MSRP- WHOLESALE-COST FOR FPs

[mirror]

Ages ago when I was a buyer for a clothing boutique (The Rag Theatre if any of you go back to Telegraph Ave or Isla Vista in the early 70’s) we basically operated on keystone markup that meant we would double the cost of the average item when we priced it.

 

Some companies would pre-tag their items with their suggested price and others would strongly discourage discount sales.

 

Later when I worked in international trade services I got to review the import paperwork for all sorts of products and saw the markups were quite different in different industries and especially were different when the big chain stores were buying.

 

I also from time to time got to see the actual factory cost and thus the factory markup to wholesalers, though that got into some esoteric cost accounting for overhead.

 

I was wondering if anyone is familiar enough with the pen industry to know how this chain works, at least in general?

 

It seems that most pen companies sell directly to retailers.

 

Some high- end brands discourage price wars by not letting them advertise below MSRP prices.

 

It also seems that pen manufacturers will supply closeout items to various of the large pen stores, and that from the looks of it that eBay dealers also have access to overstock.

 

This would seem to indicate that they can either buy from the factories or closeout deals exist.

 

I don’t see a lot of evidence of a gray market pens available in different markets at lower wholesale prices then imported and sold here below domestic price levels.

 

I’d also be curious about if anyone ordering from overseas has had to pay Customs duty, which appears to be about 2.7%. The post office will often not bother to collect this when the values involved are small.

 

Does anyone wants to give an insider’s view on the chain of markups?

 

My own feeling is that it is OK to pay extra for fine service, but that it seems can still be found with discounted prices from some of the recommended vendors.

 

So is anyone willing to fill in the gaps?

 

I realize that there might be no standards, but usually there is a starting place.

 

How prices are set on the highest priced pens is at the moment a little beyond me other than the Maki-e where I see truly intensive labor or a place like Conway Stewart where one is paying for British labor and upscale image.

 

High priced pens seem more like art or fashion, dependent on opinion.

 

But to buy intelligently it would be nice to get a notion on the cost of manufacture, wholesale, and then retail even though it will vary greatly between countries like China and pens made in the U.S. or E.U.

 

As far as I can tell while some of the big manufacturers have moved production overseas no one has started a high quality pen company using strictly third world assembly?

 

[playpen]

What a great question. I'm glad you asked because I am very used to having a host of opportunities at my fingertips for price comparisons and certainly the internet has enabled us to take full advantage (regardless of our location) of this aspect of buying anything.

I have noticed that FPHospital right here in NYC gives a standard 20% discount unless you are a real "high roller" then you may take advantage of a more preferred rate. They will price match certain things but in the past I have come away feeling somehow diminished, after the experience. I imagine that this is how some people feel, asking for a handout. Other vendors happily discount much more than the standard 20% and you don't even have to ask. Sometimes the prices change for mysterious (to me) reasons. I have also noticed this in the paper market. It is possible to find very nice discounts on paper but you must be willing to put in the time and effort to find a price.

I suppose that much of commerce depends upon people not having the time or inclination to sit and do the necessary research so that accounts for higher prices and outright price gouging.

If anyone has any insight into this particular industry it would be very instructive.

[RalphP13]

I'm a little suprised at the lack of response this question got. I wish I could shed some light on the issue, but I can't. I'd love to know if the "high end" pens are treated more like jewlery - 100%, 200%, 1000% markups?

 

I guess some things are just closley gaurded secrets. :blink:

 

 

Ralph

 

 

[daveg]

I once revealed some markup information on another luxury product many years ago. I learned that most people don't want to know. Even some of the people asking the question were very annoyed by the answer. Most people think it's the manufacturers, distributors and dealers who will be the most upset, but it was the customers by far. One of the problems is that a lot of customers aren't business people and they don't understand that you can have very high markups and still have little or no profit. As a youngish design engineer, I just ASSumed these things were better understood. I don't know anything about the pen channel but I wouldn't tell you if I did. You might be able to handle the truth, but others are reading too.

[Stylo]

Just based on the price spread among retailers, I would say that for many places the markup is a lot more than a factor of two. I see a number of current pens, not newly released and not about to be discontinued, sold at such different prices as $250, $360, and $430. These are all authorized dealers, all presumably profitable businesses based on how long they have been around, all with good reputations.

