Thoughts on authorized dealers raising GEC prices above the minimum sale price.

[EngrSorenson]

Oh, I can't wait to sharpen off the factory bevel and sink that thing into a chunk of basswood.

if I snag one I’m right there with you. It’d have to be at a reasonable price... but you know it’s going to be a good one.

 

[ooitzoo]

Your argument falls flat, because the "user cohort" you talk about already has alternatives. Rough Rider is made in China and can be had for less than half the price of a GEC. Case is made in the USA, and is (on average) cheaper than GEC. Buck also makes some traditionals in the USA for a reasonable price. All cut things just as well as a GEC, yet GEC is more sought after.

I'm relatively new to buying GEC (off and on since early 2019), but mine are all users, so I guess I would fall into the "user cohort" you talk about. I have a few Case and Buck Knives, but I hardly ever use them because I prefer the quality of my GEC knives, and I have never considered buying a Rough Rider. That's because GEC is in a different category from those other brands. They are made from better materials, with much higher fit and finish, and in my opinion, more functionality.

You mention Spyderco using overseas production, and you even mention that they had some quality control issues. Others have explained why that's not an apt comparison, so I'll leave that alone. But I think you should look at Benchmade for a better example. They started out as a completely USA made brand, and later started an overseas production line, with the express intent of getting more knives into more people's hands at a lower price. In the end, they got rid of their overseas made lines because they felt it diluted their brand. That's a more apt comparison to this situation.

Like I said: execution matters. The Chinese made Benchmades had a number of issues including a lack of quality control. Its interesting that you keep focusing on failures rather then successes. Spyderco was successful with it as has Kershaw. The better question is "did Benchmade suffer any long-term ill-effects from expanding production overseas?" Aside from the obvious monetary loss, the answer is an easy no.

As far as offering alternatives, one of the benefits of expanding production is that it creates revenue for GEC to then expand in the US. Effectively, this would amount to a win-win for the company and consumers in the long run.

What? I guarantee more people will see these threads than they will ANY Discord server. LOL Are you serious? Twitter account? That would be unregulated disaster in itself as well. Come on, now.

Your moot point is moot

 

[Fixall]

Like I said: execution matters. The Chinese made Benchmades had a number of issues including a lack of quality control. Its interesting that you keep focusing on failures rather then successes. Spyderco was successful with it as has Kershaw. The better question is "did Benchmade suffer any long-term ill-effects from expanding production overseas?" Aside from the obvious monetary loss, the answer is an easy no.

As far as offering alternatives, one of the benefits of expanding production is that it creates revenue for GEC to then expand in the US. Effectively, this would amount to a win-win for the company and consumers in the long run.

None of the arguments for GEC expanding overseas make a lick of sense to me. Like at all.

This thread is about GEC dealers raising the price of the knives well above the GEC MSR and the secondary market prices. Your genius fix for that is to have GEC expand production overseas? How does that help anything?

Spyderco has been used as an example. Spyderco makes some of their knives overseas and some in America and are highly successful. Has moving some of their production overseas made the Sprints or exclusives any easier to get? Hell no. We still see them flipped here and elsewhere for 3x MAP on a regular basis. Same thing goes for the recent Kershaw Sprints as well as the Buck of the Months. People like limited releases.

I think we'd see a similar thing if GEC moved some of their production overseas. Yea, there would be a lot more GEC branded knives on the market, but the American made GECs would still be in limited supply and hard to get. So what would be the point of GEC expanding? Just expanding for expansions sake? To put GECs in as many hands as humanly possible? What does it solve? If GEC was to release 2500 Indonesian made GECs at $50 and 250 American made GECs at $120, why do you think it would help the situation? What does it have to do with this thread?

You say expanding GECs production overseas would create revenue that would help them expand in the U.S.

And just how in the ever loving world do you know that? GEC made a name for itself by producing high quality, American made knives at a reasonable price. If you have some magical formula that would guarantee such a company would be profitable by expanding production overseas, please share. Heck, maybe you should do it yourself. Let us know how it goes.

 

[Quiet]

Your moot point is moot

The irony here is rich.

 

[Quiet]

None of the arguments for GEC expanding overseas make a lick of sense to me. Like at all.

