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  #1  
Old 11-17-2003, 07:20 AM
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Question Makers how do you feel about dealers openly undercutting your prices?

Currently, there are several Internet "custom" knife dealers who are openly selling below the makers retail price.

Note, every single one of these "custom" dealers also sells factory knives.

From previous threads I got the impression that some makers don't care, as long as they sell some knives.

So my first question to the maker is this: Do you care if your knives are sold below your retail price?

Note: This is not done quietly with a good customer, etc. This is done out in the open for the world (literally) to see.

Next question: How do you think this will affect your aftermarket sales?

Last question: If you think this is a problem, how would you remedy this situation?


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  #2  
Old 11-17-2003, 07:55 AM
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This is all part of the game. I have seen this happen before and I think that it usually happens for a couple of reasons. The dealer bought too many of this makers knives and is in over his head, or the knives were not up to the quality that the dealer was expecting and lowers the prices to move them out. Either way the dealer is flooding the market with this makers knives at a lower price which drives the makers retail sale prices lower. I know a dealer that bought 14 knives from one maker. He was an unedcuated new dealer and did not know what he was buying and is now stuck with them. The same maker sold 12 knives to a dealer at the blade show before the show started and just had a note on his table saying sold out. He was in it for the short money!

I do care about this issue. I would rather sell 1 knife at a show for full retail than 3 at a 30% discount to a dealer. Although the dealer probally does more shows than I do and more people could see my knife and get more exposure, if he undercuts my prices it does not help me.


I think that this does affect aftermarket sales. A customer could do some research on the web and find the dealer selling these knives at lowered prices. If he contacts the maker and wants to order a knife the price he is going to be quoted will be more than it was through the dealer, how does the maker justify the difference? Aren't dealers supposed to be more expensive? They have to make a profit too!

It might be tough to remedy this situation. Some dealers want to move knives so they constantly have new inventory, and it is hard to "sit" on a knife that you have some money invested in. They don't have the patience to wait for the right buyer. If this was the case I would not sell to this dealer again.


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  #3  
Old 11-17-2003, 01:14 PM
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I dont sell but heres a thought:
Customer buys knife from maker,he gets short on cash,customer sell's said knife to dealer for fast cash at 50% or more below makers price,dealer has option to sell knife greatly below makers price.

Another thought: dealer selling hot good's. LOL. Not very funny is it?:confused:


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  #4  
Old 11-17-2003, 02:37 PM
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Hi Paul,

It does happen that dealers occasionally get some good deals on custom knives. Especially, if they buy an entire collection.

More times than not, when I do buy a custom knife from a client it is at the price I would pay the maker. However, if I were to buy a knife at 50% off and it was a maker I worked with on a regular basis. I would list the knife at the makers retail price. Not to make an extra 10%, but because of our working relationship.

If a dealer and maker are in a professional relationship. The last thing either wants to do is to devalue the makers work. As the maker works in the aftermarket, he would feel the "crunch" first.


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  #5  
Old 11-17-2003, 02:59 PM
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Hi Striper,

First, a business relationship should not be a "game". Custom knife makers should take the business aspect of their knives as serious as they do making the knives.

Regarding the maker selling 14 knives to the "uneducated" new dealer. This knife maker is as uneducated as the new dealer.

That maker should have known what was eventually going to happen. This is the problem with many in business...not just the knife business.

You trade a short term gain for a long term loss.

This maker sells 14 knives to a new dealer. Knowing full well that this new dealer will probably not be able to sell all these in a timely manner. Ultimately, he will discount the knives and blow them out. This does not help the dealer or the maker. Both end up losing.

I know I check out other dealers sites. If I see they are selling below the makers retail I make a note of that. If I go back 60 days later and see that dealer still selling a makers knife at a discounted price. I add that maker to my "do not buy" list.

If they don't care enough about their knives in the aftermarket to stop the dealer from undercutting their prices. That means that eventually, the dealers price will become the makers "retail" price. Again, this is a lose/lose situation. A maker can only stay in business for so long with his prices going down.

