Customs Pricing – Opinions and Views?

[Kevin Jones]

Recently, custom knife pricing has come up in a couple threads (“what do you look for in a maker” and “how has your collection philosophy changed over time”) so I thought we as makers, dealers and collectors could kick around our various views and opinions on this subject a bit.
And yes, there are various opinions, as some dealers will tell you custom knives are under priced and a few will tell you they are overpriced. Same with collectors.

Makers seem to have the most to gain or lose regarding this subject.
From a business standpoint, it’s probably almost as important for a maker to price his knives realistically as it is for him to produce a quality piece that will be in demand. If a maker prices his knives too high they will probably not sell no matter what the quality. If priced too low the maker will struggle to earn enough to continue as a maker long term.

From my observations and what makers have told me, pricing is one of the more difficult aspects of running a successful custom knife business. The maker should be in the best position to determine what his knives are worth thus what price to offer them at, however some seem to be cautious and price towards the low side and are very reluctant to adjust prices as demand increases for their knives and/or as material, power/fuel cost rise.

Some collectors seem reluctant to price knives at current maker’s prices when offering pieces for sale in the secondary market. It’s the old “I must sell for less than I paid” mindset. Or, as one dealer calls it the “Turn & Burn” when a collector buys a knife then gets rid of it at a loss so they have the money to put towards another knife.

IMO, most dealers do a pretty good job in setting prices as they tend to monitor the market for trends, maker’s market position and what the top collectors are and are not paying for particular knives.

IMO, it’s definitely in the maker’s best interest for collectors and dealers to price their knives realistically in the primary and secondary markets to keep a healthy, stable price structure.

It’s a very narrow line to walk in regard to makers adjusting prices and many factors to consider. They have to adjust prices responsibly to maintain their margins, stay in-line with comparable maker’s prices and to help initiate appreciation for their supporting collector’s knives. However raising prices too high too fast can have a devastating effect on the maker’s success.

Enough of my running on, what’s your opinion on:

• How often should makers raise their prices? Once a year? Every two years?

• Do you view it as positive or negative when a maker you support by collecting his knives raises his prices?

• How about if he lowers his prices?

• How do you feel about makers discounting to dealers?

• What % is acceptable for a single increase?

• What is an acceptable mark-up for a maker? A dealer?

No need to limit yourself to these questions as all discussion is good. But please no name calling.

 

[JeremyM]

• How often should makers raise their prices? Once a year? Every two years?

To me, I see pricing being raised not based on time, but 2 primary factors: inflation/materials and the maker increasing his skill level. I'd guess yearly adjustments for both factors would be a good way to handle it, though it's possible material pricing may be more volatile than I think.

A 3rd factor of increased demmand/popularity is also a thought.

• Do you view it as positive or negative when a maker you support by collecting his knives raises his prices?

- Generally positive, provided there is a good reason for it. I'd like to either see a better knife than they previously made or know that there is increased demand for their product.

• How about if he lowers his prices?

- The only way I think I'd feel good about this is it due to a decrease in material pricing.

• How do you feel about makers discounting to dealers?

- Conflicted.

• What % is acceptable for a single increase?

- I don't really know here. I'd guess, for someone just starting out who is improving in leaps and bounds every year, a reasonably large increase would be acceptable. As the improvements become more subtle in nature I'd expect smaller increases year on year.

I know that I was able to negotiate much larger percentage increases in my hourly rate during the first 10 years of my career than I can negotiate now. But maybe that's just something I'm not doing right.

• What is an acceptable mark-up for a maker? A dealer?

- Not sure I really understand this question. Does a maker have mark-up? Do you mean on top of the material and other sundry costs?

As far as dealers go - I really have no idea what kind of margin dealers need to make in order to have a viable business. It probably varies from dealer to dealer - some dealers have more overhead (retail space, etc) than others.

