View Full Version : Aftermarket Impact on Primary Market Sales


Les Robertson
08-18-2001, 08:41 AM
In the Bang for the Buck Thread, Ghostdog had questions about the aftermarket impact.

I thought I would answer that here as opposed to the BFB Thread.

Makers, by the nature of their sales are concerned almost soley with the primary market. The Primary Market is direct sales, either to a customer or a dealer.

Very few makers I know will take their own knives back in trade for a new one, most won't even consider taking another makers knife in trade. After all they only sell their knives.

So the aftermarket is the domain of the collector and dealers.

Dealers, are the "Masters" of this domain.

The aftermarket is important to knife makers for several reasons:

1) This is where collectors get their education as to what the real world of knives thinks about your work. You no longer are afforeded the luxury of having the collector's undivided attention in front of your table or on the phone.

The collector is holding your knife up for the world to see and saying: How much will you pay ME for this knife? It is at this very moment that the collector has asked to be edcuated.

What many find, especially the new collector is that they made a mistake. I know this to be true, as a collector I went through thousands of dollars worth of knives before I started to "GET IT".

2) The aftermarket, kicked into overdrive by the Internet and forums such as this. Provide today's collector with unlimited information, regarding all aspects of custom knives.

The days of Shows, Magazines and Catalogs (all which required, for the most part, money to get the information) has been supplemented with forums such as CKD.

3) Information on you as a maker, Good, Bad or Indifferent is now available for all to see. I have witnessed makers crushed by the information passed along the Internet. The good news is, most of these makers deserved it. Unfortunately, because too many of these forums allow access to them without the new member identifiying themselves. Makers can be bashed by these unknown assaliants without fear of retribution.

4) The aftermarket is where a maker can find out which knives are in demand in the aftermarket, which knives hold their value and which dont.

Obviously, this is very important. Because if your knives do not hold their value in the aftermarket, it will DIRECTLY AFFECT YOUR PRIMARY MARKET SALES.

Next time you have a couple of minutes, pick up a Knives 2001 and a Knives 1996 and look at how many names that appeared in the Knives 96 are no longer in the Knives 2001. Ever wonder what happeend to those makers?.

The other thing you should notice is how many more makers are now listed in that book in 2001 than were in 1996. Where did all these NEW makers come from.

Years ago I wrote a couple business plans for makers. Part of this process is Competitive Analysis. That is to say, I would figure out what the makers primary market(s) were. Then looking at styles, materials, sheaths, etc. Would look for his/her nearest competitors.

I would look first within the state. That would show the maker how close his nearest competitor is. This may be important if the maker attends large gun shows within a couple hundred miles of the house.

Then you would expand into a "tri-state" area and then finally nationally.

This model no longer exists. As with your potential customer base, your competitor base is now GLOBAL.

5 years ago, information travelled at a much slower pace. Collectors were tempted with fewer knives. Places to find knives for sale were also fewer. Consequenlty, the aftermarket had much less of an impact on custom knife makers.

Today that is not the case. In my book I tell collectors specific things to look for in the aftermarket. How to track trends and use this information.

People ask me all the time, how do you determine which makers you will work with. I answer them that performance in the aftermarket is a major part of my decision.

As part of my business plan, I will not buy knives in the primary market from makers who's knives do not hold their value in the aftermarket.

This is part of the reason I can offer the trade in policy of 100% of your purchase price towards a more expensive knife.

Ever ask yourself, How come Les is the only Custom Knife Dealer in the United States that offers that?

Are there makers out there who I would like to buy from but can't or don't? Yes. This has mostly to do with availability of that makers work.

For you makers out there reading this, I would urge you to give at least a glance every once in a while to the aftermarket and see how your knives are doing.

You may be pleasently surprised or you may get thousands of dollars in direct consumer marketing information for....FREE!

Either way it is a win/win situation for the maker. That way when the Knives 2006 comes out, people won't wonder why your name isn't in it.

Les Robertson
Custom Knife Entrepreneur
www.robertsoncustomcutlery.com

Roger Gregory
08-20-2001, 06:32 PM
Les

That was a very good post. The points that you and Jerry Fisk made in the other thread were good, this makes the whole position even more clear.

I am sure my knifemaking will never be in a state where your advice will matter a ####, but my collection will definitely benefit. Currently it doesn't contain a knife that cost me more than about $300. Most of them are probably worth 50% of what I paid, a few might be worth more. I've had offers on a couple, well in excess of what I paid, whether that's down to good judgement on my part or stupidity on the part of the potential purchaser I don't know.

As my purchase prices creep up and the potential aftermarket sales prices also increase I might even buy a copy of your booklet after all....