This thread is about GEC dealers raising the price of the knives well above the GEC MSR and the secondary market prices. Your genius fix for that is to have GEC expand production overseas? How does that help anything?

Spyderco has been used as an example. Spyderco makes some of their knives overseas and some in America and are highly successful. Has moving some of their production overseas made the Sprints or exclusives any easier to get? Hell no. We still see them flipped here and elsewhere for 3x MAP on a regular basis. Same thing goes for the recent Kershaw Sprints as well as the Buck of the Months. People like limited releases.

I think we'd see a similar thing if GEC moved some of their production overseas. Yea, there would be a lot more GEC branded knives on the market, but the American made GECs would still be in limited supply and hard to get. So what would be the point of GEC expanding? Just expanding for expansions sake? To put GECs in as many hands as humanly possible? What does it solve? If GEC was to release 2500 Indonesian made GECs at $50 and 250 American made GECs at $120, why do you think it would help the situation? What does it have to do with this thread?

You say expanding GECs production overseas would create revenue that would help them expand in the U.S.

And just how in the ever loving world do you know that? GEC made a name for itself by producing high quality, American made knives at a reasonable price. If you have some magical formula that would guarantee such a company would be profitable by expanding production overseas, please share. Heck, maybe you should do it yourself. Let us know how it goes.

What you're seeing is someone attempting to apply chapter two from his copy of "Baby's First Macroeconomics Textbook" to a company with a following based on very special attributes that he doesn't understand, like at all.

 

[TradTrapper]

What you're seeing is someone attempting to apply chapter two from his copy of "Baby's First Macroeconomics Textbook" to a company with a following based on very special attributes that he doesn't understand, like at all.

The economics 101 principals people are scratching their heads about is the whole “maximize your profits” and “supply and demand” piece. Why is GEC themselves leaving so much $ on the table? Why do they not raise prices to meet demand and if they don’t want the $ give it to the dealers who are sticking to the MSRP?

Maybe the GEC owner is a genius and he knows exactly what he’s doing. But for people who have studied economics or run their own business this behavior raises all sorts of questions (red flags or alarm bells might be a better description).

 

[EngrSorenson]

The economics 101 principals people are scratching their heads about is the whole “maximize your profits” and “supply and demand” piece. Why is GEC themselves leaving so much $ on the table? Why do they not raise prices to meet demand and if they don’t want the $ give it to the dealers who are sticking to the MSRP?

Maybe the GEC owner is a genius and he knows exactly what he’s doing. But for people who have studied economics or run their own business this behavior raises all sorts of questions (red flags or alarm bells might be a better description).

there are very few things that can sustain large price fluctuations- mostly things we require, like gasoline, food and other necessities.

I’ve been thinking about this; I wonder if popularity starts driving cost for a brand then the brand will suffer once the patronage ebbs.

Supply/demand conversation aside- folks will ultimately judge the value of a GEC on the intrinsic qualities of the knife- craftsmanship, blade steel, pattern choice, etc. Those things haven’t changed, so I could see price hikes based on “shortages” (i.e. opportunity) to be possibly irreversible and detrimental. I’d guess that’s why GEC hasn’t jacked up the cost at the source. Some people will pay $150 for a #15... but not everyone.

 

[Jiki]

Some people will pay $150 for a #15... but not everyone.

There was an OO one available at a dealer last night at a number I was unwilling to pay.

 

[Quiet]

The economics 101 principals people are scratching their heads about is the whole “maximize your profits” and “supply and demand” piece. Why is GEC themselves leaving so much $ on the table? Why do they not raise prices to meet demand and if they don’t want the $ give it to the dealers who are sticking to the MSRP?

Maybe the GEC owner is a genius and he knows exactly what he’s doing. But for people who have studied economics or run their own business this behavior raises all sorts of questions (red flags or alarm bells might be a better description).

Things like maximizing profits are always of utmost importance...usually if your company has shareholders to answer to. Many small companies exist where profit ISN'T the most important thing in the room (which is why textbook freshman year business class market knowledge fails in discussions like these). That's not to say that those owners don't want to make a profit. But for whatever situation specific reason, they have decided that their business continuing is more important than "Do ONLY the things that make you the most profit." Heh, for example, ask anyone you know who's a restaurant owner why they got into that business.

