industry (housing) is apples and oranges.

Mayo
February 2, 2013, 05:50 PM
2. I'm not talking about anticipating Sandy Hook per se. The fact is most people(at least here) had the sense 4 years ago or more recently to start getting the guns and ammo they wanted knowing this day was coming. This day meaning Obama's 2nd term and a shooting leading into another AWB. Again, plenty of people anticipated this happening yet none of these companies did---NONE. Or is it they now have a reason to jack prices. Heck, 24 hours ahead of the election the high ups on Wall Street were moving their investments anticipating(theres that word again) what was going to happen when Obama won. At the very least increase production slightly!
A little heads up out there people---in the next 2-3 years(maybe sooner), interest rates are going to rise on mortgages, new housing contruction will increase, immigration reform is going to happen, Disney prices will increase as will Univeral and Sea World---plan accordingly and please don't say you didn't see it coming. ;)

Sam1911
February 2, 2013, 05:54 PM
Again, plenty of people anticipated this happening yet none of these companies did---NONE. Or is it they now have a reason to jack prices. Those companies had the same information we did and knew the odds just as well. They did what they needed to do to stay profitable to the best of their abilities.

They are profitable today -- not hurting. I can't see any reason why they'd have changed a thing. "We don't want to have to increase prices in the face of rising demand..." isn't part of most business strategies.

Mayo
February 2, 2013, 06:41 PM
They WERE profitable last time too...and then they weren't. We can learn alot from history.
It's not the "raising" of prices that bothers me----based on their model of business costs will rise. Again, pass on those costs to the consumer and maintain a reasonable profit margin---not pass on thoses costs to the consumer and JACK your profit margin. A $650 dollar gun with a 20% profit margin is $130. By simply adding the added cost(say $170 dollars) and keeping a 20% profit you now made $164(instead of $130) without any added expense. However, you take that same gun($820) added cost included, and charge $1800---you now have passed on a 110% profit for the same work. That's what I call JACKING the consumer and there's no excuse for it!:barf:

larryh1108
February 2, 2013, 06:59 PM
However, you take that same gun($820) added cost included, and charge $1800---you now have passed on a 110% profit for the same work. That's what I call JACKING the consumer and there's no excuse for it!

Ok, but who is doing the gouging? The mfgr? The distributor? Or the retailer? Who do we direct our ire to?

Sam1911
February 2, 2013, 08:02 PM
They WERE profitable last time too...and then they weren't. We can learn alot from history.I guess I could. How many AR-15 makers went non-profitable and closed their doors in the last 20 years when the market fell? Must be quite a few, right?

Who do we direct our ire to?You direct your ire to the evil nasty guy in line next to you who WILL pay what you won't.

He is the ONLY culprit here. Well, him and the 37 guys behind him who will each pay more than the last.

The manufacturers, distributors, and dealers just respond to the market, they don't set it.

All this ire is just shaking your fist at the wind and tide.

Mayo
February 2, 2013, 10:51 PM
Most of the blame goes to the retailers, but not all. While I agree with you about the guy in line paying more, that doesn't take the sellers off the hook. The olny economics they are dealing in is greed. As far as AR makers closing their doors--no that would fall to the local gun store owners. There is a middle scale, not just jacking and non profit. Many struggled financially but it was brought on by the same tactics of overpricing in times like these and then the market flooding after the ban falls thru.

Sam1911
February 2, 2013, 11:29 PM
The olny economics they are dealing in is greed. LOL! :D

Most successful businesses being charities?

It is always mighty good of us to point out to others when they've made enough money.

Zak Smith
February 3, 2013, 04:40 AM
Calling it "chaos" is a little overboard. Lines like this are laughable,
Its like a guns value is almost forgotten about, and price becomes the only consideration.

As for this one,
Long term, Fjestad said, this could spell disaster for gun companies, which could see the value of its products drop dramatically.
Well, yes, with a stroke of a pen, whole classes of the industry could be effectively eliminated. That would be disaster for companies.

However, I disagree with the idea that all this "panic buying" is going to create a glut that will cause death stagnation when there's the "all clear."