Roger

Les Robertson
08-20-2001, 08:33 PM
Hi Roger,

Wait until your collection gets bigger before you buy my book?????

Thats like saying you will wait until you are thirsty to dig the well!

The price of the knife has nothing to do with investment potential. If you have 10 knives at $300 apiece that is $3,000. Congratulations, you are now an investor.

I have bought several $300 and under knives most of which sold for more than what I paid for them. I found this happened quicker when I got tired of losing money on my knives.

When I was part of the Seminar at the Blade Show this past June. I asked people if they would buy a knife that would lose money. Several said yes. I asked them why?

Most responded "because I like the knife". I laughed and said you mean you couldn't find a knife you liked out there for the same money that actually had a chance of retaining it's value?

Why would you pay a maker for a knife knife that performs poorly in the aftermarket. If the maker doesn't care about your collection in the aftermarket, why should you care about their sales in the primary market?

Roger, you owe it to your customers and to yourself to pay attention to what happens in the aftermarket.

That is where you find out if your doing it right or not.

I used to have a book that I took to shows and would put makers on one side or the other. The one side had about 350 makers. All who thought they were doing it right.

I asked them seven quesitons. Depending on how they answered those questions deteremined on which side of the book they would go on. The side with the 350 names answered the questions incorrectly.

Their primary fault was that they misunderstood the realtionship between themselves and the customers.

They way they answered told me that they thought they were the most important part of the equation. They didn't understand that without customers, they were removed from the equation.

I was asked by the editor of one of the knife magazines to see the book. I laughed and said "why these guys don't make knives anymore".

Im glad Jerry's and my comments made sense to you.

Les

Tmac001
08-22-2001, 05:53 AM
Hello Les, I have few questions regarding aftermarket sales as relating to the collector. Before I get to that..... I have very much enjoyed your dissertations you have written here in the CKD Forum, I look forward to hearing more as well as receiving your book. Now onto my comments......

Now when you talk about knives selling on the aftermarket that retains their value, it seems like the knives should be new/mint/unused safe sitters. Now I know that there are exceptions and some makers stuff will still get high dollar if they look rode hard and put up wet. I am talking about knives in the $300-$600 range (the range I'm currently in). Now, for example, I'm in a collecting mode for tactical folders 3" or less, and ones that I will carry and use. Use not to dig in the dirt, but for everyday chores, indoor or out, but keep in a good clean condition after use.

Have I set myself up for a loss? As of now I don't see myself selling these knives, some still on order, mostly because I'm having them made just for my preferences, hence custom or customized custom (oxymoron?). But for the sake of discussion, I see a few potential problems for me, the collector if I were to sell these knives on the aftermarket. One, I purchase these knives to use but not abuse (unless the situation dictated). So, is there a used car theory to custom knives? As soon as you drive the new car off the lot is a percentage lost because the engine was revved and the oil changed, as a comparison. Two, I look quite a bit on the forums in the customs for sale sections and custom knives will sit, until the seller drops his price, and this almost always happens. The seller may be too eager to ditch the knife to get some money, who knows. But, I think the forums have developed the mentality that even though price maybe good, you can guarantee a price drop, regardless of demand, if you can wait. At least that's what I've observed lately. Third, is having a truly custom knife, a variation of the makers design. The makers I've ordered from and going to order from, the blade lengths will be 3"or under. For me this is so I can legally carry within the state I live. This helps me create my own personal collection to enjoy, but maybe a niche too small for the aftermarket to want.

I'd like to hear your comments. If I need to elaborate more or clarify my point please let me know.

Thanks,
Tom

JerryO13
08-22-2001, 10:34 AM
I can't speak for Les (nor would I try to :) ) yet I think that there is a used car theory to everything collectible, whether it's knives or Barbies. Once the wraping is off or you drive off the lot or you carry/cut with that knife there is going to be some loss in value. Can't be helped. What Les is saying (correct me here if it needs it) is that if the maker has a good aftermarket value the drop will not be as severe. Just as a Mercedes or Honda retain more of their value than a Ford or GM. In the same respect even if the knife is used hard it will keep more of it's value when/if resale becomes an issue. As time goes by those knifemakers that have survived/thrived their knives will become classics and pull in ridiculous amounts of money. They way any corvette is an instant classic (whether we like the body style or not) and the older ones call for prices way beyond their "actual" value. Same with Moran's and Loveless's.

Tmac001
08-22-2001, 10:54 AM
O.K. Jerry, that makes sense.

Thanks,
Tom

Les Robertson
08-22-2001, 01:52 PM
Tom,

As Jerry points out, the collectable market has certain rules and guidelines that if you want to maximize your investment, you should follow these.