Anyway, GEC. Let's hit that bullet point list; I always love those.

• The owner isn't stupid. He's been in this industry for decades.
• His company sells nearly every single unit of product it can make, and has done so for years. (yes, yes except for the #97s and a couple of the #62s, and even those are finally drying up).
• His products are exceptionally difficult to acquire, causing high secondary market prices (that he knows full well he's not reaping any reward from).
• Secondary market prices do not deter the thousands of people looking to acquire those products.
• In fact, this company is garnering more and more fans every single day, despite the only readily available products being only available on secondary, where people ARE buying.
• The owner (and his employees) have been in this business for many, many years.
• The price they sell to their dealers at is allowing for a profit (probably the most important point).

So, Bill Howard is clearly not in this solely for the money, and yet, his business is selling everything it can make. There ARE avenues he could take to increase his production* but he doesn't. Hmmmm...wonder why:

• It's possible that high-level trained cutlers are difficult to come by.
• As has been explained many, many times in this thread, GEC knives are a slice of well-made Americana...made in America...by Americans who have been doing it for decades.
• You can't outsource (or "offshore", good Christ) tradition or authenticity. Sorry, you just can't.
• He's making a profit at his current unit cost.

All of this is an ultra fancy way of saying "So, believing GEC and its owner are not smart business people, or are doing things that "raise flags or alarm bells" is merely that person attempting to apply cookie cutter business principles to a company that exists very much in its own space and domain, by an owner who is determined to do things his way regardless of what those business principles say he should be doing instead. And remember, he's doing this in a way that instead of his customer base leaving, it actually continues to grow.

And finally, the last point I'll make in this coffee-fueled entire-too-long post is this: if you've spent any length of time on the Porch in any of the GEC threads, you'll have seen posts from Mike Latham, one of GEC's dealers, and either a friend, or friendly with Bill Howard (GEC's owner). Mike has posted many times about having made various suggestions for improvements to Bill, who has smiled said something along the lines of "I'll take it under advisement" and then just continues to do whatever he wants to do.

Do I hope that one day BH (or his son, or whoever takes up the reins after he retires) increases production in a way that keeps the product true to what fans (like myself and others) love about his brand? I sure do. But hey, if wishes were horses, we'd all ride.




* No, ooitzoo , sit down.

 

[Jiki]

 

[craytab]

None of the arguments for GEC expanding overseas make a lick of sense to me. Like at all.

Exactly. Talk about a moot point.

 

[EngrSorenson]

There was an OO one available at a dealer last night at a number I was unwilling to pay.

I think that says it all.

 

[spoonrobot]

The economics 101 principals people are scratching their heads about is the whole “maximize your profits” and “supply and demand” piece. Why is GEC themselves leaving so much $ on the table? Why do they not raise prices to meet demand and if they don’t want the $ give it to the dealers who are sticking to the MSRP?

Maybe the GEC owner is a genius and he knows exactly what he’s doing. But for people who have studied economics or run their own business this behavior raises all sorts of questions (red flags or alarm bells might be a better description).

Maximizing profit in the short-term can be the death of a company in the mid or long term. The thought that a company must maximize profits at the expense of all else is only a fairly recent idea that came about in the late 1970s/early 1980s from computers allowing increased interaction with the stock market by non-governmental entities and financial firms that exist to transfer material wealth created through manufacturing and service industries to the financial sector. The idea that a company produces a product and then allows it's dealers to set prices (really we mean raise, nobody cares if a dealer sells for low prices or has a sale - in a MAP/MSP free situation as we are discussing) as they see fit only becomes "weird" if looking at it from the viewpoint of post "the end of history." Until probably the early 2000s this concept was a no-brainer.

The manufacturer creates a product to sell to dealers who sell to the end user. If the end user has higher demand the dealer can raise their price, which allows the dealer to capture increased demand with the assumption that at times increased demand will flow back to the manufacturer - who is already satisfied that they are selling out their products to dealers. Is the customer the dealer or the end user? Who needs to be satisfied first and most for sales to grow at a stable rate?

