Makers, Manufactures, justifying the "HI" Price for product

A

Akapennypincher

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Sep 12, 2013
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There have been several threads on this "general" sub forum that seem like people have no schooling in business, or real world experence running a business. Having done that for about 25 years. I understand making a product, or providing service is or was fun. But there is in many cases a huge investment in time, equiptment, and money.

MONEY FOR:

Permits, licences, and just getting the city, county, or state were you want to operate to give you the OK.

Than add Rent or Cost of Building to run the business out of.

Than add equiptment, small tools, supplies, etc.

Than add telephone, fax, internet, web-page, computers, telephone, copy machine, printer, plus maybe some stationary supplies. Printer cartridges, paper, pencils, business cards, and the list goes on.

Utilities, for light, heat, telephone, and of course water.

Now business insurance, and if you manufacturer anything were you ever repackage. BUSINESS LIABILITY INSURANCE. Should someone do something like cut them selves, because you forget the WARNING STICKER IN. Fill in the blank , for the launguage your forgot to print on your warn sticker.

Lawer on call, or retainer. Good accountant to keep you straight with your "silent partners" (city, state, and federal government) Who all want their share of your profits. TAXES.

I am sure I have not cover it all, but if you have employees. Worker compensation, pay their Social Security, and other expences of having paid staff.

Those cost are passed along to the consumer in the price of that expensive knife.
 
You're partly correct. But it's still frustrating for many people when there is such a disparity between the raw material cost and the MSRP. This phenomenon becomes even more painfully obvious when looking at limited edition/midtech knives. For example, on the ZT 0454 you've got maybe $20 in carbon fiber, $10 in titanium and $30 in steel. On a Todd Begg Bodega you've got maybe $40 in titanium and $30 in steel. When you pay $770 for the Bodega, the $700 more than you paid for the materials doesn't all go to manufacture, labor, supplies, rent, dealer markup, business expenses, marketing, and other overhead. Not even close. You pay extra for the name and exclusivity at an inflated price artificially set by that manufacturer - that is pretty standard practice for higher end luxury goods like knives, watches, pens etc.

If you buy custom, the price you're paying also goes to overhead, labor time and materials, but it all goes to one individual, the person who made your knife. Buy custom knives direct from maker and the price is 100% justified.
 
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Akapennypincher said:
There have been several threads on this "general" sub forum that seem like people have no schooling in business, or real world experence running a business. Having done that for about 25 years. I understand making a product, or providing service is or was fun. But there is in many cases a huge investment in time, equiptment, and money.

MONEY FOR:

Permits, licences, and just getting the city, county, or state were you want to operate to give you the OK.

Than add Rent or Cost of Building to run the business out of.

Than add equiptment, small tools, supplies, etc.

Than add telephone, fax, internet, web-page, computers, telephone, copy machine, printer, plus maybe some stationary supplies. Printer cartridges, paper, pencils, business cards, and the list goes on.

Utilities, for light, heat, telephone, and of course water.

Now business insurance, and if you manufacturer anything were you ever repackage. BUSINESS LIABILITY INSURANCE. Should someone do something like cut them selves, because you forget the WARNING STICKER IN. Fill in the blank , for the launguage your forgot to print on your warn sticker.

Lawer on call, or retainer. Good accountant to keep you straight with your "silent partners" (city, state, and federal government) Who all want their share of your profits. TAXES.

I am sure I have not cover it all, but if you have employees. Worker compensation, pay their Social Security, and other expences of having paid staff.

Those cost are passed along to the consumer in the price of that expensive knife.
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MSRP is expected to cover all of the overhead along with expected profit for the maker as well as expected profit for the dealer... the issue with a lot of the prices people complain about are due to inflated prices above MSRP and instances where that expected profit at the maker or dealer level is abnormally high compared to the rest of the industry
 
Noswad0208 said:
Even considering this some prices are still outrageous.
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Personally, I have never seen a price that I would categorize as outrageous. I have seen knives with designs/features/elements that I don't quite understand and don't fit into my knife philosophy, thereby not justifying the prices for features I'll never value. But to someone, they will have value and the price will be paid. That's not the fault of a production knife company or a custom knife maker, it's my fault, it's your fault, it's all our faults for being knife enthusiasts and enjoying and coveting knives. IMO, it doesn't matter what the price of a knife is, all that matters is the value I place on it.
 
Here's a pet peeve of mine. Some manufacturers of goods don't allow their distributors to discount their products. Case in point, Costa sunglasses. I'm sure there are knife manufacturers that do the same. That doesn't allow "the market" to work in the way I understand "free market". The price of a knife, car, sunglasses, furniture whatever, should be determined by the market. Not what a manufacturer determines it to be. I've been in retail for 24 years now and I can tell you it can end up biting the producer in the ass. One example. Saturn cars. Scion. Ok. Two examples. Supply and demand is not called a "law" for nothing.
 
As a business owner, I don't think final retail cost has much of anything to do actual production or business costs. Luxury goods are priced the way they are to both make it worthwhile to be in the luxury goods market and to make sure that consumers feel they are buying luxury goods (a $200 pocket knife is undoubtedly a luxury item).

The other part of the pricing problem is the number of people in the supply chain. For the risk of being in business (manufacturing, distribution, retail), everyone needs a return on investment. That means that for every dollar invested in a supply of retail goods, you must sell those goods for $1.50 to $2.00 - 50 to 100% markup. If you don't, there is no point in retailing say, knives, because you could be retailing pantyhose instead and making real money. So if a knife maker spends $20 in materials they're going to sell the knife to a distributor for $40, the distributor will sell to the retailer for $80, and the retailer will offer it to you for $160.

$160 for a knife the manufacturer was happy to sell for $40.