Once you buy a custom knife does the value drop as soon as you "drive it off the show room floor"? No.

If you take your knife out and use it, will you devalue the knife? Yes.

Even the Corvette that was only driven to church on Sunday by the little old lady from Pasadena. Will not have the same value you as Corvette that was only driven home from the show room and then put into storage.

In the world of collectables there are factors that are part of the equation. With one carrying more weight than all the others.

First, there is Rarity

Second, Name Recognition

Third, Availability. This differs from Rarity in that, rarity tells you how many were made. Availability tells you how many can be bought at a particular time.

Example. 10 were made of a particluar knife. A the time you go looking for one, 4 of these 10 are available. Obviously, this is a buyers market. As you have 4 sellers to play against each other.

If only 1 is for sale, and it is common knowledge that 8 of the other 10 are locked up in collections never to see the light of day. Well, this is now a sellers market. If you want the knife, you will have to pay the price.

Most custom knives made today will not hold their value in the aftermarket. Why, because there are so many choices it is difficult to narrow down which makers collectors are going to want 5 years from now.

Many of the makers who were "Big Names" in the 80's and early 90's are no longer big names with todays collectors.

This is where you pay the price for not doing your homework in the aftermarket.

If you were paying attention, you would have divested yourself of these makers knives before they hit the very top of their value.

Many of these makers have developed a group of ardent followers for the primary market. The makers still enjoy the laurels of their years of creating a body of work.

However, what happens is that, they stop spending money on advertsing, they stop going to as many shows or shows all together. For several years after that they are still in demand.

Then one day, a new star is born! New collectors, not familiar with the former superstars (because they no longer advertise, go to shows or have a web site). Are now drawn to the new star.

The problem is not for the new star or the new collector or even the old star! The problem is for you the collector. As you are the one who is now holding the old star's work.

Their lack of keeping their name out there, has robbed you of the next generation of buyers for that makers work. Consequently, even though there is demand for the makers work in the primary market, there is a diminishing demand for that makers work in the after market.

So faithful collector, guess what, your knife is steadily declining in value. This is due directly to one thing.. both you and the maker did not pay attention to the aftermarket. The maker has failed you because they did not keep their name in front of the next generation of knife buying public.

However, it is not the makers fault your knives are worth less money now. It is your fault for not paying attention.

Its like investors who buy a stock and "fall in love with it". Even though they have set a sell point. They violate this, as they feel there will be a market correction, etc. and the stock will rebound. Even as they continue to watch the stock drop further.

I meet collectors at every show who waster their money buying knives that are overpriced and will not hold their value in the aftermarket.

I know, I know. most of you out there will keep your knives forever and never sell them. My question is to those who say that is, why would you buy a knife that you know will not hold its' value?

I know you fall in love with it and have to have it. But surely there is a knife out there with similar materials and design elements that will hold its value?

Now Rarity, Name Recognition and Availbility are all very important in the equation of a knife holding it's value.

However, the most important part of that equation and it weighs more heavily than all three is:

DEMAND.

Without this, the aftermarket is meerly a grave yard for people to dump knives they are no longer happy with, or to help fund their next project.

Do you know which knives you could buy today and sell tomorrow for a 10 - 200% return on your money? If not, why not?

Do you know which makers are the top three in each market segment and why? If not, your not doing your homework.

Which maker makes the best under $200 hunter in the world? Geno Denning

Which maker makes the best $300 hunter in the world?. Schuyler Lovestrand

Which maker makes the best $400 hunter in the world?. David Broadwell

Which maker makes the best $500 hunter in the world? George Herron

Which maker makes the best $600 hunter in the world? Jerry Fisk

Which maker makes the best $800 hunter in the world? Steve Johnson.

Which maker maker makes a hunter that isn't worth $250 but routinely gets $2,000 in the aftermarket for their knives? Bob Loveless. Why?

Now you can argue that others may fit into first place in these categories. Especially in the $200 -$400 range.

Now when I say the best, I don't just mean technically. That is only part of the equation.

I am also speaking of, Value, Desireability, Quality and of course.....DEMAND.

Now look at the type of knives you collect or want to collect.

Where do those makers rate in their repective categories?

As I stated before, most makers don't pay attention to the aftermarket, because that is not where they make their money.

However, this is where collectors do. So you need to take it upon yourself as a collector to track the aftermarket.

In the long run, this will afford you the opportunity to own some of the worlds best knives. At the same time, after you have decided to upgrade or change the direction of your collection. That knife you prized for years will help you buy your next treasure.

Les