Most dealers try to price at 33 percent markup. That means something most people would disagree with when termed 33 percent. It means if you pay $200 you divide that in two and add the remainder to the price you pay you get a markup of 33 percent. A gun that cost a dealer $200 will likely be priced at $300.
It is actually a far cry from the 10 percent many gun shops claim.
But, when you figure out profit margin you use another formula. This one includes taxes, shipping, handling (unpacking, setting up for display, necessary cleaning, etc.). It also includes sales time for the paid employee. If the owner is the salesman his time is figured at a much higher rate. Typically, a service call is included in the calculation.
When you figure in all those costs it leaves a net in the neighborhood of 10 percent. But, that is what you will typically hear referred to as markup. Even though markup means something altogether different.
Net means that is how much the owner actually puts into his pocket after the sale. I do not begrudge a business owner putting $30 in his pocket on a $300 sale. But, the whole process is very deceptive.
Accessories, holsters, mags, etc., are usually at 50 percent markup. That means you take your cost and double it. That is the sale price. It is also why they want you to walk out the door with much more than the gun.
Those items are generally figured as net 33 percent.
A smart dealer will get a 2 percent discount on net 30, which means if he pays for the items within 30 days of ordering he gets a 2 percent discount.
He will also, if his credit with the jobber is good, demand free shipping.
Mail order or Internet dealers who have "good" prices on guns are getting their 2 percent net 30 and free shipping. They cut their costs with zero sales time and no service time.
For that the buyer gets about a 10 percent discount over buying from a local shop. The buyer also usually pays shipping and a transfer fee. Fixed shipping rates on retail gun sales are usually a ripoff. When you see "fixed shipping" it probably means "I'm only getting half of what my actual cost is, but I have to pad my profit margin somehow.
This is just how business works. If you buy a car a motorcycle or a bicycle you will pay the same - 33 percent markup. Discounts are offered when a dealer needs money to hit the net 30, it is behind in payments or it is easy seeking quantity sales to offset lower retail prices.
Accessories is where the money is. I've bought numerous guns at dealer cost and that is 33 percent markup. I've also bought quite a few at manufacturers' cost. That is half to one-third of retail.
I just picked up a dozen Colt factory mags at manufacturers' cost. That is 12, eight-round mags with Rampant Colt on the baseplate of the mag and on the plastic bumper, for well under $100. The retail prices I've seen have ranged from $20+ to more than $30. When you get right down to it I paid less than $8 each and somebody made a profit or I wouldn't have them.
Profit is not a bad thing. If the maker, wholesaler and dealer did not make a profit you would not be able to buy it. How it is presented to the end buyer is kind of sleazy.
I know these things because I've been a retailer and a wholesaler and spent many hours working for a manufacturer.
Here is how it works. I make the gun for $100. I sell it to someone who supplies the dealers' suppliers for $150. The suppliers sells it to a distributor for $225. He sells it to a retailer for $337.50. The retailer prices it at $506.25.
The retailer prices it at $499.99 because it is a lot easier to move if it is under $500. The federal government gets 10 percent of that sale in excise tax (it pays for all the feds' conservation programs). The dealer takes the final, and biggest, hit.
You pay $500 for a gun that cost $100 to make.
The closer to the end user the more that is taken away in costs and taxes.
The real price is so low it is insane.
Why don't you like a Hi-Point? It's worth about $30 or $40. Why do you like a Colt? It is a $150 gun!
Ammo? I can make my own .45ACP ammo for about $7 per hundred. Why does it cost $40? Do the math! And, remember, the folks who sold me the primers and powder went through all the profit generating maneuvers as everyone else.
My wife can bake a nice cake for $3. It would cost $15 or $20 at the bakery.
It is just business. If I sell a million guns that cost me $100 to make I pocket $100,000. A mere 3 percentage points is the difference in me driving a Kia or a Mercedes. Or paying union workers a 10 percent raise - back to the Kia.
This is why "trickle-down economics" works. Give me back a percent or two and I can pay more or I can live better. Either way, I like it.
Raise my taxes, I make more by earning less. I hire fewer people. We turn out less product. The price goes up.
Best I can do at economics 101...
The numbers are $670 vs. $640.
