Custom Knife Mark-up/Profit?

[Kevin Jones]

There was discussion on another thread regarding a particular dealer’s lofty markup on his knives.

Mark-up deserves substantial consideration whether you’re are a dealer, maker or a collector selling your knives. There’s always that fine line between maximizing your return and pricing the piece beyond what the market will pay.

I know different dealers have varying philosophies on the mark-up of their knives.
Some have a standard percentage they add to every knife no matter the cost, some claim to sell at maker’s retail after receiving a discount which serves as their profit and some evaluate each and every knife to determine what mark-up the market will bare, ultimately trying to average a percentage that supports their business/finance needs.

I don’t think dealer’s that seem to ask above market are necessarily “gouging” as it’s always the buyer’s choice as to what they are willing to pay.

As a collector first and investor second, I don’t need as much mark-up as makers and dealers as I don’t have the expense of running a business. I may lose a little on some and make quite a bit on others however do strive to average over 15% ROI as I adjust my collection. I expect dealers need to get around 30% depending on their overhead/expense. I would think there’s a substantial range in mark-up among makers.

•So collectors, what are your thoughts as to the different philosophies for and how much dealers mark-up their knives?

•For example, how do you feel about dealers doubling or perhaps tripling their cost in pricing certain “hot” maker’s knives?

•Are you OK with paying dealers more for “special knives” or knives from the “hard to get” makers, because they have accessibility to these knives that you may not?

•As you sell knives in adjusting your collections, what ROI do you try to maintain, or is that even important to you?

•So makers and dealers, anything you would like to share in regard to mark-up or pricing of knives?

Thanks in advance for your participation.

 

[antonanton]

I do buy some knives that I really like / potential for trade (baits) from Dealers. I do not mind if the dealers mark up double/triple/quarduple ... it's their business ... make a living from it. I did pay some knives double or triple of the maker prices in the past coz it's very very rare.

I try to get at least break-even. Of course, I try to get some profits for my other loses or other knife-collection-expenses (I dont record the %-tage ... what I remember .. the most I lost in the past was $1000 and the most profit was $2500).

 

[Joss]

Any practice and margin is OK in my book, as long as no fraud is involved. If a dealer finds a rare piece and sells it for 5X what he paid, more power to him.

I generally don't buy from dealers except Nordic because I consider that there's an infinity of knives I like, but a (very!) finite amount of cash and I'm not in a hurry to build up my collection right now. So I can wait and buy directly from the maker, or be opportunistic on forums / eBay / Nordic. Another difficulty I have with dealers is that the pieces available for the makers that interest me are often not the most desireable. When they are, they are completely out of my reach. (KnifeLegends, Great Lakes, Exquisite, etc, have a lot of fancy stuff, but it is not a segment of knives I know much about. So it's hard for me to assess whether, say, a Bennica at Great Lakes is considered one of the desireable Bennica's or a standard one. For me, they are all very desireable.)

Dealers are great when you have a large amount of disposable income but no time to attend shows and / or specific desires. If you *need* a Loveless / Bennica / Loerchner, have plenty of cash, and no time to attend the right shows, then a dealer is perfect. Same thing if you *need* a Terrel Crowd Pleaser now - Les Robertson is a good option if you like this model and cannot wait to get it directly from Mark.

I'm aiming to break even on knives I sell, from a cash standpoint. This corresponds to a negative ROI on knives I kept a while due to inflation. I was lucky enough to buy a few pieces from makers who have since become highly desireable, and I have done well, on average, because of this. I think that if you are really honest with yourself and look at the full ROI of your collection as if it were a business, factoring all the costs (shipping, sheaths, photo, insurance, value of your time, time value of money, taxes, etc), then you would find that you don't make a profit. There are probably some exception to that, but they are few.

 

[Daniel]

The market will dictate what the dealer can ask for a knife and still be able to sell it.

If the dealer thinks that it is a $1500 knife and lists it for that price, but nobody is willing to pay that price then it is not a $1500 knife.

If someone is willing to pay the offering price, then it is not exorbitant. The difficult thing in pricing is to determine the maximum price while being able to sell it in a reasonable time so that the carrying cost does not cut into your net margin.

If the dealer cannot cover the cost of goods sold, operating expenses, and desired internal rate of return, it is not worth staying in business.

