How does the price of a knife go up so high?

dextersp1 said:
Price is determined by what people are willing to pay for it - not any other factor.

If it costs you $100 to make something but people are only willing to pay $50 - you are doing something wrong.
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Only in a Buyer Determined Mechanism.:D
 
Adding to what others have already mentioned, there is also the concept of economies of scale. All things being equal, smaller production numbers will require a higher per unit price. Higher production numbers allow a manufacturer to spread out his fixed costs.

In a competitive market, a seller is trying to set the price where they make the most cumulative profit not simply the largest profit margin per knife. Selling 10,000 knives at a profit of $5 per knife is obviously better than selling 1,000 knives at $10 profit per knife.

If a seller can accurately predict demand, they can determine the best price and the best quantity to produce in order to maximize their profit. In theory it's as simple as graphing the supply and demand curves, where the x-axis represents quantity and the y-axis represents price, and determining where they intersect. Of course the devil is in the details and a graph is just a visual representation of the number crunching a business must do to properly price their product and determine how much to produce.
 
Josh K said:
MSRP isn't designed to sell knives. Selling knives at MSRP allows the dealer to keep a very nice piece of a brick and mortar store, as well as keeping all knives in stock. In the online age, that just simply isn't how it works. No one, not even the company, is expecting people to pay full MSRP for a knife, just like the car dealer isn't going to expect you to pay full sticker price on a new car.

A lot of costs aren't in producing the actual knife, but designing it. FRN and other plastics need molds. Molds cost anywhere from $250,000 to $3,000,000 depending on how intricate the pattern is. The design of the knife, setting up stamps, lasers, heat treats, etc all add to the cost.

Sure that slab of AUS-8 may only cost $25 in materials, but then you have to take those materials, shape it (lasers), run it through a grinder (belts and discs), heat treat (heating costs and time), add the handle (molds), package and ship. That's also not taking into account the overhead of the company, it's employees and benefits, and marketing costs.

People get used to buying $5 knives that are made from pot metal in china and start wondering why a much better knife costs more.
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Bingo.
Lasers and heat treat furnaces are expensive to buy and expensive to run (you have to keep them adjusted as well, so add in the cost of trained technicians). So is filtering the air to protect the employees from the metal dust generated by the grinding operations. Don't forget the cost of permits to have that equipment. You can also add 30% tax on profits by uncle Samuel.

The cost in a knife is not the materials. It is processing them and the cost of the equipment needed to do that plus the overhead involved in running a manufacturing business that actually designs, produces, and markets a product.

Folks in the past used to understand manufacturing costs and worth. Now, not so much. So few ever see the inside of a factory today, so they do not understand what is involved.

Supply and demand my eye.
 
Make folk think that $100+ knife will fulfill their requirements in a way no others will and people will buy it.

+ 1 for Marketing.
 
might i add that labor in the USA is gonna be more than in China.

persoanally, i'd rather buy a more expensive made in the USA knife then a cheaper made in China one.

also, some models get discontinued, thus less supply, same if not more demand (ie-spyderco manix). you pay.

spyderco manix (c95)....
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some companies have propriotory steel such as INFI (Busse Combat). only they have this steel, so you pay. very good knives by the way.

busse combat ffbm....
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some companies have very strict tolerances and tight quality control standards (CRK). add good quality materials= you pay.

bottom line is you buy what you can afford.
 
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knarfeng said:
Bingo.
Lasers and heat treat furnaces are expensive to buy and expensive to run (you have to keep them adjusted as well, so add in the cost of trained technicians). So is filtering the air to protect the employees from the metal dust generated by the grinding operations. Don't forget the cost of permits to have that equipment. You can also add 30% tax on profits by uncle Samuel.

The cost in a knife is not the materials. It is processing them and the cost of the equipment needed to do that plus the overhead involved in running a manufacturing business that actually designs, produces, and markets a product.

Folks in the past used to understand manufacturing costs and worth. Now, not so much. So few ever see the inside of a factory today, so they do not understand what is involved.