It's obvious reading this thread that many end users are looking at things from the outside in and not understanding. Many run their business this way as well. This creates a general frustration as most times two people end up talking past each other.

Personally I think the true issue is not increased demand but increased "unreasonable demand" - people want everything for lowest price, right now today. It's what they've been trained for the past 10 years by Amazon/Walmart/eBay/etc.

When companies do not wish to follow this business model, there is a significant negative reaction. We see it with Spyderco sprints and exclusives and we see it with GECs and we see it with sneakers and all sorts of products. In the 90s if something was rare and hard to get often you just bought something else and that was it. Now, because everybody has a voice and behavior pattern set in stone, we see much more disaffection when companies are not able or willing to satisfy the demand point to a given end users preference. I don't believe this has much, if any, effect on what actually sells. IMO these sorts of threads and posts are more of an expansion valve that a indicator of buyers leaving the market for that specific good or brand.

 

[mrknife]

If it will deter the flippers and we are some how rewarded for shopping with that retailer, I'd go along with it. I missed out on a lot of the 15s from this run that I wanted only to see them being flipped or be used as trade bait to force other knives from other people. It happens here and on all the knife groups no matter what they claim. However, its so hard to get a knife despite signing up with several knife dealers that by the time the email is opened the knives are gone. If this is what must be done to deter flippers, let the chips fall where they may. Having not bought many gec knives last year because they didn't make much I cared for, I can see this being another year I don't buy much as well if they dont make anything I care for since the 15s are already gone.

 

[Jiki]

I think that says it all.

 

[TradTrapper]

Things like maximizing profits are always of utmost importance...usually if your company has shareholders to answer to. Many small companies exist where profit ISN'T the most important thing in the room (which is why textbook freshman year business class market knowledge fails in discussions like these). That's not to say that those owners don't want to make a profit. But for whatever situation specific reason, they have decided that their business continuing is more important than "Do ONLY the things that make you the most profit." Heh, for example, ask anyone you know who's a restaurant owner why they got into that business.

if you were aware of the graveyard of restaurants whose owners got into the business for reasons other than to make money you’d realize how bad of an example this is. Yes - some of those idealists succeed and become wildly successful. The vast majority fail badly.

All of this is an ultra fancy way of saying "So, believing GEC and its owner are not smart business people, or are doing things that "raise flags or alarm bells" is merely that person attempting to apply cookie cutter business principles to a company that exists very much in its own space and domain, by an owner who is determined to do things his way regardless of what those business principles say he should be doing instead. And remember, he's doing this in a way that instead of his customer base leaving, it actually continues to grow.

You keep insinuating people don’t understand basic economics ( "Baby's First Macroeconomics Textbook" and “freshman year business class”) and yet make straw-man arguments instead of basing your argument on the actual economic concept you just criticized people for not understanding. Btw, what you are describing is not Macro-economics, but Micro-economics.

I’m not making an argument one way or another about how GEC should run there business. Yes - he knows better how to run his business than I do. You might like how he runs his business, that has zero to do with him following a particular economic theory you keep critiquing others for not understanding. It’s exactly why so many people like discussing this. GEC is a black swan. It is the exact opposite of a company following these traditional economic theories.

 

[Quiet]

if you were aware of the graveyard of restaurants whose owners got into the business for reasons other than to make money you’d realize how bad of an example this is. Yes - some of those idealists succeed and become wildly successful. The vast majority fail badly.



You keep insinuating people don’t understand basic economics ( "Baby's First Macroeconomics Textbook" and “freshman year business class”) and yet make straw-man arguments instead of basing your argument on the actual economic concept you just criticized people for not understanding. Btw, what you are describing is not Macro-economics, but Micro-economics.

I’m not making an argument one way or another about how GEC should run there business. Yes - he knows better how to run his business than I do. You might like how he runs his business, that has zero to do with him following a particular economic theory you keep critiquing others for not understanding. It’s exactly why so many people like discussing this. GEC is a black swan. It is the exact opposite of a company following these traditional economic theories.

Actually, you're proving my point as to why I used restaurants as an example, so thanks for that. You literally explained my point for me:

Yes - some of those idealists succeed and become wildly successful.

