The Remarkable Number of Factors Impacting Gun Prices

[Kynoch]

I'm not sure they could. If the margin was significantly reduced, I would stop carrying them in my store. Considering the paperwork, record keeping requirements, and relatively low volume that guns sell at, the $20/gun i'd be reduced too wouldn't make it worthwhile for me to stock them.

A retailer could maintain their margins (in fact as a % of the sales price it would actually increase) even if Glock slashed their prices which apparently they have the cost structure to do if they so wanted.

The price reduction could come from Glock and not their resellers.

 

[Kynoch]

The story goes that when Glock sold his guns to NYPD, he sold them for $75 because they cost him $52 to make. If you can make a product for that cost and sell it for $500, why wouldn't you? If you do not like the prices, you have several choices -don't buy them, or go into business and make the better proverbial mousetrap. In calculating your costs, do not forget all of those nasty things like FET, import tariffs and duties, employee salaries, benefits and taxes, utility costs, transportation costs, Obamacare for his US employees, local, state and federal taxes, and that little thing called profit - which if stagnated like you seem to think it should be, would stop reinvestment and growth and innovation.

It's the old (profit/unit) * (volume comparison). Why would Glock sell their guns at say $250.00 each if they can get $550? Because they might be able to sell 10x the number of guns.

The other costs you speak of are largely sunk no matter what the firearm is sold for so they are a non-issue. No one here ever suggested that it would be healthy for Glock to cut their prices so low that selling their guns became unprofitable for them.

Some folks really have to take classes in basic business 101. This stuff comes up almost every week because folks think everything is too expensive for their shooting hobby. It is a HOBBY; if it is too expensive, cut your costs or do something else. Your anger about high prices should be going towards high gas and food prices and healthcare which affects you on a daily basis, not towards a hobby.......

It sounds as though you need to. Have you ever done any actual product costing or pricing? Why did you mention the sunk costs that remain no matter what the product is sold for? Why exactly did you mention profit? No on ever suggested that Glock not make money.

You false dichotomy of $75 and $500 is silly. There are plenty of more choices. It would be interesting to know exactly where the (price/unit)*volume would have been absolutely maximized for Glock? Maybe exactly what they did maximized income? They have done a stellar job but I suspect they would have made even more if they sold say 5x the number of guns they already have because of say a $100.00/gun lower price than their rivals (which would be fewer of course.)

 

[Agsalaska]

I think you missed the original point of the Glock comments and the pricing. It had to do with brand perception, not equilibrium.

 

[Kynoch]

Why aren't you factoring in all of the other associated costs that go into that gun? There is a LOT more than wood and manufacturing technique - especially since 1989. Do you still make the same salary as then? Does your food, gas, etc. cost the same as back then? How about healthcare, taxes, etc? These costs have also gone WAY up for businesses during this recent "Recession" since most folks like to think that businesses don't pay their fair share. Costs are UP on just about everything; demand is up; raw materials are up; etc.......

You're looking at it from one angle. Let's look at another angle.

In 1985 a Skil Saw, a Bosch Drill Motor and a Porter-Cable Belt Sander cost more than they do today even if one does not include inflation.

Guns on the other hand are far, far more expensive. This has a lot to do with the restrictions/regulations placed on gun manufacturing/importation and on the stigma associated with getting into the gun business.

 

[Kynoch]

I think you missed the original point of the Glock comments and the pricing. It had to do with brand perception, not equilibrium.

You are quite right.

I was responding to someone who apparently feels that maximizing the price/unit is always the best way to make the ultimate maximum profit for the business which is not true.

 

[JTHunter]

Hhmm - this is the second forum tha indicates another page but kicks back to the current page when I try to go on. Maybe this will do it?

Yep but it had indicated there were "posts 76-80" here and it's only this one at 76.

Crazy computers.

 

[oneounceload]

It sounds as though you need to. Have you ever done any actual product costing or pricing? Why did you mention the sunk costs that remain no matter what the product is sold for? Why exactly did you mention profit? No on ever suggested that Glock not make money.

Yes I have, both corporate-wise and as a small business owner

You're looking at it from one angle. Let's look at another angle.

In 1985 a Skil Saw, a Bosch Drill Motor and a Porter-Cable Belt Sander cost more than they do today even if one does not include inflation.

Yep because they were made of steel and made in the USA; now they are plastic and made in China. Chinese labor today doesn't even come close to union workers wages in the 80's. Labor costs and taxes, especially in Europe with al of their socialism bennies programs add a LOT to the overall costs

I was responding to someone who apparently feels that maximizing the price/unit is always the best way to make the ultimate maximum profit for the business which is not true.