If you buy a knife and hold it for 5 years and then sell it for only 25-30% more than what you paid for it, then it is not a very good investment.

 

[Kevin Jones]

The market will dictate what the dealer can ask for a knife and still be able to sell it.

If the dealer thinks that it is a $1500 knife and lists it for that price, but nobody is willing to pay that price then it is not a $1500 knife.

If someone is willing to pay the offering price, then it is not exorbitant. The difficult thing in pricing is to determine the maximum price while being able to sell it in a reasonable time so that the carrying cost does not cut into your net margin.

If the dealer cannot cover the cost of goods sold, operating expenses, and desired internal rate of return, it is not worth staying in business.

If you buy a knife and hold it for 5 years and then sell it for only 25-30% more than what you paid for it, then it is not a very good investment.

Perhaps not an exceptional investment, however a very good return on a collectible that has also brought you enjoyment for 5 years. Especially when you calculate for comparison your monetary return for playing golf the last five years.

 

[SharpByCoop]

•So collectors, what are your thoughts as to the different philosophies for and how much dealers mark-up their knives?

If a dealer is selling their knives, then their sales philosophy is working. Any strategy is OK. Charge what they want. The public will pay with their wallets, but decide with their emotions. Some require more 'selling' on behalf of the dealer in reaching out to select clients with that interest, and creating a buzz.

•For example, how do you feel about dealers doubling or perhaps tripling their cost in pricing certain “hot” maker’s knives?

Yeah, it's a wave-riding climate. I would LOVE to purchase a Bogi at his table cost from a dealer. Won't happen. Any smart dealer will find the true sales value.

•Are you OK with paying dealers more for “special knives” or knives from the “hard to get” makers, because they have accessibility to these knives that you may not?

Sounds like Business 101.

•As you sell knives in adjusting your collections, what ROI do you try to maintain, or is that even important to you?

I would LOVE to make a profit. I would be pleased at breaking even. I would note my purchase decisions if I took a loss.

Every knife offers a return value in non-monetary funds for the life that we own them:

It is a return of enjoyment that consists of pride of ownership and the ability to handle and share this piece in-person, to ourselves or with others.

This is an intangible that makes even selling a knife at a loss, a valid purchase.

Good points, Kevin and others.

 

[RogerP]

•So collectors, what are your thoughts as to the different philosophies for and how much dealers mark-up their knives?

I don't really give it much thought. For the types of knives that I buy, I have a pretty good idea of fair market value for a given piece. If dealer has a piece that I want at a price I am prepared to pay, I buy it. If I don't like the price, I don't buy it. Simple. Besides, unless I was privy to the initial purchase of the knife by the dealer, I won't really know how much he / she is marking it up.

•For example, how do you feel about dealers doubling or perhaps tripling their cost in pricing certain “hot” maker’s knives?

It troubles me not at all. If they find buyers at those prices, more power to them. I will not be one of those buyers.

•Are you OK with paying dealers more for “special knives” or knives from the “hard to get” makers, because they have accessibility to these knives that you may not?

Yes, to a degree - one that falls well short of doubling or tripling the maker's price.

•As you sell knives in adjusting your collections, what ROI do you try to maintain, or is that even important to you?

I make that call based on the individual knife, rather than having a general overall target for ROI.

Roger

 

[Lorien]

I don't sell custom knives, but I do sell bikes and I do sell production knives in my store:

- bicycles from the manufacturers I deal with have a suggested retail. When I sell them, I use a set profit margin, which is a little below full retail. If I can buy bikes below wholesale, I will raise my margin, as the opportunities to buy bikes are less than wholesale is rare. I also have wiggle room to make a deal.

-since the margins on bikes are low, and I have to pay to assemble, service them, storefront, operation costs etc, I sell clothing and accessories for a much higher margin

-I sell production knives at the suggested retail. If someone does research and finds one cheaper, I would expect them to buy it. But it cannot be called gouging as I'm sticking to the accepted rate.

I got a bit of flak for suggesting awhile ago that pinpointing costs, so that a maker and/or dealer can develop themselves some form of standard by which they can adhere when it comes to the pricing was a good idea and a way that the dealer and/or maker can judge for themselves if they're on target when it comes to margin is a reasonable way to go. I still stick by the concept, as opposed to pulling a figure out of the air and hoping that you'll get what you've asked. What if you don't cover your costs? What if you're seen to be a gouger? Both roads lead to failure.