 

[brownshoe]

There is a difference between collectible knives and those knives that are not truly collectible. The vast majority of custom or handmade knives are made by people who are not famous and will never be famous enough for their knives to be collectible. These knives are priced more by fit, finish, design and materials. That's why the price for a 4" fixed blade hunter with leather sheath is the same between so many makers.

For collectible knives, the market is much more complex and prices will rise and fall with the popularity of the maker, the number of pieces they make, the total number of pieces on the market and whether they are dead or alive. This market is volatile and that's why so many collectors on this forum who don't have enough capital to collect w/o looking forward to future liquidation are so nervous and worried about the subject of price, resale value, etc.

If you collect for fun, buy what you like and stay within your means, all this hot air about prices, ABS certifications, lotteries for knives, discounts to dealers etc. is just wind. Like any collectible or hand made product, if you know the field, you know what a knife is worth on the market today. You can either afford it or not. The future market is only predictible by WWG and possibly AGR.

 

[lwrhea]

I have two points that are related but am not exactly covering all of the points. I have no doubt they will be .

First: Dealers sometime get bashed for a variety of reasons, but they are the single best source of advice and accurate (as opposed to stroking egos) information when it comes to esablishing the maker's position in the market and pricing.

Second: About "mark ups". I dont consider any part of the knife's price a mark up. It's the price. The dealer should have the same price for a maker's knife as the maker. The dealer get a discount for services provided. If the dealer does not offer services (exposing the maker's work to other areas of the country, etc) there is not much point to work with a dealer. That being said, some dealers go above and beyond, which is good for everyone.

Lin

 

[RogerP]

• How often should makers raise their prices? Once a year? Every two years?

Not a function of any given period of time. Rather, a function of imrpoved quality of the product and improved market position. Of course, increases for costs of materials must be factored in on an ongoing basis, but these (generally) will be neither drastic nor frequent.

• Do you view it as positive or negative when a maker you support by collecting his knives raises his prices?

Neither uniformly positive or negative - depends on how much and how often.

• How about if he lowers his prices?

That's almost always not good.

• How do you feel about makers discounting to dealers?

That's between the maker and the dealer. If the maker feels he is getting value from the dealer in providing a discount (promotion of his work, dealer attending shows and showing the knives where the maker can't attend, etc.) I can't imagine why I would find it objectionable. In fact, I find the fact that I maker I support is working with a good dealer to be a positive.

• What % is acceptable for a single increase?

Dunno. But generally, incremental increases are prefereble to letting knives fall behind the pace for a while, then followed by a HUGE increase to catch up.

• What is an acceptable mark-up for a maker? A dealer?

Not sure about the question. How can a maker "mark-up" his own prices? For a dealer? I tend to buy from dealers who sell at or near the maker's price.


Roger

 

[Kohai999]

...... what’s your opinion on:[/U]

• How often should makers raise their prices? Once a year? Every two years?

• Do you view it as positive or negative when a maker you support by collecting his knives raises his prices?

• How about if he lowers his prices?

• How do you feel about makers discounting to dealers?

• What % is acceptable for a single increase?

• What is an acceptable mark-up for a maker? A dealer?

1. Makers should raise their prices when they can, continuing to sell as good or better than they did before they raised them, and it is up to the market to determine if this is a good thing. Demonstrably better equipment, materials and skills to make the knives all help to justify increased prices.

2. I like it when makers raise their prices, it means the value of my collection MAY be going up.:thumbup:

3. The only time that prices should be going down is if the maker is doing sort of "mid-tech", and production time is dramatically lowered. IF the maker is just not selling enough, and has to lower prices to make a sale, this is very bad.

4. It is not a matter of "like" to discount to a dealer. If you work with a dealer, you discount. You mutually come to an agreement about terms.

5. As far as increases go, that has a lot to do with the aftermarket, there is no hard and fast rule. The maker might have been vastly underpriced to begin with.

6. Markup by a dealer depends upon too many variables to comment on.

Best Regards,

STeven Garsson

 

[Kevin Jones]

•[
• What is an acceptable mark-up for a maker? A dealer?