First of all, there isn't going to be an "all clear." Even if we get through 2013 without any significant bannings, 2017 is a long way away. And who's to say it will be "safe" then.

Second of all, it is my opinion that most people who buy up guns during a "panic season", rarely try to move them in the proximate future.

Third, if they bought at inflated prices, they will be even less likely to sell, and if they do, it will be much, much later.

Cosmoline,

I think the solution is a lot simpler than building a bunch of new factories. Just quit trying to roll out firearms on a just-in-time basis like bread loafs. Get some back stock of them. In fact this is a problem that comes up ALL THE TIME, not just during these panic periods. Vendors from Midway to Track are constantly short of everything from components to firearms. With a return to the old style of actual warehousing, there could be a lot more flexibility in responding to market flux. Because trying to predict exactly what's going to be bought when appears to be impossible. I realize nobody likes to actually warehouse anything anymore, but it's not going to break anyone's bank to rent storage space and put up some racks.
And put what on those racks exactly? The surplus that the industry is creating today above and beyond what there are orders for? Yeah, no problem...

I, for one, would love to stuff 6 months of product in a warehouse before selling it.

+1 what Sam1911 said.



Easy fix----maintain the lower cost of selling the new guns instead of raising them during this nonsense. That way, when the flood(and there will be) of used guns hitting the market at cheap prices hits the consumer can then buy a used gun or a new gun at the same price! Which would you choose. But they won't do that. They have raised their prices sky high because of the panic.
You can't "maintain" a lower cost when the demand far, far exceeds supply at the lower cost. You can't maintain it because they will all be bought and someone else may just then resell them for a competitive price.

Kynoch
February 3, 2013, 05:17 AM
http://www.gunsandammo.com/2013/01/30/industry-report-rise-in-gun-sales-prompting-industry-chaos/

The gun companies do need to be careful about how much they pump-out right now. After both WWI and WWII, gunmakers went from boom to bust. When the surplus guns (of many nations) hit the US market it further depressed sales of new sporting arms.

Some suggest the demand has "permanently" changed. I suspect gun prices will ultimately plummet well below their pre-Newtown Massacred prices.

Kynoch
February 3, 2013, 05:28 AM
Not an easy fix.

When companies put on an extra shift, the O/T pay premium increases the cost. When companies stay open longer, use more energy at night, all the things that add up with increased production to churn out more product around the edges . . . . all these things increase cost.

An extra shift is not "O/T." It's another shift of regular time. Electricity is also cheaper at night in many regions. The absorption of overhead is also spread over the production of far more product. All else being equal, production costs/unit actually drop.

And you're looking at small shops who have less to sell, but the overhead doesn't go away. Again, increased cost spread across a smaller amount of inventory to sell.

The more they make without paying OT premiums or making investments in capital equipment will actually reduce their cost/unit.

This is economics. And while it would be great to hire up some of these unemployed people, the cost of laying them off in a recession means they won't find another job again for a long time. Which means your company's unemployment insurance premium goes up. So, pay the overtime and mark up the product to cover the premium.

Not at all. The smartest way would be to hire temp workers on contract if their length of employment was estimated to be fairly short. A company could even go through a job-shopper and simply buy hours with is extremely competitive in many markets.

A buddy of mine opened up his shop just before AWB 1.0. He said he had a great business right up to and shortly after the ban.

Followed by several lean years where nothing sold, because people hurridly spent a few year's worth of their "gun budget" in a short period of time, and didn't start buying again for quite a while after.

And when little shops go out of business, they're hard to replace. Getting an FFL and setting up shop is not an easy thing to just go out and do. When the dust settles there will be fewer shops after all this plays out, and fewer places to buy the capacity of the manufacturer's output.

Gotta be careful about that cost accounting stuff...

Kynoch
February 3, 2013, 05:34 AM
If the firearms mfg's went out and acquired new plant and equipment assets as a result of this panic, yes, they could end up in a lot of trouble. I don't know of one who has done that, and instead they are writing huge backlogs. Completely different from the construction industry.

True. And the longer the backlogs become, the more orders that are booked, stretching the backlog out even further, causing even more orders to be booked and on and on and on.