Supply and demand my eye.
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Treating supply and demand and business/manufacturing costs as if they are exclusive of each other is a pretty wrong assessment. Lasers, forges, facilities, etc are all expensive whether you make 20 knives or 20,000. However, costs can be amortized with higher production numbers, resulting in lower prices. Victorinox might love to fetch $50 for a Classic. Quality is certainly better than many knives in that range. However, it's not likely as long as they make thousands a week and have millions still in circulation. Similarly, Buck or Case can sell a 420HC fixed blade for several hundred dollars, simply because they are made to be limited collectors items.
 
Lots of great thinking on this thread. A word or two of warning, you ignore supply and demand at your own risk. If you are wanting to sell 1,000 knives and when I started in this business, you could not get less than 12,000 of a knife made, you cannot spend $10 and Charge $200. There are not 1,000 knife buyers that out of touch with what knives should cost,

The manufacturer or importer must establish a MSRP - discount 50% to the dealer, another 20-25% to the distributor, he is probably paying another 10% to his sales force or to the Rep group that sells to the dealers. Your $100 knife then brings in $33.75 and the advertizing in the knife magazines is a heavy expense and if you are Buck or Case then the ads in Field and Stream, etc are eating your lunch.

The good news (for the buyers) is that the major retailers are probably selling the knife for $69.95.

Handmade knifes are another story altogether. The last time I helped a maker work out his hourly rate, he found that after materials, supplies, electricity, travel to shows, hotel, table costs, he found that his return per hour at the end of the year was a hair under $5. Today he is making $15-20 hour. Only a double handful of makers do better.
 
labor is about 70% of cost, so it's cheaper in a way when you go custom before the name is able to drive costs upward beyond the basic value of material choice and build quality. :)
 
A. G. Russell said:
Lots of great thinking on this thread. A word or two of warning, you ignore supply and demand at your own risk. If you are wanting to sell 1,000 knives and when I started in this business, you could not get less than 12,000 of a knife made, you cannot spend $10 and Charge $200. There are not 1,000 knife buyers that out of touch with what knives should cost,

The manufacturer or importer must establish a MSRP - discount 50% to the dealer, another 20-25% to the distributor, he is probably paying another 10% to his sales force or to the Rep group that sells to the dealers. Your $100 knife then brings in $33.75 and the advertizing in the knife magazines is a heavy expense and if you are Buck or Case then the ads in Field and Stream, etc are eating your lunch.

The good news (for the buyers) is that the major retailers are probably selling the knife for $69.95.

Handmade knifes are another story altogether. The last time I helped a maker work out his hourly rate, he found that after materials, supplies, electricity, travel to shows, hotel, table costs, he found that his return per hour at the end of the year was a hair under $5. Today he is making $15-20 hour. Only a double handful of makers do better.
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when you look at all the work that goes into fitting, drilling, shaping, grinding, all the things which go into making a custom folder, along with the finishing & such i dont see how any of them make a living doing it, i suppose the big money comes from designing for one of the big makers like BM or spydie, i dont think anyone is getting rich making custom folders though.
 
I've seen stock of O1 and A2, 12" x 1.25" x .188" going for $15.00 this is top grade knifemaking steel, so tell me now, where do the makers get off charging so much more for knives made of this steel, claiming the cost of the steel alone is the major factor in the high price? And this steel already had a heat treat, I am fully aware machining these steels is more rigorous, but why do they say it's the TYPE of steel and is the extra rigor involved really so much more that the price of the final product doubles or triples?? Someone explain that to me will you please? :mad:
 
A. G. Russell said:
Lots of great thinking on this thread. A word or two of warning, you ignore supply and demand at your own risk. If you are wanting to sell 1,000 knives and when I started in this business, you could not get less than 12,000 of a knife made, you cannot spend $10 and Charge $200. There are not 1,000 knife buyers that out of touch with what knives should cost,

The manufacturer or importer must establish a MSRP - discount 50% to the dealer, another 20-25% to the distributor, he is probably paying another 10% to his sales force or to the Rep group that sells to the dealers. Your $100 knife then brings in $33.75 and the advertizing in the knife magazines is a heavy expense and if you are Buck or Case then the ads in Field and Stream, etc are eating your lunch.