Not sure about the question. How can a maker "mark-up" his own prices? For a dealer? I tend to buy from dealers who sell at or near the maker's price.


Roger

Hi Roger, good comments.

In regard to a maker "mark-up" I assume that a common way for a maker to set his prices is to take:

material cost, supplies, power/fuel, depreaciation on shop and equipment, marketing/advertisment (ads, show expence, dues etc.), insurance and office expence then add a % mark-up to cover salery and living expences etc.

I might be wrong, but that's the purpose of this thread, perhaps makers will share this kind of thing with us.

Boy after that list of costs, kinda glad I'm a collector and not a maker.

 

[Starkman1]

Enough of my running on, what’s your opinion on:

• How often should makers raise their prices? Once a year? Every two years?

• Do you view it as positive or negative when a maker you support by collecting his knives raises his prices?

• How about if he lowers his prices?

• How do you feel about makers discounting to dealers?

• What % is acceptable for a single increase?

• What is an acceptable mark-up for a maker? A dealer?

1. A totally agree with Roger, with the exception of aftermarket. I think it may be to volatile to price knives based on what is going on in the aftermarket.

2. Positive, if it is justifiable as a result from any of the above with the exception of aftermarket influence. If a maker increases his prices because of aftermarket, then he must inherently decrease his prices if his position falls. Aftermarket prices are the domain of the collectors/dealers..IMHO.

3. Bad, but it really depends on the circumstances, some imperfection, honest mistake etc. The maker may lose some credibility.

4. I agree with Roger and STeven.

5. Tough one. It should be in response to any increase in materials, experience or other costs the maker may incur. In regards to the aftermarket, leave that up to the collectors to determine and perhaps makers should stay out of that one.

6. See #5. All costs must be covered, hourly wage, and a profit must also be allowed…business needs to grow.

I think any collector/buyer, or anyone for that matter, wants to know what he is paying for. I think someone may have mentioned in a previous thread something to the effect that there aren’t many wealthy knifemakers. I have yet to see any driving European cars and wearing Rolex watches and fine Italian made suits etc. Doesn’t Les wear a Rolex? Maybe I need to change my opinion on #4.

Bob

 

[Joss]

One thing I find difficult to deal with with regard to price increases is when a maker lets their prices stay flat for a long time and then increases them 50% or more. This makes it very hard to decide to place an order and puts everyone in a weird spot. If the maker was trully ridiculously underpriced, he probably had a long wait time, which means that when the collector's slot comes up, either the maker quoted a price and feels trapped by it, or he didn't and the collector feels that he's not getting the value he expected initially. A maker that raises their prices 10% a year or so is much easier to predict.

 

[Kevin Jones]

One thing I find difficult to deal with with regard to price increases is when a maker lets their prices stay flat for a long time and then increases them 50% or more. This makes it very hard to decide to place an order and puts everyone in a weird spot. If the maker was trully ridiculously underpriced, he probably had a long wait time, which means that when the collector's slot comes up, either the maker quoted a price and feels trapped by it, or he didn't and the collector feels that he's not getting the value he expected initially. A maker that raises their prices 10% a year or so is much easier to predict.

I agree, and that was kind of where I was going with that question.
Could be a good move for a maker to increase his prices modestly each year, say 5%. This would allow him to account for inflation and the buyer would most likely not even notice.

1.A totally agree with Roger, with the exception of aftermarket. I think it may be to volatile to price knives based on what is going on in the aftermarket.

Bob

I agree Bob. IMO, makers need to maintain stable pricing with periodic modest increases.

 

[RogerP]

1. A totally agree with Roger, with the exception of aftermarket. I think it may be to volatile to price knives based on what is going on in the aftermarket.

For clarity, I referred to market position - not aftermarket pricing.