 

When models are cleared, the difference can be even larger. I purchased a Waterman Liaison during super/final clearance for the incredible price of $100. One well known retailer is currently selling it for $292! Perhaps I got my pen from a lot of demos/returns sent back to the manufacturer, and so perhaps the dealer got it for a lower price than usual. I doubt it, but it is possible. But this and other dealers have cleared their Liaisons long ago, and the one selling it for $292 obviously doesn't want to budge, and that is why it still has them. I am sure the dealer who sold it for $100 still made some money. So that should give you an idea of the range of markups.

Edited May 16, 2007 by Stylo

[Stylo]

As a youngish design engineer ...

 

Many aerospace companies have overheads of 300-400%. That means for every dollar an engineer charges directly to a contract, the company bills $4-5!

 

[Benjamin McFerret]

I remember reading about a person on pentrace who struck up a conversation with a guy at a Montblanc Boutique in some airport. The boutique guy showed his 149 (146? I don't remember) that he bought for $10 or so - the production cost of his pen.

 

Note, I read about this over a year ago so the specifics are fuzzy and should not be takes as hard facts. The gist of the story is that MB sold factory seconds to employees at cost (waaaaaayyyy less than than discounted retail prices).

 

Ben

[eytim]

I'm a little suprised at the lack of response this question got. I wish I could shed some light on the issue, but I can't. I'd love to know if the "high end" pens are treated more like jewlery - 100%, 200%, 1000% markups?

 

I guess some things are just closley gaurded secrets. :blink:

 

 

Ralph

 

tHIS IS VERY UNSCIENTIFIC BUT ABOUT 7 MONTHS AGO i SPOKE TO AN AQUAINTANCE WHO OWNS A VERY WELL KNOWN INTERNET SITE FOR WATCHES, JEWELERY AND SOMETIMES HIGH END FPS. I BELIEVE HE TOLD ME THAT COST TO THE SIT FOR MANY OF THE HIGH END FPS IS 1/3 OF THE SELLING PRICE-NOT MSRP BUT ABOUT 1/3 OF 70-80% OF ACTUAL RETAILS PRICE. SO THAT WOULD MEAN A $ 1000 MSRP FP THAT MIGHT SELL FOR $ 750 IN A DECENT BOUTIQUE IS BOUGHT BY THE RETAILER FOR $ 250.

 

I KNOW FIRST HAND IN MID PRICED WATCHES OF MSRP 300-700$ THAT THE DISTRIBUTORS WILL SELL TO HIGH VOLUME RETAILERS THE PENS FOR BETWEEN 30-35% OF MSRP.

 

BUT PEOPLE DON'T WANT TO KNOW BECAUSE AN FP A WATCH OR IN EFFECT ANY OTHER LUXURY ITEM HAS VERY LITTLE TO DO WITH INTRINSIC VALUE BUT RATHER IS AN AMALGAM OF DESIRE, PASSION AND WHATEVER ELSE DRIVES US CRAZIES TO BUY THESE ITEMS. SO REALLY WHO IS TO SAY WHAT IS EXCESSIVE. IF IT GIVES YOU PLEASURE AND YOU CAN AFFORD IT IS VALUABLE TO YOU, (THAT SOUNDS GREAT BUT THE REALITY IS I CAN BUY A LOT MORE DREAMS IF I BUY THEM AT %35 OF MSRP)

[James P]

I shouldn't get into this, but all I can say is you guys are way off. The markup is not nearly as great as you'd think. In fact, on many internet sales, which are often deeply discounted over MSRP, dealers are making only a few dollars on each pen sold. Factor in overhead (yes, even internet sellers have overhead), and the margin is slimmer still.

 

There may be an instance where someone gets a deal on closeouts or overstocks. I know one dealer, for instance, who was selling pens for less than I was able to purchase them wholesale.

[wordherder62]

Jim's right. I was selling a lot of pens and getting the best prices that some of the distributors and manufacturers had to offer and the numbers you have above are so far off as to be laughable. I will tell you that many of the high brands of pens don't even offer dealers the luxury of a 100 percent market up from cost to MSRP. The notion that a dealer pays $250 for a $1,000 pen made me laugh and it also explained the difficult customers I had who insisted I could give them outrageous discounts and still somehow make money. Really, it was silly the margin I had to work with in some instances and particularly when it got down to pens that sold for $50. It often just wasn't worth it when you calculated it in terms of an hourly wage!