It will be interesting to see how much of this backlog ends-up getting DE-BOOKED. It's not as if they are paid-for orders...

Kynoch
February 3, 2013, 05:54 AM
Remember back in the days when there were warehouses actually full of things people might buy? And the vendors didn't try to keep every bit of inventory in transit?

I think the solution is a lot simpler than building a bunch of new factories. Just quit trying to roll out firearms on a just-in-time basis like bread loafs. Get some back stock of them. In fact this is a problem that comes up ALL THE TIME, not just during these panic periods. Vendors from Midway to Track are constantly short of everything from components to firearms. With a return to the old style of actual warehousing, there could be a lot more flexibility in responding to market flux. Because trying to predict exactly what's going to be bought when appears to be impossible. I realize nobody likes to actually warehouse anything anymore, but it's not going to break anyone's bank to rent storage space and put up some racks.

There's a lot more to it than that...

In addition to the warehousing space and racks, there is the huge cost of your finished goods inventory sitting there. Not only are you not selling it and making money, you're investment is tied-up and you're paying to warehouse it.

Further, should a quality problem become known from a field report, your entire warehouse of goods will need to be retrofitted/repaired.

Enterprise planning is very sophisticated. The manufacturers have booked orders from their distributors that are constantly being updated with planned orders running even further out. Many individual gun shops are required to book orders well in advance with their distributors now.

In most cases the current panic would easily be dealt with except that the gun manufacturers are already pretty much at plant capacity. In many cases adding additional capacity would require capital spending which is fairly scary not only because of possible gun control but because they are satiating the market slowly but surely with their already tremendous output.

goon
February 3, 2013, 07:04 AM
Vendors from Midway to Track are constantly short of everything from components to firearms...

When I saw the reference to "Track" I immediately knew what you meant and without looking at the author, I knew you had typed that. I have been on this forum for too many years...

I wonder though if demand is high enough that gun manufacturers can't get ahead on production under normal circumstances.

Anyhow, I also don't think the gun industry is going to have any problem weathering this storm. Imagine a parallel universe where beautiful women want to track you down and squeeze you, then pay you for the awesomeness that you naturally emit... That's where gun manufacturers are right now.

To those wishing to direct ire, why be angry? A gun manufacturer with more profit is healthier and better able to contribute to defense of the Second Amendment. Why are you mad about that? If you can't afford the coin, buy an old Winchester to shoot until you can afford an AR.

Mayo
February 3, 2013, 05:07 PM
Sam1911----it's 1 extreme or the other with you----no middle ground huh? Charities:rolleyes:. There is a huge void between greed and charity. You seem to think going from a 20% profit to 200% profit is not greedy. I believe differently. I think you would be 1 of those people selling water for $20 a bottle when a hurricane hit. Not being a charity you would want to maximize your profit while the guy next to me in line offers $20 for what you paid $1 for.:banghead:

larryh1108
February 3, 2013, 06:17 PM
Not the same thing. Food and water are necessities. It this example of gun and ammo prices running rampant, these items are a luxury at this time. Right now, this isn't like Katrina or the L.A. riots or a natural disaster, it's people trying to buy all they can before any potential bans come to place. Huge difference.

Zak Smith
February 3, 2013, 06:26 PM
The beauty of the free market capitalism is that it matches supply and demand through transaction price.

What a lot of people apparently do not understand is that holding price low creates shortages; whereas if the transaction price is adjusted so supply meets demand, those people who have a particular poignant need can obtain the items, just at a higher price. The alternative is nothing left in the marketplace.

Sam1911
February 3, 2013, 07:00 PM
I believe differently. I think you would be 1 of those people selling water for $20 a bottle when a hurricane hit. Not being a charity you would want to maximize your profit while the guy next to me in line offers $20 for what you paid $1 for.Look I'm not sure I quite buy that there's a legitimate "gouging" ethical conflict when life necessities are involved. There could be a whole lot said about whether it is ethical -- or moral -- to raise prices on food and water when people really need food and water.

However, we are NOT talking about life necessities here! So that thorny question is completely irrelevant.