Of course, if your volume is high enough to sell a million Paraframes, Gerber can specify lower markups between maker and retailer. And Walmart is probably happy only making 15% on a Gerber, because it sells so many. But Chris Reeve is never going to have that kind of manufacturing base, so making enough knives that they can be put out at low mark ups and high volume is never going to happen. So smaller shops go the luxury pricing route.

You could take any design and materials for a knife and have it put into production at modern cutlery factory, then sell it direct via mail order. Or you could have the same knife made in small batches in a machine shop, then sent to a distributor, then retailer. Even if everyone involved got the same 100% mark up, the two identical knives would be 400% different in retail price.


So while it may be perfectly true that all sorts of people have to keep the lights on, the "intrinsic" value of a particular knife has little connection to its MSRP. That was driven by target market, production costs and distribution chain.
 
GronK said:
The price is only outrageous if no one pays it.
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Exactly.

sirupatespecial said:
Here's a pet peeve of mine. Some manufacturers of goods don't allow their distributors to discount their products.Case in point, Costa sunglasses.......That doesn't allow "the market" to work in the way I understand "free market". The price of a knife, car, sunglasses, furniture whatever, should be determined by the market. Not what a manufacturer determines it to be.....
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Um, this is still America bud. A maker is free to charge whatever the hell they want for a knife. It is their choice. If a retailer does not want to honor a Manufacturers price then that Manufacturer can simply not sell the dealer any more knives. I think you might be miss understanding what free market refers to, IE government intervention. If it really goes badly for the Maker then the Free Market will adjust itself.

sirupatespecial said:
I'm sure there are knife manufacturers that do the same.
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Let us not turn this into the BM MAP debate.

I guess I don't get the point of this thread. I know it is the reverse of the usually whining that folks do about high prices. So it might be kind of refreshing....unless it turns into arguments between folks about prices being too high....then we will be back where this argument mostly ends up...whining about high prices.

Look, if you don't think something is worth the asking price, don't buy it. What is so difficult about that?
 
Sometimes I look at one of my knives and think: this simple piece of metal with two slabs of wood cost more than an smartphone with a trillion of features :eek:

How can I justify this :o
 
craytab said:
Um, this is still America bud. A maker is free to charge whatever the hell they want for a knife. It is their choice. If a retailer does not want to honor a Manufacturers price then that Manufacturer can simply not sell the dealer any more knives. I think you might be miss understanding what free market refers to, IE government intervention. If it really goes badly for the Maker then the Free Market will adjust itself.
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Um, America has Federal antitrust laws. Price fixing is illegal.
 
RX-79G said:
Um, America has Federal antitrust laws. Price fixing is illegal.
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Well then why aren't they stopping this horrible practice of manufacturers charging what they want for the products they make! Oh the horror!
 
craytab said:
Well then why aren't they stopping this horrible practice of manufacturers charging what they want for the products they make! Oh the horror!
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Because it is so common that it is hard to enforce.

But the point of antitrust laws is to insure a free market. Price fixing prevents the free market from working.
 
RX-79G said:
Because it is so common that it is hard to enforce.

But the point of antitrust laws is to insure a free market. Price fixing prevents the free market from working.
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Okay pall. Think what you want. This argument has been had here many a time. Until something actually happens in court, what you say doesn't matter one bit.
 
craytab said:
Okay pall. Think what you want. This argument has been had here many a time. Until something actually happens in court, what you say doesn't matter one bit.
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What do you mean "think what I want"? Are you arguing about how economics works?

You're the one who is pointing at something that isn't "free market" behavior and calling it that. That has nothing to do with knives or knife prices.

Just like "freedom isn't free", the free market can't exist as an anarchy.
 
RX-79G said:
What do you mean "think what I want"? Are you arguing about how economics works?

You're the one who is pointing at something that isn't "free market" behavior and calling it that. That has nothing to do with knives or knife prices.

Just like "freedom isn't free", the free market can't exist as an anarchy.
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I mean exactly what you read. Think what you want. If what certain knife companies do is price fixing where are the court cases? Why isn't it being stopped? If you think it is price fixing, great, think what you want but the evidence available is to the contrary. BM or ZT or whom ever aren't getting shut down. Facts are facts.

Further, there is competition in the knife market, lots of it. There are many options. If I don't want to pay what Benchmade is asking (or whatever company) then I have the option to buy a different knife from literally hundreds of other Makers. Now if BM was the only game in town, you might have an argument. They aren't. It is not price fixing.

Based on your other interactions here in the last couple days I know you like to argue for arguing sake. I am sure you will have some witty response to this that I have no intention of responding to as there is no point.
 
craytab said:
I mean exactly what you read. Think what you want. If what certain knife companies do is price fixing where are the court cases? Why isn't it being stopped? If you think it is price fixing, great, think what you want but the evidence available is to the contrary. BM or ZT or whom ever aren't getting shut down. Facts are facts.

Further, there is competition in the knife market, lots of it. There are many options. If I don't want to pay what Benchmade is asking (or whatever company) then I have the option to buy a different knife from literally hundreds of other Makers. Now if BM was the only game in town, you might have an argument. They aren't. It is not price fixing.

Based on your other interactions here in the last couple days I know you like to argue for arguing sake. I am sure you will have some witty response to this that I have no intention of responding to as there is no point.
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The fact that low level price fixing doesn't lead to arrests and federal prosecution isn't evidence that it isn't price fixing, just that it isn't enforced at that level.

Driving 58 in 55 zone is still speeding, and not reporting all of your tips is still tax evasion. But the Fed has better things to do than make sure every little company complies when they have the billion dollar companies to worry about.


And lecturing people about their attitudes when you use phrases like "Um, this is America dude" is ridiculous. You're just as argumentative as I am, and maybe a teeny bit less polite about it.
 
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