 

What it costs manufacturers to make a pen is a whole 'nother story but I'm sure MB would love to buy 149s all day at $10 each. And, really now, we're all smart enough here to know that manufacturing cost is nothing. Handling, shipping, inventorying, marketing, and other expenses add far more to what it really costs to put a pen into the market place.

 

Different manufacturers have different pricing structures for dealers, but I never got anything at 70 percent off retail unless it was being clearanced by the manufcturer and even then I'd typically have to buy $1,000 or $2,000 worth of it minimum--an attractive proposition on an item being discontinued because nobody wanted it when it was in the line. And some dealers get better pricing for various reasons. You know that lovely catalog you get from a big pen store I won't name? Well every page in it is paid for by the manufacturers in either straight dollars or through free inventory. Same goes for some others that do catalogs as well.

 

It's an interesting question but the speculation above is way off. Laughably so.

 

Richard

[Benjamin McFerret]

It's an interesting question but the speculation above is way off. Laughably so.

 

Richard

As I said, I'm just recounting a story that I read on Pentrace in the far distant past. I make no claim as to the accuracy of my secondhand information. I thought that it was an interesting story so I wanted to share and add some fuel to the fire.

Edited May 16, 2007 by Benjamin McFerret

[eytim]

Jim's right. I was selling a lot of pens and getting the best prices that some of the distributors and manufacturers had to offer and the numbers you have above are so far off as to be laughable. I will tell you that many of the high brands of pens don't even offer dealers the luxury of a 100 percent market up from cost to MSRP. The notion that a dealer pays $250 for a $1,000 pen made me laugh and it also explained the difficult customers I had who insisted I could give them outrageous discounts and still somehow make money. Really, it was silly the margin I had to work with in some instances and particularly when it got down to pens that sold for $50. It often just wasn't worth it when you calculated it in terms of an hourly wage!

 

What it costs manufacturers to make a pen is a whole 'nother story but I'm sure MB would love to buy 149s all day at $10 each. And, really now, we're all smart enough here to know that manufacturing cost is nothing. Handling, shipping, inventorying, marketing, and other expenses add far more to what it really costs to put a pen into the market place.

 

Different manufacturers have different pricing structures for dealers, but I never got anything at 70 percent off retail unless it was being clearanced by the manufcturer and even then I'd typically have to buy $1,000 or $2,000 worth of it minimum--an attractive proposition on an item being discontinued because nobody wanted it when it was in the line. And some dealers get better pricing for various reasons. You know that lovely catalog you get from a big pen store I won't name? Well every page in it is paid for by the manufacturers in either straight dollars or through free inventory. Same goes for some others that do catalogs as well.

 

It's an interesting question but the speculation above is way off. Laughably so.

 

Richard

The issue is not that the purchase by the dealers at significant discounts of perhaps 35% of msrp is out of line. I for one never said that it was not justified but there are costs. I can assure you from firsthand knowldege that most typical production jewelery for example is sold at triple key meaning the manufacturer will sell an item for example at $30 and it will retail for $90. The manufacturer is making a profit at $30. Certainly though as it makes its way from manufacturer to distributor to retailer costs buildup and the retailer is not making necesarily an inordinate profit. The questions was about what manufacturers sell at. Also it all depends on volume. Some retailers and large sellers can demand a larger and significant discount because of their niche in a particular market a manufacturer must be at that retailer/seller. Watches are indeed sold at the price pointsthat I mentioned (at least many of the brand that you see on such sellers as shop NBC). I dont understand the ned to protstthat a retailer may only be making a "few dollars"-why would I expect a seller not to make a healthy profit. Me doth thinks you protest too much to paraphrase our famous English cousin. If youa re investing hundreds of dollars in a paerticular item in yoru stock; tying up capital waiting for an item to be sold or using a credit line for that purpose then it would seem that if this happens on a regular basis you might as well put the money in a money market and make 5%, Your comment that we "are all smart enough" is a bit biting to say the least. Your statement as to the non profitabulity of the pen business was indeed "not smart" and somehwat offensive to those of us that spend good money on these items. Here is another approach if pen collectros are willing to spend hundreds and perhaps thousands on a pen or pens we should not be disrespected with the notion that the sellers are doing us a favor and not making a profit. I fully expect as it should be that the seller for taking the expense of carrying a stock and all of the overhead associated with catering to the pen community should indeed make a healthy profit. I believe such candor is only beneficial to a healthy marketplace. But please I don't want to be told that by dropping $400 on a pen someone is doing me a favor.