This is a LUXURY item. Just like a Rolex or a big bottle of Mot & Chandon, or a 60" HDTV, or an extra dollop of whipped cream on your sundae, or a new Corvette, or a Grande double-extra-soy-latte. You aren't owed those things. You have no inherent right to them. If you can't afford to purchase one, that's YOUR tough luck. If there are only 2 in the store and the guy next to you will pay $1 more than you will -- you lose. No fault in it, no harm. You've decided that your money is more valuable to you than that item. Someone who makes a thing, or who owns a thing, is utterly and completely within his/her rights (and acting perfectly ethically) in asking whatever amount of compensation s/he desires to give up that item. If two (or two thousand!) people want the item you have, you find out who will give you the most compensation for that item and they get it.

Add competing similar products and producers into the system and you have a market.

There may be pragmatic reasons why you don't ask whatever is the top of the market for your goods, but they all depend in the end on how they affect your ability to make the most PROFIT for the goods you sell.

But again, this is a luxury item. No person is about to DIE because they can't afford an AR-15 rifle this month. When you conflate "want one" with "need one" you fall into the trap of confusing following the market with being unethical and "greedy." No one is being coerced. No one is having their money pulled out of their pockets. The folks who are making fairly common rifles cost $3,000 right now are WILLING customers who have decided on their own to give up their cash (or credit!) for that item at that price.

People who have $1,800 or $2,200 or $4,000 or whatever sitting in their pocket are walking out of gun shops as satisfied customers with their new rifles. The sales go on. The market works. Maybe that means YOU aren't able to tap into that market right now. (I certainly can't!) But that's no fault of the makers, distributors, and retailers.

That's the "fault" of the guy in line next to you. And even hating HIM for being able to afford a rifle you can't afford is silly. Let alone hating the maker who is willing to sell it to him for that higher than usual price.

Sam1911
February 3, 2013, 07:09 PM
What a lot of people apparently do not understand is that holding price low creates shortages; whereas if the transaction price is adjusted so supply meets demand, those people who have a particular poignant need can obtain the items, just at a higher price. The alternative is nothing left in the marketplace.Very, very true!

One great reality of a free market is if you are selling every single unit you produce immediately, you NEED to raise your price.

Just like we say in practical shooting, if you are hitting all "As" or "Down 0s" you are shooting TOO SLOW.

When your product is priced right, there's still one or two on the shelf, almost every day, for folks to see when they get to the store. If you sell out every day, you should be asking more. If your product piles up on the shelves unsold, you should be asking less.

By that token, the market seems to be working just fine. If by some chance you simply MUST have an AR right this minute, you can have one, but it has to be worth a lot to you because you'll pay quite a bit for it. If you can wait, you can buy when the price is more comfortable for your budget.

Right now, if you put AR-15s out on the shelves for ~$1,800, your shelves will be bare by lunch. Ergo, that price is too low. Juggle the price until you can keep about ONE still on the rack until your next shipment and you're probably about right.

rtz
February 3, 2013, 07:13 PM
If anyone here has any free time; fly over to eastern Europe or Russia and buy ALL their weapons and ammo and ship it all back over here ASAP!

http://i45.tinypic.com/2mwtutk.jpg
http://www.sarcoinc.com/
http://i49.tinypic.com/avg8du.jpg

larryh1108
February 3, 2013, 08:37 PM
fly over to eastern Europe or Russia and buy ALL their weapons and ammo and ship it all back over here

On this note, does anyone know if there has been a halt to importing firearms?
Can an EO be used to stop the import of firearms?
We do get a lot of firearms from overseas. If Obama does not get his way with these bills and bans, can he just shut the door to companies like CZ, Taurus and Glock (even though Glock has a plant here)?

Mayo
February 3, 2013, 09:13 PM
Sam1911----fine, let's play semantics. Let's say a generator then. Certainly not life or death--more of a luxury while power is out 1 week. Are you still 1 of those buying 10 at $200 and then selling for $1000 each? How about a store owner who sees a hurricane coming and raises gas prices $2 per gallon? Just because you CAN take advantage of people doesn't mean you should!