 

[Keith Montgomery]

What is important to me is, is the price of the knife something that I am willing to pay?

I know the prices that the makers that I am interested in are charging. If I get interested in other makers, I check to see what their prices are. If a dealer is selling at, or is close to those prices, that is a dealer that if the right circumstances came about, I would consider purchasing from.

There are factors that go into the prices that a dealer has to charge. Most makers will give a dealer a discount, but some won't. The really hot makers usually don't. In fact, for many hot makers dealers have to put their card in the box and have it drawn to get one of their knives, just like anyone else. Many times someone that wins a draw will turn around and immediately sell the knife to a dealer for a rather substantial profit. In that case the dealer has paid way over the maker's selling price, and that has to be reflected in the dealer's price. Sometimes what you think is gouging, really isn't.

What it all really comes down to is this; are you willing to pay the price that you can work out with the dealer, or not? To be able to know if you are getting value for your money, you have to do your homework. Always take the time to find out what a similar knife from that maker is selling for, and how easy is it for you to get one his/her knives? Make sure you are an educated consumer, and chances are that you will be able to make the right purchasing decision.

Most times when someone overpays, it is because they saw a knife that they fell in love with, from a maker whom they have always coveted, and they just buy it. Later they find out that they paid too much and this sours them. This is not the dealers fault, but they tend to get the blame. Be a smart consumer, educate yourself. Besides, learning what you need to know to make good purchasing decisions is fun. It's part of what makes collecting anything enjoyable.

Dealers can price their knives at whatever profit margin they want. They will live or die by the decisions they make. You can't control that. You can however make sure that you are not making poor purchasing decisions. If it is a knife you really wanted, but the price is not acceptable to you (after you have done all the negotiating you can), that is too bad, move on. It won't be long before you find another knife that will catch your fancy, that will be priced right.

 

[Lorien]

If a dealer is selling a maker's knives at the same price that the maker charges, then I think that probably means the dealer and maker have a mutually beneficial working relationship. That in itself is very valuable to both parties; brand exposure and promotion figuring prominently, but also in service to the client, who- if they have a problem with a knife they bought- can count on the dealer to advocate for them to the maker.

It probably also means that the dealer is likely buying in quantity, if not all at once then at least over time. A profit margin of up to 30% is fair, but much higher than that and the maker doesn't get their fair share, or the customer pays extra.

If the dealer is taking the 'risk' of paying up front, then the profit margin should probably be higher than if the dealer is consigning the product.
I wouldn't expect any dealer to charge their makers more than 20%.

But of course, it's none of my business what a dealer's margin is. If the dealer and maker are happy with their arrangement, and it lasts, then it's likely that the consumer will be happy too.

 

[RogerP]

A profit margin of up to 30% is fair, but much higher than that and the maker doesn't get their fair share, or the customer pays extra.

I disagree with this. The dealer neither forces the maker to sell at a certain price nor the collector to purchase at a certain price. Where you have a willing seller of a knife at price A an subsequently, a willing buyer at price B, there is no unfairness, regardless of the percentage by which B exceeds A.

Roger

 

[betzner]

What it all really comes down to is this; are you willing to pay the price that you can work out with the dealer, or not? To be able to know if you are getting value for your money, you have to do your homework. Always take the time to find out what a similar knife from that maker is selling for, and how easy is it for you to get one his/her knives? Make sure you are an educated consumer, and chances are that you will be able to make the right purchasing decision.

Most times when someone overpays, it is because they saw a knife that they fell in love with, from a maker whom they have always coveted, and they just buy it. Later they find out that they paid too much and this sours them. This is not the dealers fault, but they tend to get the blame. Be a smart consumer, educate yourself. Besides, learning what you need to know to make good purchasing decisions is fun. It's part of what makes collecting anything enjoyable.

Dealers can price their knives at whatever profit margin they want. They will live or die by the decisions they make. You can't control that. You can however make sure that you are not making poor purchasing decisions. If it is a knife you really wanted, but the price is not acceptable to you (after you have done all the negotiating you can), that is too bad, move on. It won't be long before you find another knife that will catch your fancy, that will be priced right.