Successful....hmmm... almost like how GEC is the only company of any decent size left whose entire product line is traditional pocket knives and who commands a loyal following, and whose products are so desirable, people pay two to three times their "actual" value on the secondary market. Huh. I bet Bear & Sons sure wishes they could make that claim. When's the last time you saw anyone paying $250-$400 for an old Buck 303 or the like? SMKW is making the sad face right now with their Chinese made Rough Riders that hardly anyone bothers to resell here on the Exchange because they know nobody wants 'em. GEC threads last what, five, ten minutes? LOL

So, obviously Bill is doing something right, wouldn't you agree? Despite not following what some of you believe they "should do"? I am not "insinuating", I'm stating flat out. There's a difference, though it doesn't surprise me that it escapes you, as little as you seem to know about GEC. It also seems to have escaped you why I respond in the fashion I have. You and everyone else are free to critique away, all it's doing is exactly what I've already stating: showing you have no idea what you're talking about. Macro versus Micro, I see elements of both in this discussion. They are an industry to themselves at this point, making a unique product you can't get anywhere else other than a small handful of custom makers. But hey, at least you've admitted what we've been saying: GEC is not doing things the "traditional" way, which is why suggestions that they should are wrong. Thanks!

Also, I would love (and I mean it sincerely) for you and a couple others to get a traditional pocket knife company going, so you guys can show us all how it's supposed to be done! Count me in for a first production model!

LOL

 

[TradTrapper]

I think we may be closer to saying the same thing than having any real difference.

GEC are doing things differently and for the vast majority of businesses this would be bad. But they seem to be pulling it off - hence my black swan label. The only reason I find GEC perplexing is because they claim to want to make traditional knives for the every man at an affordable price, however, their current business model is making them almost exclusively for collectors. Because of that, they are a fascinating company to watch and comment.

They make great knives. I wish them well. But it’s interesting.

 

[Pomsbz]

Perhaps it's possible that the current crazy situation is due to an overall increase in hobby spending due to Covid? Yes there are lots who are in big trouble due to the crisis (I've been out of work for a year myself, actually longer, I'd just set up a new business when the hammer struck and suddenly no organisations had budgets for consultations and services in my field) but there are also plenty who have not gone on expensive vacations or even trips to see the kids or grandkids. That gas money is still sitting in the account and there are many hobbies where the spending and as a result pricing, has simply gone ridiculous due to the boredom. Computers, photography, RV's, whatever.

Is it possible that Mr Howard is recognising this for what it is, a blip and is not going to change his entire business model just for the blip to end, for things to come back to normal and all that extra cash no longer being available due to being spent on 'catch up' for all the stuff currently unavailable due to the crisis? For example the moment flying returns to 'close to' normal there simply isn't going to be all this spare cash for collecting knives. We've got the kids to visit, we've only seen our new grandchild over Zoom and boy do we need a vacation after this year of horror!

Perhaps he's simply taking the long view, making sure that his business keeps ticking over, his employees are taken care of and isn't interesting in trying to leverage the crisis but rather weather it and come out as strong as he went in? I know it's not the 'business' way of doing things, Bezos would faint at the idea, but as a strategy it's far surer for someone running a very niche old world business whose main selling points are appreciated by a gradually diminishing sector?

Please note that although I've run a few (tiny) companies I don't know jack about business, all of the above makes sense to me as a not particularly ambitious small business owner but what would I know.

 

[TradTrapper]

I know it's not the 'business' way of doing things, Bezos would faint at the idea, but as a strategy it's far surer for someone running a very niche old world business whose main selling points are appreciated by a gradually diminishing sector?

This is probably correct. It might work out great for GEC. There are 2 groups of people commenting on this thread.

• Group 1 - how unusual Mr Howard is running his business based on current business norms and pointing out the risk to a company when such a significant % of their products are sold by flippers. It’s particularly interesting because a retailer is posting how little profit margin exists selling GECs (for both GEC and the authorized retailers) given their current pricing model. This has less to do with knives and more to do with the general way GEC is selling their products.
• Group 2 - telling people in Group 1 they are idiots for making these observations. And besides, I got a knife this drop and you didn’t!

None of this has to do with GEC making nice knives. Nobody disagrees about that.