Rancher5
February 3, 2013, 09:26 PM
Sounds like the Occupy folks hating Corporations for making a profit, Its Free Market Capitalism, Really though how many guns sell at MSRP , none except maybe limited runs or Yes harder to find though those high prices usually come from middleman. Woulldn't want anyone telling me how to run my business

Rancher5
February 3, 2013, 09:29 PM
Take in account that this biggest push for restrictions came after OBama won in Nov, than Sandy shooting , Christmas came and wow what an excuse to buy a firearm at all cost.

BullfrogKen
February 3, 2013, 09:29 PM
Both Walter Williams and Thomas Sowell have pointed out - over and over and over again - how rising prices draws more production and more product to a region in scarcity.

Just like the freeze on gas prices in the 70's led to shortages and rationing - constant shortages - the only thing constant pricing of ARs guarantees is long shortages. Want more product? When prices rise production will shift towards producing the product with the best margin, the market will satisfy demand and prices will stabilize.

Sam1911
February 3, 2013, 09:54 PM
Sam1911----fine, let's play semantics. Let's say a generator then. Certainly not life or death--more of a luxury while power is out 1 week. Are you still 1 of those buying 10 at $200 and then selling for $1000 each? How about a store owner who sees a hurricane coming and raises gas prices $2 per gallon? Just because you CAN take advantage of people doesn't mean you should!I'm not going to go off into the weeds about other items that MAY or MAY NOT be conceivably some kind of "life giving staple" item. That's a discussion that is far outside of THR's scope and gets off track of what we're discussing here.

Namely, a few variants of one type of modern rifle. And that's a LUXURY purchase for the folks out panic buying. There is no insurrection going on. There is no statistically significant increase in crime or terrorism they must face down with force. The only thing that has changed for any of them is a bit of worry that the government might shut down the supply and they might have to find any of the hundreds of other kinds of rifles with which to meet ... whatever need it is they didn't realize they had a month ago!

So, they're buying. They want it (they don't need it to live...they just WANT it), they've apparently got the money for it, and so they're buying. The market hums along just fine.

If someone will offer them $3,000 for that (what you think is somehow inherently a) $600 rifle, then they should and will sell it to that buyer for that price. If they can only make 3,000 units and there are 4,000 buyers willing to pay $3,000 a piece for them, then they'll sell every one they make for $3,000. And they'd be UTTER FOOLS not to.

-v-
February 3, 2013, 10:49 PM
Sam1911 is spouting a lot of wisdom. The biggest peril I do see for manufacturers is when the bottom falls out of this, or micro-economics catches up with people, we will see a large glut of used but never fired rifles on the market for cheap. This flood of lower-priced goods is going to make it very hard for manufacturers to sell newly produced items when there is a multitude of equivalent but cheaper priced alternatives on the market. Basically, why buy a new DD defense carbine for $1600 when you can buy a never been fired one for $1000.

This disruption in cash flow can be fairly damaging to a company, as they go from a very high cash flow to almost none. Even when they aren't selling rifles like hot cakes, these manufacturers still have to make payroll and overhead. With no inventory moving, making payroll and overhead starts to become increasing difficult proposition. That is the real long term concern for gun makers.

Also, guns are luxury items. Complaining about a $700 bushmaster selling for $1800 is akin to griping that you can't afford a $600,000 turboprop private plane. At the end of the day, both are more or less luxury items, unlike food, water, gas or electricity.

The only thing I do fault the manufacturers for is not raising their prices. Does it hurt the consumer? Again, this is a luxury item, so I say that's a definite NO. If many companies have such a demand that they have a 1-2 year backlog, that means they are undervaluing their goods, which means they are missing out on potential profit they could be making to either expand their business or more importantly prepare for lean times that will come after this mess. The last part is the most important, I'd say.