Keith, I think you captured the essence of what I had intended to say. The above, in my opinion, is the bottom line to buying knives.

 

[antonanton]

What is important to me is, is the price of the knife something that I am willing to pay?

I know the prices that the makers that I am interested in are charging. If I get interested in other makers, I check to see what their prices are. If a dealer is selling at, or is close to those prices, that is a dealer that if the right circumstances came about, I would consider purchasing from.

There are factors that go into the prices that a dealer has to charge. Most makers will give a dealer a discount, but some won't. The really hot makers usually don't. In fact, for many hot makers dealers have to put their card in the box and have it drawn to get one of their knives, just like anyone else. Many times someone that wins a draw will turn around and immediately sell the knife to a dealer for a rather substantial profit. In that case the dealer has paid way over the maker's selling price, and that has to be reflected in the dealer's price. Sometimes what you think is gouging, really isn't.

What it all really comes down to is this; are you willing to pay the price that you can work out with the dealer, or not? To be able to know if you are getting value for your money, you have to do your homework. Always take the time to find out what a similar knife from that maker is selling for, and how easy is it for you to get one his/her knives? Make sure you are an educated consumer, and chances are that you will be able to make the right purchasing decision.

Most times when someone overpays, it is because they saw a knife that they fell in love with, from a maker whom they have always coveted, and they just buy it. Later they find out that they paid too much and this sours them. This is not the dealers fault, but they tend to get the blame. Be a smart consumer, educate yourself. Besides, learning what you need to know to make good purchasing decisions is fun. It's part of what makes collecting anything enjoyable.

Dealers can price their knives at whatever profit margin they want. They will live or die by the decisions they make. You can't control that. You can however make sure that you are not making poor purchasing decisions. If it is a knife you really wanted, but the price is not acceptable to you (after you have done all the negotiating you can), that is too bad, move on. It won't be long before you find another knife that will catch your fancy, that will be priced right.

agreeee :thumbup::thumbup:

 

[bladeymae]

I go to the Blade show in Atlanta every year and i often wonder what the dealers and others with an exhibitors pass got to see that i didn't. Thankfully some of the more popular makers hold lotteries that eliminate that advantage.

Johnny

 

[John T Wylie Jr]

I go to the Blade show in Atlanta every year and i often wonder what the dealers and others with an exhibitors pass got to see that i didn't. Thankfully some of the more popular makers hold lotteries that eliminate that advantage.

Johnny

I wonder the same. This year at the Vegas show , I was stoked to get a shot at a Ruple from his table , being one of the 1st in the door , I , like others , found his table empty. :thumbdn:

So lets say someone made the trip with the intent on scoring a knife from said maker , but show opens , and there is nothing on the table. If that buyer factors in their trip costs on top of the knife cost , the dealers price seems like a bargain AND they end up with a knife , vs being empty handed.

I like the lotteries myself , not that I have faired well in any , but it is nice to at least have the same shot as everyone else.

 

[Kevin Jones]

Any practice and margin is OK in my book, as long as no fraud is involved. If a dealer finds a rare piece and sells it for 5X what he paid, more power to him.

I generally don't buy from dealers except Nordic because I consider that there's an infinity of knives I like, but a (very!) finite amount of cash and I'm not in a hurry to build up my collection right now. So I can wait and buy directly from the maker, or be opportunistic on forums / eBay / Nordic. Another difficulty I have with dealers is that the pieces available for the makers that interest me are often not the most desireable. When they are, they are completely out of my reach. (KnifeLegends, Great Lakes, Exquisite, etc, have a lot of fancy stuff, but it is not a segment of knives I know much about. So it's hard for me to assess whether, say, a Bennica at Great Lakes is considered one of the desireable Bennica's or a standard one. For me, they are all very desireable.)

Dealers are great when you have a large amount of disposable income but no time to attend shows and / or specific desires. If you *need* a Loveless / Bennica / Loerchner, have plenty of cash, and no time to attend the right shows, then a dealer is perfect. Same thing if you *need* a Terrel Crowd Pleaser now - Les Robertson is a good option if you like this model and cannot wait to get it directly from Mark.