Regarding dealers being more expensive. That was 10 years ago. While working on my MBA, I discovered several aspects of sound business that could be applied to custom knives.

Prior to my change in business strategy dealers were always expected to haggle. You would raise the price of the knife by $50 so you could come down $50. Giving the customer the impression they got a deal. In fact they paid what you wanted them to.

What I suggested to the makers I worked with was a standard discount with a guarantee that I would order X amount of knives over the course of a year.

Additionally, I would never sell below their retail price.

It took some buyers a while to get used to my policies. However, eventually they understood that I did not haggle on the price. That 90%+ of the knives I sell are listed at the makers price and that I would not sell below the makers price.

This is not to say I still do not on occasion get customers who ask if I can "do better" and I say "no". They tell me "I had to ask" I respond "I know".

Striper I agree with you that selling to a dealer who would undercut your price is not a sound business practice. The fact that you wrote that you would not do business with that dealer again shows us that you are taking your business and the long term value of your knives seriously.


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  #6  
Old 11-17-2003, 07:35 PM
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Hmmmmm...... Good question.

All of this is sound judgement, and it DOES make sense. Thanks guys, for the responses. No, I don't have any degree in business to qualify an educated answer, but I have an observation. Can I play the Devil's Advocate? (again? )

Who else, other than a presumably educated dealer who sees on a VERY regular basis what is selling and for how much, is better off determining the resale value of a maker's work? In many past threads you have alluded to the education that a dealer will acquire by handling and working with his/her inventory and learning collectors buying habits.

There IS a maybe, that this maker's work is, and has been, overpriced by himself, and simply is clogging up the inventory of the said dealers. The dealer's first priority is to attempt to make a profit on a makers work at his asking value. If, the maker's work doesn't move (and if it is still discounted at your 60-day watch period without selling... then that's a tipoff ), then the dealer's responsibility to HIS business and his livelyhood is to move old inventory to make way for fresh stock. This is nothing new in marketing, or at least sales.

I realize that it is NOT the way RCC operates and that is an acclaim to your very successful business. I don't have answers but there might be an legitimate explanation from others. I only pose this as 'what if?'.

Best,

Coop


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Old 11-17-2003, 08:05 PM
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Thumbs up

Hi Les,
I would like to thank you and Coop and the others for giveing me some insite on the market end of this very rewarding hobby/bussines and I'm not just blowing smoke to be nice, I love to learn what I can about all the aspects of this hobby/bussines.
As you could tell from my earlyer post I am not very learned on the biz side and have a very long way to go on the makeing side.But it's so much fun learning.

Thanks again everyone I'll keep reading and you all please keep teaching and informing,It is very valuable this site, may CKD and its owners and moderators Keep it going for a very long time.


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  #8  
Old 11-18-2003, 08:05 AM
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Hi Coop,

First, you don't need a business degree to give an educated answer. I ran my knife business (never at a loss) for the first 8 years without any kind of business degree.

My point may have been missed. My MBA allowed me to apply accepted business principles to my knife business. Again, all of these principles are nothing more than theory. If they weren't 60% of all new business' started in the US would not fold in 3 years or less.

You are also correct about a business needing to make a profit. So the question is why would an "educated" dealer who supposedly has their finger on the pulse of the custom market. Buy a knife that has potential to end up on the sale page. Continually marked down until it finally sells.

From a purely business point of view (especialy in today's economy). It would be a much better business plan to keep your business as fluid as possible.

A business model that would encourage putting your money into a product(s) that may or may not sell in a timely manner. If not, then sell them at a discounted price (decreasing your Return on Investment). Tying up your capital to where you may miss an opportunity to purchase something better. Seems to me at best confusing.

I think this business model would both harm the makers work in the aftermarket. While at the same time bring into question the dealers "expertise" in the custom knife market.

As stated earlier most "custom" knife dealers who follow this model also sell factory knives. Selling factory knives in fact contributes to their business model.