Zak Smith
February 4, 2013, 01:05 AM
I disagree that there will be a glut after the "panic". "New buyers" who realized they didn't have the firearms they wanted that they thought would be banned are not likely to get rid of them. Established buyers who wanted to lay in a little extra "supply" are not likely to get rid of them. Manufacturers are not likely to see lean times as a result unless we see bans that eliminate parts of the market.

gearhead
February 4, 2013, 01:19 AM
Sam1911----fine, let's play semantics. Let's say a generator then. Certainly not life or death--more of a luxury while power is out 1 week. Are you still 1 of those buying 10 at $200 and then selling for $1000 each? How about a store owner who sees a hurricane coming and raises gas prices $2 per gallon? Just because you CAN take advantage of people doesn't mean you should!
If a customer bought 10 generators at $200 and sold them at $1000, then the store was either selling them too cheaply or the customer was buying before the need based on speculation. He or she took a risk, and as I've seen many times if the storm was a bust then they were stuck with them.

-v-
February 4, 2013, 03:39 AM
I disagree that there will be a glut after the "panic". "New buyers" who realized they didn't have the firearms they wanted that they thought would be banned are not likely to get rid of them. Established buyers who wanted to lay in a little extra "supply" are not likely to get rid of them. Manufacturers are not likely to see lean times as a result unless we see bans that eliminate parts of the market. Thats not a unlikely scenario, I agree. I will say it really depends how the economy looks 6-12 months from now. Someone who sitting there with a $2000 AR and no cash to pay for necessities is going to reconsider their purchase. I recall post '08 panic someone on a local gun board was trying to sell a tricked out ar-15 with an 4x ACOG for literally $0.50 on the $1.00. Myself? I managed to pick up a nice Arsenal SGL 21 for only $100 more then what a WASR-10 was going for. YMMV, of course.

Plus, the other angle for a lot of the new buyers, is how many of them got it because the allure of something that is about to be banned? I suspect that crowd will have little attachment to their new acquisition.

Also, I do suspect lean times for manufacturers. Recall what was going on with prices in the summer and fall of '09? $650 MP-15s weren't hard to get, and everything seemed to be marked down a good $200+ from the going rates in '10 or '11. What does that translate to? Manufacturers and sellers accepting a slimmer profit margin in favor of moving goods.

Now, don't misunderstand me, I'm NOT saying they will have long lean times, but for the 3-8 months after this mess blows over, they are going to be seeing reduced sales volumes versus what the have been averaging prior to December of '12.

gossamer
February 4, 2013, 12:37 PM
2. I'm not talking about anticipating Sandy Hook per se. The fact is most people(at least here) had the sense 4 years ago or more recently to start getting the guns and ammo they wanted knowing this day was coming. This day meaning Obama's 2nd term and a shooting leading into another AWB. Again, plenty of people anticipated this happening yet none of these companies did---NONE. Or is it they now have a reason to jack prices. Heck, 24 hours ahead of the election the high ups on Wall Street were moving their investments anticipating(theres that word again) what was going to happen when Obama won. At the very least increase production slightly!


I need to ask this again. What evidence is there that the "gouging" is the manufacturers and not the wholesalers/retailers?

At my Walmarts, Bass Pro, and Cabela's -- the largest retailers of guns and ammo in the US -- price tags are the same as they were a few years ago. At my local gun shops the tags are not new.

At gun shows and some LGSs prices are higher, yes. But overall, I'm not seeing the chaos.

larryh1108
February 4, 2013, 05:45 PM
The recent election did not cause any serious shortages or runs on ammo like we are seeing now. There was almost 6 weeks in between the election and the tragedy at Sandy Hook. There was a run on a lot of guns leading up to the election in anticipation of the election but after it my LGS and the big box gun stores all had a good supply of ammo and ARs, etc. I did not see anything like the last election and I was watching closely. A lot of guns were on backorder and they seemed to be the recent releases and popular guns but there was plenty of stock on the shelves and walls at every gun store i visited in the weeks after the election. When Sandy Hook occured, the very next day the run on ammo and ARs started because Obama came out and said he was fed up and would do someting about it. So, I attribute this shortage on the tragedy, not the election. Who could predict that?

HoosierQ
February 4, 2013, 06:06 PM
Remember back in the days when there were warehouses actually full of things people might buy? And the vendors didn't try to keep every bit of inventory in transit?