Roger

 

[Les Robertson]

Hi Kevin,

You wrote:

In regard to a maker "mark-up" I assume that a common way for a maker to set his prices is to take:

material cost, supplies, power/fuel, depreciation on shop and equipment, marketing/advertisement (ads, show expense, dues etc.), insurance and office expense then add a % mark-up to cover salary and living expenses etc.

Stop it! It was a good think I wasn't drinking something when I read that I the liquid would have shot through my nose!

How are most knives priced??? New maker walks up to established maker and says "What should this sell for"? established maker gives him a price...Ta Da! The new maker now his his price.

Walk up to the average knife maker at a show and ask them how their show was. Then ask them how much profit they made. Then ask is that gross or net. Wait for the blinking eyes. Smile and congratulate them on great show.

Hi Bob,

You sure that is a real Rolex?? D

WWG

 

[Starkman1]

• How often should makers raise their prices? Once a year? Every two years?

Not a function of any given period of time. Rather, a function of imrpoved quality of the product and improved market position. Of course, increases for costs of materials must be factored in on an ongoing basis, but these (generally) will be neither drastic nor frequent.

Roger

Sorry Roger, I misread the statement. Aftermarket and improved market position may be two different things. However, doesn't aftermarket influence the makers market position?

Les... a fake Rolex ?

Bob

 

[bluejaunte]

• How do you feel about makers discounting to dealers?
(...)
• What is an acceptable mark-up for ... A dealer?

This comment is sure to piss someone off, but what the hell. Most of the online dealers I've seen mark up their prices so much that I feel an established maker discounting his price for a dealer is just silly.

 

[supsme]

Beyond silly...more like insanity...

 

[Kevin Jones]

This comment is sure to piss someone off, but what the hell. Most of the online dealers I've seen mark up their prices so much that I feel an established maker discounting his price for a dealer is just silly.

True, some of them are not bashful with their pricing, however someone's paying those prices.

 

[Durwood]

Slightly out of context, but... I think a maker has to price his knives very very carefully. IF his table price is the same as most dealer prices...I'm immediately suspicious of how desirable that maker's work really is.

and...
Who is/are that/those dealer(s) that always claim(s) to a prospective seller that he gave $300 to SUCH And SUCH for a knife just like that and SUCH and SUCH's table price is $750...That's the kind of stuff that bothers me. Makers should avoid dealers who do their reputation more harm than good...

 

[bluejaunte]

True, some of them are not bashful with their pricing, however someone's paying those prices.

Not I! And I've seen some knives languish for over a year at pretty crazy asking prices. I guess this is where the newbie factor is in the dealers' favor.

 

[Les Robertson]

Bluejaunte and Supsme,

Lets not lump all the dealers together now. If you want to name names, then please do so. Of course the dealer should be allowed to tell their side of the story as well.

There are some dealers who for the most part charge the makers price (There is that word that Supsme hates).

First question to ask a dealer:

WILL YOU TAKE THIS KNIFE BACK IN TRADE AND GIVE ME WHAT I PAID FOR IT TOWARDS A MORE EXPENSIVE KNIFE IF IT IS MINT (OR THE CONDITION I BOUGHT IT IN)?

IF THE ANSWER IS NO....YOU ARE BUYING FROM THE WRONG DEALER!!!

However, as Kevin pointed out, someone is paying these prices.

You know its strange for all the pissing and moaning that some collectors seem to do about dealers. I have never once (and I've been around for awhile) seen a dealer physically, mentally or otherwise implement any form of duress or coercion on the collector forcing them to buy the knife.

Am I missing something? Does this go on in hotel rooms at the shows or in seedy water front bars. What is forcing seemingly intelligent collectors to buy from dealers who they then turn around and complain about???

Really, I would like an answer to this question.

WWG

 

[Les Robertson]

Hi Blue,

Perhaps the knife is sitting on the site because it is a consignment knife that some collector wants an outrageous amount for.

Generally it isn't the Newbies who will pay out big bucks for a custom knife. Most knife collectors work their way up through factory knives then semi-production and finally into custom knives.

WWG