Factory knives are purchased for 50 -65% off of retail. As such it is common practice to undercut the factories suggested retail price. In fact this is the sales strategy for factories. They find a profitable price for their knives. Double that price and give a 50 - 65% discount.

The factories have satisfied your first requirement Coop. They have made a proft. Now regardless of what their dealers sell them for, they make money.

Of course no one in their right mind pays retail for a factory knife.

How does this translate to custom knives? Well actually it doesn't in any way that will benefit a custom maker long term.

You brought up an excellent point that dealers should be able to recognize a knife that is overpriced for it's market.

I have come across a lot of makers who were overcharging for their knives. Sometimes the quality was there. However, they did not occupy a postion in that market that would allow them to get the money they wanted...on a regular basis.

I would recommend they lower their price to be more competitive. Most would bristle at the request. At that point I ask them if they would like to sell 10 or 100.

Selling the knife at an inflated price is counter-productive. You see this same concept at knife shows. The knife on many a makers table is significantly less on Sunday then it was on Friday. If he had priced them that way on Friday he would probably be sold out and have taken some orders.

If he starts to do this on a regular basis , no one buys knives from him on Friday anymore...just wait till Sunday.

So it goes with dealers who discount knives. Why pay full price, just wait and there may be a good chance you can get the knife you want....for less money.

This especially appeals to those coming over from the factory side of the house. As they are not used to paying retail for a knife.

Point is, if you know the knife is too expensive to begin with. Than lower the price. This will allow you to sell more. Obviously you will make more profit off a knife that you sell 100 of than a knife you only sell 10 of...even at a reduced price.

You will receive the additional benefit of your knives having a better chance of holding their value and desireablity in the aftermarket.

Ok Coop now it's back to you. Im going to play the devils advocate

If you were a custom knife maker. What incentive would you have to do business with a dealer who because of their lack of expertise (which is why they have a sale page) will ultimate put your knives for sale on their world wide web site at below your retail price.

Next how you would you answer your customers who want to know why they paid full price for the knife from you?

As a savy knife buyer you know that if you are patient you can get some great deals.

So as those who got the knife at below retail start to sell these knives. You know they can sell them at under retail and get their money back. Even at 25% off they may only be losing 10%. This loss is more than acceptable for most custom knife buyers.

So as a maker how do you counter this. That is to say, what will you do to show your customers that they should pay full price for you knives.

Even though the very dealer the maker has chose on work with doesnt belive in the makers knives. As well as the collector who is now offering your knives at 25% (or more) below your retail price.

Coop you know that collectors more so today than at any other time, due to the Internet. Can, if the choose, track makers and knives they are interested in.

Over the past two years one trend I have noticed is that collectors have become more interested in a makers value in the aftermarket.

This was due in large part to many people selling their custom knives for any number of reasons. Only to be lucky to get 50% of their money back.

For many, they are now buying knives again. This time they are buying with a little keener eye.

As such, they will avoid the "bargain basement" makers. Additionally, dealers (educated or not) will avoid these makers. Even if the contributed to the makers decline. Ultimately, the maker is looking for a new outlet for their creative talents.

Profit is important to a business. However, how long does a maker work with a dealer who is causing consistent and daily damage to their reputation and their position in the market. By selling their knives at below retail?

After all, isn't one of the reasons a maker works with a dealer to increase their exposure and improve their position in the market? Isn't selling at below retail counter-productive to that?


:evil


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  #9  
Old 11-18-2003, 10:21 AM
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I think that this is a great thread. I have no problem haggling with a customer on a friday or saturday, either way it's still a sale! If you wait till sunday your going to discount the knife anyways! This way if you sell the knife on friday or saturday the customer can show it around to his friends that he is at the show with or other dealers and it might bring you more sales that day. It is also good Public Relations, word-of-mouth sometimes can go a long way. A happy customer is a repeat customer. It's one thing if I undercut my prices, I can do that, I know how much time and $$$ I have invested in each knife. It's another thing if someone does it for me!