Tell that to Google who charges you for electrons. Glock can charge what they don because folks will PAY that price. try checking gun prices in Canada, New Zealand, or many of the Euro zone countries and see what they have to pay. We have it very LUCKY here on pricing

 

[Kynoch]

Yes I have, both corporate-wise and as a small business owner

I find that to be interesting. Why did you mention the litany of sunk costs that aren't volume sensitive in that case?

Yep because they were made of steel and made in the USA; now they are plastic and made in China. Chinese labor today doesn't even come close to union workers wages in the 80's. Labor costs and taxes, especially in Europe with al of their socialism bennies programs add a LOT to the overall costs.

Actually the materials used in say a Skil worm-drive saw are pretty much the same as they were in 1980. In any event, go look at an 870 built in 1980 and one built today. The cost reductions taken in materials is obvious. The labor cost is axiomatic. It's one of the major points of this thread. Overall, the reason for the static nature or drop in pricing of power tools is due to increased competition.

Tell that to Google who charges you for electrons. Glock can charge what they don because folks will PAY that price. try checking gun prices in Canada, New Zealand, or many of the Euro zone countries and see what they have to pay. We have it very LUCKY here on pricing

You're getting off the point but you're flat-out wrong when you suggest Google sells electrons. Were that the case, companies would go out and erect server farms and each one would be mini-Googles and they are not. Google largely sells ways to access and manipulate information and to communicate. Think about that one a bit.

You're also missing the bigger picture in the (margin/unit) * (volume) matter. You simply don't know what pricing/volume would have maximized Glock's overall profit. To actually know that, Glock would have had to lower prices to see what sort of impact it had on volume and it never really has.

Yes, I know your retort is "because it doesn't have to!" That's right given the business path they have chosen but it in no way proves that it is the plan that would bring Glock the greatest wealth. I hope you understand that.

There are many things to consider if Glock would have chosen pricing of $250 (or even less) per pistol rather than more than double that. Some would no doubt have equated such a low price to substandard quality which was an initial concern.

Had the drop in price triggered a truly huge increase in sales, it would have brought attention by regulators through concerns of Glock's competitors and general fears that "too many cheap guns are flooding the streets of America." It might have even caused an able company to get into gun making once Glock gave insight into the size of the market.

It would have also led to lower material costs for Glock, probably a reduction in direct labor and definitely a reduction in the amount of overhead absorbed by each gun.

 

[Zoogster]

I doubt that Glock would have done better selling at half the price. They are already among the top in US pistol sales.
At the time they were the first mainstream widespread polymer pistol, though the VP70 predated it.

Being space age polymers sounds a lot fancier than being plastic guns. Pricing them too cheap would likely have caused people to associate them more with being cheap plastic than sturdy polymers.


They also ate costs and/or took minimal profit to get them into the hands of police officers across the nation. That was thier strategy, since the average naive citizen looks towards what the police or military use and often makes thier decision on that. Considering them the professional firearm users, most citizens assume what they use must be ideal. (It's not a bad way to choose a firearm, as at least it should be durable and reliable and result in a good decision by even those without much firearm knowledge.)
By making the Glock the police gun they then became a primary gun purchased by civilians copying the police.
This then offset the low gains from the law enforcement market.
New double stack wonder nines like the police were using became the prime civilian purchase.
What were the guns the police and military were switching over to in the 80s and 90s predominantly? Glocks and Berettas. Guess what took a massive share of the civilian market as a result?


Being reliable, effective, modular, and easily maintained with minimal parts kept them popular.
But it was initially about getting the gun associated with police that resulted in success, and part of doing that was being content with limited gains from the law enforcement market for a number of years and making a name for themselves. They were then able to reap the rewards of higher profit down the road. Glock was outselling most all metal firearms while costing a fraction to produce. Other manufactures also saw how high the profit margin was with plastic compared to metal, and after Glock made plastic acceptable to a public that previously would have derided it, most jumped on the polymer bandwagon. But Glock had already established itself as the polymer gun for the next generation and would continue to reap the rewards of being the primary law enforcement firearm.

The market is only so large. So after a point dropping prices further does not increase sales much. The percentage of the market that buys multiple of the same or similar guns is small, though you see a lot more of it on gun boards.
So without increasing the size of the market dropping costs even more won't necessarily result in more profit if the overall number of sold firearms is only slightly greater.
If they already have one of the largest shares of the market they only have so much more to gain, and would those minimal gains be worth it long term? Saturating the market with even more, being associated with being a lower cost gun in a society that equates quality with cost to some extent, and being purchased in greater quantity by the poor and undesirables a lot of anti-gun legislation of the time targeted.