The good news (for the buyers) is that the major retailers are probably selling the knife for $69.95.

Handmade knifes are another story altogether. The last time I helped a maker work out his hourly rate, he found that after materials, supplies, electricity, travel to shows, hotel, table costs, he found that his return per hour at the end of the year was a hair under $5. Today he is making $15-20 hour. Only a double handful of makers do better.
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Thanks for the excellent information, Mr. Russel.

Demand is a two sided sword. If demand for product A is at $30 MSRP (meaning approx $10 distributor price), then manufacturers lose money if they can't make it for less than $10. When market is tough and they just want to move old inventory out, manufacturers sometimes will sell at loss. I know people in my industry do, even today we're still selling some inventory below cost just to recoup the money.

On the other hand, if product B has high demand and it's constantly out of stock within weeks after release even when sold at MSRP, then manufacturers can increase their take.

Custom knife making sounds pretty close to any other art. Just like painters, musicians, etc. only the top few percent actually makes good money. The rest does it as labor of love.

On a slightly different subject:
Your own store sells at a higher price because you offer life time iron-clad warranty. That kind of warranty has it's own cost. In effect your customers are paying for product insurance, which other retailers don't provide (at least not at the same level).
 
Ryou said:
I've seen stock of O1 and A2, 12" x 1.25" x .188" going for $15.00 this is top grade knifemaking steel, so tell me now, where do the makers get off charging so much more for knives made of this steel, claiming the cost of the steel alone is the major factor in the high price? And this steel already had a heat treat, I am fully aware machining these steels is more rigorous, but why do they say it's the TYPE of steel and is the extra rigor involved really so much more that the price of the final product doubles or triples?? Someone explain that to me will you please? :mad:
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Ever try drilling some of that stuff? Have fun with your standard drill set. This is stock steel that has already had a full heat treat? Drilling, shaping, or grinding, hardened steel isn't a walk in the park. There is a huge gap between making a steel in 420HC and S30V. You start in the design room and continue from there.

If you're making a locking knife, that lock needs to be properly engineered. Take a liner lock. The liner needs to not only be fitted to the knife, but the tang needs to be properly shaped to ensure no slip, the liner needs a heat treat to match the blade steel otherwise it will wear unevenly, the stop pin needs to be positioned correctly. All of these add to the cost of the knife.

I'd love to see a knife in a certain steel, then another knife in the exact same design, with a different steel, costing 3x more then the original.
 
Ryou said:
I've seen stock of O1 and A2, 12" x 1.25" x .188" going for $15.00 this is top grade knifemaking steel, so tell me now, where do the makers get off charging so much more for knives made of this steel, claiming the cost of the steel alone is the major factor in the high price? And this steel already had a heat treat, I am fully aware machining these steels is more rigorous, but why do they say it's the TYPE of steel and is the extra rigor involved really so much more that the price of the final product doubles or triples?? Someone explain that to me will you please? :mad:
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I can't explain why anyone would claim that the cost of steel is the major consideration in pricing their blades, but a quick check of my records show that a 36" bar of precision ground A2 was $47.88 where an identical dimension of CPM154 was $132.44, neither were heat treated and I have no idea why any maker would want to grind on already HT'ed steel unless at the finishing stage. 3V was a similar price, so it is a significant cost, but not the main one from what I see.

My machinery, heat and light, and the fact I won't work for less than $1/hour are my main costs that people will pay for. How a maker arrives at his product price is an interesting subject that's for sure.

Whomever mentioned that many makes knives out of a labour of love certainly got that right, although some days it's hard to feel any lovin' in the shop. :)
 
Les said:
Only in a Buyer Determined Mechanism.:D
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price is always a function of supply and demand. While thre may be outlying factors such as taxes, tarrifs, govt intervention, etc affecting it, it will always match the market in the end. Both supply and demand will change to compensate for the interference.

Microecnomics 101!
 
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