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Old 11-18-2003, 12:25 PM
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Not trying to break off on a tangent, but since show prices have been mentioned. I recently attended my first show. priced my work at what I felt were fair prices. All weekend I was told I wasn't charging enough for my work. It was pointed out that this table and that table had sold x amount if knives at considerably higher prices. My show was fair at best and I took a few orders, but still wasn't what I hoped it would be. Quality wasn't the issue according to the ones offering opinions. Would this be the mentality that if it costs more it's got to be better. Could it be a lack of exposure? Any comments would be greatly appreciated.

Thanks in advance,
Lee


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Old 11-18-2003, 05:44 PM
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Hi Lee,

While you didn't say it, I suspect those telling you to raise your prices were knife makers. As few if any custom knife buyers would tell you that your prices are too low....they would just buy the knife.

Knife makers do not buy knives. Additionally, they are your competitors so be careful of their advice.

Of those who sold X amount of knives. Were they the same type and style of yours? Comparable materials and craftsmenship?

If your selling hunters you can't compare your show with those selling tactical folders. It's apples to oranges.

If they were selling simiar knives. What is their position in that market? How long have they been making knives? How long have they been attending that show?

Where did you advertise you were going to be at this show? Did you send customers in the area an invitation. Did you list this show on your web site?

Shows have slowed over the last two years due to numerous reasons. The economy excuse has been beat to death. Even in a good economy those who are not selling shows blame the economy.

Did you check with other table holders from previous years as to what was selling. Did you talk with customers who have attended this show. Did you talk with the show promoter.

You would be amazed at the number of makers who just show up at a show and expect to sell knives.


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Old 11-18-2003, 06:48 PM
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Les,
Thanks for the reply. Once again you hit the nail on the head in many ways. I wanted this first show to be more educational than anything, and well, thats exactly what it turned out to be. I can't complain though as I was able to pay for my room and table. Got lots of homework to do before I do another one. BTW, the comparison was the hunters, but every order I took was for tactical stuff.

Thanks again,
Lee


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Old 11-19-2003, 08:56 AM
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Hi Lee,

First, if you covered your expenses at your first show, you are way ahead.

The next question is. When you say you paid for your table and room. Was that money from your total sales or from the profit from the sales of those two knives.

You would be amazed at how many table holders do not understand the difference.

Remember to keep all your receipts and note the milage on your vehicle. All of this is tax deductable. If you don't have a business #######, you should get one ASAP.

Second, hunters are a difficult category to sell in. Most new makers have better luck selling the $75 -$95 range. That is a knife with no bolster or guard, usually micarta handle. Just a good, clean using knife.

Generally it will take years to get a hunter to the point that it will sell routinely for $200. Few makers can get $300 routinely for a hunter.

So be honest with your position in this market and charge a fair (maybe even a more than fair) price

It's interesting that you were selling tactical knives. I have makers, writers and editors ask me all the time if the tactical market is slowing down.

I laugh every time I get asked that question. Sorry guys, the tactical market is not slowing down. Well let me add a caveat to that.

If your were a second tier maker building tactical knives 3 years ago...yes your business has slowed.

However, if you were on the A list, your as busy as you want to be.

At that New York Custom Knife show a couple weeks ago I sold 18 knives. Eight were hunters and 10 were tactical knives (ranging in price from $300 - $1100).

I traded for two tactical knives at that show. Those sold in less than 24 hours when I put them on my site.

Lee, you didn't say. Was it fellow knife makers that were telling you that your knives were too "Cheap"?

As in working with dealers, shows require work on your part as well.


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Old 11-19-2003, 12:27 PM
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Hi again Les,
Answers to the questions, I have a DBA, and the opinons were from other makers. It may be a bad business practice, but I figured the orders in as part of paying for my show as these were knives I probably wouldn't have sold otherwise. Can't seem to slow down long enough to get my web site going in earnest. It's there but hasn't been touched in several months. I'm learning that making a good knife is just the start of this custom knife making thing.

Thanks for your time,
Lee

BTW pm sent


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