I think the solution is a lot simpler than building a bunch of new factories. Just quit trying to roll out firearms on a just-in-time basis like bread loafs. Get some back stock of them. In fact this is a problem that comes up ALL THE TIME, not just during these panic periods. Vendors from Midway to Track are constantly short of everything from components to firearms. With a return to the old style of actual warehousing, there could be a lot more flexibility in responding to market flux. Because trying to predict exactly what's going to be bought when appears to be impossible. I realize nobody likes to actually warehouse anything anymore, but it's not going to break anyone's bank to rent storage space and put up some racks.
It in fact costs millions and millions of dollars to warehouse product. It used to be done prior to the advent of computerized inventory because there was just no way to know what was coming at you. Nobody liked dealing with all that inventory but they had to. Now, the whole supply chain is "just in time". So the guy making barrels for you is getting his steel just as he needs it...all the way back to the steel mill who's smelting the iron...etc.

It does not allow for the graceful handling of dramatic demand shift but otherwise saves an industry millions and millions of dollars. Until you sell it, you own it and if you own it, it's on your books and thus you have to pay taxes on it as well as secure it etc.

A few industries do maintain large inventories (vaccinations for example) because it there is unexpected demand, supply cannot wait. Guns do not fall into that category. Ammo...well the military does all the warehousing there, not the manufacturers.

Isaac-1
February 4, 2013, 06:26 PM
One thing that I am a bit surprised has not been mentioned here is just how much out sourcing there is in the production of AR platform rifles these days, just look at all the Magpul branded parts you see on many brands of AR's, the limiting factor on the production of these guns may well be the availability of such parts, I therefore suspect we will see some new volume production models introduced soon that bypass many of the 3rd party parts bottle necks by using imported replacement parts, etc..

breakingcontact
February 4, 2013, 07:26 PM
I suppose I could join the logic that if prices were raised, there would be more availability. A magazine that cost $40 before is $100 now. I'd be happy at $60 at this point.

Kynoch
February 6, 2013, 01:31 PM
One thing that I am a bit surprised has not been mentioned here is just how much out sourcing there is in the production of AR platform rifles these days, just look at all the Magpul branded parts you see on many brands of AR's, the limiting factor on the production of these guns may well be the availability of such parts, I therefore suspect we will see some new volume production models introduced soon that bypass many of the 3rd party parts bottle necks by using imported replacement parts, etc..

The AR15 has become the IBM PC clone of the firearms industry. Back in the late 1980's and early 1990's small shops across the US were building dirt-cheap IBM PC clones until they were finally overtaken by a few that had grown into large companies themselves like Dell.

I would like to understand the (non-massacre) supply of parts to AR15 assemblers. If it's truly competitive and not artificially controlled, it should ultimate lead to very inexpensive AR-15s...

Cosmoline
February 6, 2013, 02:16 PM
It did! Stripped lowers were going for under $100. But then panic hit and demand went crazy.

Jay Kominek
February 6, 2013, 03:10 PM
Let's say a generator then. Certainly not life or death--more of a luxury while power is out 1 week. Are you still 1 of those buying 10 at $200 and then selling for $1000 each?

How about that, my favorite video on price gouging actually uses generators as its example.

"Is Price Gouging Immoral? Should It Be Illegal?"
http://www.youtube.com/watch?v=h9QEkw6_O6w

Kynoch
February 7, 2013, 10:51 PM
It did! Stripped lowers were going for under $100. But then panic hit and demand went crazy.
Yeapper.

Areo Precision branded stripped lowers were going for $59.95 before the massacre.

jwh336
February 7, 2013, 11:37 PM
I don't think they'll have any issue selling them. I know people that own a few AR's for different purposes. Competition, hunting, tricked out, fun, long range, etc...

I personally don't own an AR because I think there are better rifles available. I have owned a few different AR models and shot a number more, the gun is just not for me. Either way, whatever they manufacture will sell.

On a side, I haven't seen price increases at any of my area gun shops, just empty shelves and many customers. I'm sure after the panic is over the people who intended to purchase an AR will get one.

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