At the time many states were combating inexpensive firearms. The ring of fire guns, Saturday Night Specials, and anything the poor could afford saw restrictions and legislation aimed at increasing the minimum price.
Part of this legislation many places was melting temperature of the frame. While trying to find properties to legislatively differentiate the less expensive firearms they realized many were made from lower melting point metals.
But the market was still largely metal and they all had significantly higher melting points than polymer firearms.
Glock as a police firearm priced only slightly less than other service firearms was not held to that standard, polymer was exempted, or other exceptions were made.
Had they priced thier guns lower they may have faced a lot more ring of fire type restrictions, and been held to things like the frame melting standards that would have banned them many places.



As for competition reducing costs, it does but the result is not always good.
Most products today are outsourced to cheap labor elsewhere, and firearms would be no different. The result would certainly be a much weaker firearm industry within the US itself, few career or job opportunities in the firearm industry, and a greater dependence on foreign factories for our arms.
A positive would be firearms at a much lower price point. Norinco combined with Walmart's economies of scale and distribution system would have firearms easily at 1/4 the cost of what we pay now.
But for how long? Would gun restrictions be passed more readily without domestic companies invested in the firearm industry joining with civilian firearm owners to fight them?

 

[Kynoch]

I doubt that Glock would have done better selling at half the price. They are already among the top in US pistol sales.
At the time they were the first mainstream widespread polymer pistol, though the VP70 predated it.

There is far more revolutionary things about a Glock than simply being made from plastic. You really don't how Glock would have done if it sold at a slimmer margin. Not only would it have captured more of the existing market, it might well have expanded that market and it might have dissuaded competition from others.

The market is only so large. So after a point dropping prices further does not increase sales much. The percentage of the market that buys multiple of the same or similar guns is small, though you see a lot more of it on gun boards. So without increasing the size of the market dropping costs even more won't necessarily result in more profit if the overall number of sold firearms is only slightly greater.

Not only could the market have been fundamentally expanded if the pricing changed, Glock could own a great deal more of it. Even if Glock owned more of the existing market they would greater increase their share.

At the time many states were combating inexpensive firearms. The ring of fire guns, Saturday Night Specials, and anything the poor could afford saw restrictions and legislation aimed at increasing the minimum price.
Part of this legislation many places was melting temperature of the frame. While trying to find properties to legislatively differentiate the less expensive firearms they realized many were made from lower melting point metals.
But the market was still largely metal and they all had significantly higher melting points than polymer firearms.

Ring of Fire guns were often dangerous to the user and typically under $50.00/each. Often half that. Not comparable to Glocks.

As for competition reducing costs, it does but the result is not always good.
Most products today are outsourced to cheap labor elsewhere, and firearms would be no different. The result would certainly be a much weaker firearm industry within the US itself, few career or job opportunities in the firearm industry, and a greater dependence on foreign factories for our arms.
A positive would be firearms at a much lower price point. Norinco combined with Walmart's economies of scale and distribution system would have firearms easily at 1/4 the cost of what we pay now.
But for how long? Would gun restrictions be passed more readily without domestic companies invested in the firearm industry joining with civilian firearm owners to fight them?

I would much rather see extremely strong competition in the gun industry instead of the overly regulated, overly restricted artificial market we have today. Springfield Armory imports its polymer pistols from Croatia which is no bastion of high wages or benefits. It's too bad they can't do so with less regulations and restrictions.

What I would really like to see is an erosion of the stigma associated with making and selling guns. It would it would nice to see the gun industry attract some top-notch entrepreneurs, designers and venture capitalists on a large scale which it currently does not.

 

[russ69]

I didn't read all the posts but I think the biggest cost increase is on the retail side not the manufacturing side. The cost of doing business is skyrocketing. More paper work, permits, training, fewer FFLs, etc. are driving retail expenses off the scale.

 

[Kynoch]

 

[Ignition Override]

Won't ObamaCare be an added solid factor, which could force even gun stores into reducing the staff's weekly working hours,
in order to limit the cost of operating the businesses?

 

[Kynoch]

There are certainly fewer "kitchen table" FFL's then in the past and that does impact competition.

 

[JSH1]

Won't ObamaCare be an added solid factor, which could force even gun stores into reducing the staff's weekly working hours,
in order to limit the cost of operating the businesses?

Employers will not be required to provide medical insurance unless they have more than 50 full time employees. I doubt many gun store meet that criteria. The vast majority (90% or more) of companies with more than 50 employees already provide insurance. The mandate is there as a disincentive to keep employers from dropping coverage and moving their employees into the exchanges.