I'm aiming to break even on knives I sell, from a cash standpoint. This corresponds to a negative ROI on knives I kept a while due to inflation. I was lucky enough to buy a few pieces from makers who have since become highly desireable, and I have done well, on average, because of this. I think that if you are really honest with yourself and look at the full ROI of your collection as if it were a business, factoring all the costs (shipping, sheaths, photo, insurance, value of your time, time value of money, taxes, etc), then you would find that you don't make a profit. There are probably some exception to that, but they are few.

For figuring ROI, I factor in knife cost, shipping, consignment fee/advertising cost (if applicable), sheath (if the sheath goes with the knife when it's sold), taxes and photos. Since I'm not a dealer and I collect, buy, sell knives for pleasure I don't factor in value of my time nor insurance cost as it's not that significant.

Even accounting for he above expenses I don't find it difficult to maintain a modest overall ROI. Would be more difficult for a dealer considering his additional overhead of running a business and receiving a salary. Though it's been mentioned that dealers get substantial discounts from some makers, I would imagine it's more the up and coming makers that need help in building their markets rather than the established ones with strong client list and backlogged orders.

 

[Les Robertson]

bladeymae and John,

The advantage is not gained on the first day of the show for collectors and dealers.

It used to be the night before the first day of the show, Now it is weeks if not months before the show that many of the knives are pre-sold

The makers have expenses, the way to pay for those expenses and to stock up on more material is to sell the knives you are bringing to the show.

All of us on the sales side of the table have heard the "I'll be back" or the phone call before the show "Hold that for me, I'll be there right after the doors open".

The reality of any business is money talks. And too many times (especially new to the sales end of it) the maker/dealer will hold the knife. Too often you never see the person again. Imagine holding a knife for hours only to see the customer buy a knife from someone else and then walk out the door...gone.

So while you would like to see all of the knives the first day of the show, the reality is you can only be at one table at once. As hot as you are to get to Maker Number 1...someone is equally as hot to get to Maker Number 2 on your list. Even if the knives were held until the second the doors open, there would be knives you will not get to see and makers whose knives you wanted will be sold out in minutes.

How do you keep this from happening??? You contact the maker a month or so before the show find out what they are bringing and tell the maker you will take it....and send them payment before the show. In todays digital age it is very easy to ask for a picture via email.

You get the knife you want....the maker has some expenses paid before the show and takes a little stress of him the maker.

By doing this you will become a happy collector and at the same time vilified by those who want to look at every knife before making a decision.

I know for myself I have orders delivered to me at the show. I place these orders months in advance. More times than not I leave the knives on the makers tables to allow them to take orders off of the knife.

Contrary to popular belief, most dealers will not get a knife early at a show from the hottest makers unless they pay full retail. One very popular maker I know adds 10% to the price of any knife he brings to the show. So this is a case of the maker asking a premium...(which is done to cover his show expenses) now the dealer who purchases this knife has to add an even higher premium to this knife. Knowing that the knife is already 10% over the price of a knife that has been ordered from the maker.

Lastly, neither a dealer or a collector can buy any knife until the maker sells it! So if you are looking to point a finger at all those makers whose knives you didn't get to see because another dealer or collector got into the show before you did. Well now you know who is responsible for this.

 

[John T Wylie Jr]

I understand completely Les , either way it sucks to get into a show to find makers sold out BEFORE the show opens.

I was in no way placing the blame on the dealers or collectors with an " in " to get in the show early or during setup. It is the makers who decide to sell.

It has soured my taste for a few makers knives I was wanting.

 

[Les Robertson]

HI John,

What is keeping you from ordering a knife?

I don't know who the makers are, but if they have a list of orders many times at shows most of those knives are deliveries.

Which even if they had them you wouldn't be able to buy them.

There are a lot of interpersonal dynamics in play at shows that most buyers don't know about...or care.

 

[B . Buxton]

I was wondering everyones opinion on this, if a maker is selling knives through a purveyor on consignment, meaning no money changes hands from purveyor to maker until the dealer sells the knife, and the dealer lists the knife at the makers suggested price. Is it acceptable for the maker to add the extra % that the dealer will be receiving from the sale to that knife, or is this a big no no, and just an expense the maker needs to eat.
I wonder this for the simple reason that if someone wants a knife they would be ahead by buying from the maker saving the added %. Now if the purveyor were to buy the knives outright it would be a different story because the maker would no longer have to wait for the purveyor to locate a buyer, ship and then pay the maker. Just Curious.

Thanks,

Bill