Thanks for your comment. Keep up the incerdible art that your perform on the nibs.

[Stylo]

It's an interesting question but the speculation above is way off. Laughably so.

 

 

I am not sure what exactly is the speculation you are referring to, but it is a fact that there are many current production pens out there that some retailers sell for $200 while others sell them for $300. There are even some where the price difference is nearly double. So some retailers sell for at least twice the price they buy the pens from the manufacturer.

 

Having said that, I don't think anybody is insinuating the markup is all profit. There is a lot of overhead even for purely internet based retailers, and FPs are not exactly high volume merchandise that are sold daily by the hundreds, so markups have to be high enough for the retailer to make an acceptable living on low sale volumes.

[david i]

I remember reading about a person on pentrace who struck up a conversation with a guy at a Montblanc Boutique in some airport. The boutique guy showed his 149 (146? I don't remember) that he bought for $10 or so - the production cost of his pen.

 

Note, I read about this over a year ago so the specifics are fuzzy and should not be takes as hard facts. The gist of the story is that MB sold factory seconds to employees at cost (waaaaaayyyy less than than discounted retail prices).

 

Ben

 

 

Production costs are dwarfed by dealer wholesale even before he marks it up.

 

MB indeed "might" spend $10 to make a pen (thought suspect even they pay more for their nibs alone), but perhaps spends multiples of that on advertising, so that when they sell the 146 or whatever to distributor for say $100 before distributor sells to dealer for $200 before he retails it at $400, they might well be into the pen for oodles more than $10 and are not making $90 profit, never mind $390 on said pen.

 

regards

 

david

 

[marklavar]

The tale about the 149 costing only $10 to produce is garbage. The gold nib alone is worth around $50. I would say, overall, around $100-150 is likely to be the final production cost.

 

In my opinion, and from what I have observed, the mark up varies enormously according to brand and model. Pens with a prestige image, in a metal like solid gold or sterling silver, have a big mark-up, while ordinary plastic pens (even with a gold nib) have a much lower mark-up value. At the end of the day, it's largely a question of image.

[playpen]

Eytim I think you think Wordherder62 is Richard Binder. As far as I know, he is not the same Richard. Richard may be Richard but he is not the Richard who you think Richard is. I know this because I have a Richard right here at home and he is also not the Richard you think Richard is. I would love to see all the Richards get together for a big Richard picture at the D.C. show. Maybe then we can figure out just which Richard really is Richard.

So, again, your Richard may not be the Richard you think Richard really is.

BTW does this Richard also work on nibs because if he does then maybe we have two Richards so now we can all think that this Richard is the other Richard. Do you follow?

[Phthalo]

playpen... have you been drinking?

[RalphP13]

Eytim I think you think Wordherder62 is Richard Binder. As far as I know, he is not the same Richard. Richard may be Richard but he is not the Richard who you think Richard is. I know this because I have a Richard right here at home and he is also not the Richard you think Richard is. I would love to see all the Richards get together for a big Richard picture at the D.C. show. Maybe then we can figure out just which Richard really is Richard.

So, again, your Richard may not be the Richard you think Richard really is.

BTW does this Richard also work on nibs because if he does then maybe we have two Richards so now we can all think that this Richard is the other Richard. Do you follow?

 

Wow, that is EXACTLY what I was thinking.

 

 

Thanks for all the answers. I suspected the profit margin was not that great given the generally slight diferences of the "sale" prices (from each other and from MSRP).

 

 

 

Ralph

 

 

 

Edited for leaning my forearm on the enter key after typing only one word and submitting a nonsence post!

Edited May 16, 2007 by RalphP13

[Richard]

Thanks for your comment. Keep up the incerdible art that your perform on the nibs.

Sorry, 'twarn't me. Wordherder62 is Richard Jarvis, not Richard Binder.

[playpen]

Phthalo: LOL...you'd be surprised at how many of these my kids in school can memorize! (they're surprised too!)