How much does it cost Gibson to make a Les Paul?

[rokker2010]

I heard its costs about $600 to make a brand new Reissue Gibson Les Paul that sells for around $6000. If this is true thats a huge profit margin. No wonder people are buying those fake Les Pauls from China.

[Tim Plains]

I bet it's less. That profit isn't all Gibson's. Dealers make well over $2,000 on an R9.

[Versatile]

Interesting question....I often wonder about profit margins etc. Gibson are a mass producer with economy of scale, some of their guitars are lowish profit margin and obviously their elite and signature ranges attempt higher profit. Some dealers will lower their margin to clear guitar stock. Compare to a one-off or small production run from a single luthier who is producing top quality hand built instruments often competitive in price to the 'big boys'.

[pete c]

when i worked at a gun manufacturer i wanted a certain rifle, my employee cost was 1,200. then i found out it only cost them around 200 per rifle to make. didn't buy it after i found that out.

[Rocky4]

It makes you wonder when you see Squier Strats selling for $119. I realize there's more labor and materials costs, but just how much?

[cdntac]

I figure I could probably make a really decent LP for about $500.

 

But that would be the second one made.

 

The first one, what with the CNC machines, the building, etc, would probably cost me about $35 million.

 

Granted I'm not a businessman, but I suppose I'd have to factor in the cost of making that first one into subsequent guitars and that might make their cost a little higher. ;)

[badbluesplayer]

I heard its costs about $600 to make a brand new Reissue Gibson Les Paul that sells for around $6000. If this is true thats a huge profit margin. No wonder people are buying those fake Les Pauls from China.

 

Depends on what you include in "costs". Six hundred dollars might be the cost of the materials and straight payroll (I doubt it). But there are other "costs". The cost to pay the utilities, the cost to pay the mortgage, the cost of advertising, the costs for everything else that a guitar company has to do to run their business, including paying everybody's benefits and paying the big shots to run the show.

 

I'll bet that the real profit margin at Gibson is more like five percent, not one thousand percent.

[Artie Owl]

If you want to be really disgusted by gross profit margins you should look up "xbox live digital content" or Facebook's "farmville" and see how much money they make a year for literally providing nothing but digital code. Absolutely no overhead for manufacturing, materials or labour.

[LarryUK]

Forget Gibson.

Look at the banks.

[Bowdiddley]

If you want to be really disgusted by gross profit margins you should look up "xbox live digital content" or Facebook's "farmville" and see how much money they make a year for literally providing nothing but digital code. Absolutely no overhead for manufacturing, materials or labour.

 

Why would anyone be disgusted by a profit margin? Isn't that why they are in business? I know in my business I attempt to make the highest profit margin possible and I see nothing wrong with that.

[BigKahune]

It doesn't maker how much it costs to make any product.

 

It's what people are willing to pay that drives the prices.

 

If people won't spend $3.5K to $5K on a LP Custom, the price will eventually come down.

 

If people won't spend $1.8K to $2.5K on an LP STD, the price will eventually come down.

 

But so far, people are payin', even in this economy.

[MojoRedFoot]

Depends on what you include in "costs". Six hundred dollars might be the cost of the materials and straight payroll (I doubt it). But there are other "costs". The cost to pay the utilities, the cost to pay the mortgage, the cost of advertising, the costs for everything else that a guitar company has to do to run their business, including paying everybody's benefits and paying the big shots to run the show.

 

I'll bet that the real profit margin at Gibson is more like five percent, not one thousand percent.

Don't forget about the players endorsed by the company. I'm sure some famous recording artists are given guitars. Who do you think pays for those? It all rolls into the cost per unit. I'm sure the companies don't eat those costs.

[cookieman15061]

My brother managed a GC and he said give or take a few percentage points his cost was basically 50 percent of what it listed for.

 

That was about 5 years ago so I don't know how much the current economics may have changed that.

[Artie Owl]

Why would anyone be disgusted by a profit margin? Isn't that why they are in business? I know in my business I attempt to make the highest profit margin possible and I see nothing wrong with that.

 

Oh we all do, I'm just mad I didn't get in on it first :P

[Bowdiddley]

Oh we all do, I'm just mad I didn't get in on it first :P

 

Well you won't be first but it loooks like its on the way up for now.

 

http://www.advfn.com/quote_Sony-CP-Adr_NYSE_SNE.html

[sparky scott 29]

Just like everything else sold. Overpriced, everybody's got to make their buck all the way down the pipe!!

But, we still but this stuff though.

[Riffster]

$600 to manufacture a reissue? that is crazy talk. That must be a figure isolated of fixed costs and other costs.

 

A local retailer told me the mark up on Fender products is 40%, I would assume about the same for Gibson.

 

It is nuts that the manufacturer charges 60% of the final price for their "Art" and the retailers get 40% for hiring imbecils ~GC..cough~ to bother you while you browse in their stores.

 

Frankly I do not think Gibsons are overpriced, they are priced as a product made in America just like any other COMPARABLE guitar MIA be it Gretsch or PRS, etc.

 

What happens is that as a society we are spoiled with Chinese made stuff and their sweat shop labor costs and disregard for the environment. Which is by the way unsustainable long term. Chinese laborers are already demanding higher wages, what happens next? a $2,000 Chinese guitar? nah they'll move production to the cheapest bidder. Just like Epiphone moved from Korea to China when Korea got expensive.

 

Think about it, we are (America) a society that pride ourselves in quality and well being of employees that produce that quality but we do not want to pay the price for it anymore.

[MojoRedFoot]

Think about it, we are (America) a society that pride ourselves in quality and well being of employees that produce that quality but we do not want to pay the price for it anymore.

True but I'll never buy another American brand car again. That's just me. But I don't see myself ever buying anything but MIA Fender. And I'm sure I'll buy another Gibson or 2. but they will most likely be used.

 

And you really can't knock the Japanese or Korean stuff. If you do, you're just stubborn in my book.

 

Chinese: crap. Indonesian: crap.

 

This is rehashing everything has been said hundreds of times in this forum. Yes, it's worth it to pay more for great quality but how much more? $4k for an LP "custom?" I say "nay." Not for something that's not truely a "custom." I could buy a true custom one of a kind Jackson, ESP, Fender, McNaught, etc. for $4k. I'd pay $2000 max for a used LP Custom in good condition. It can be done.

[KL]

I heard its costs about $600 to make a brand new Reissue Gibson Les Paul that sells for around $6000. If this is true thats a huge profit margin. No wonder people are buying those fake Les Pauls from China.

 

Any business has to pay for it's overheads: premises, raw materials, employees, electricity, lighting, tools, equipment, marketing, advertising etc. Then the middleman (the dealers) have to cover all the same kind of expenses, and make a profit so that they can afford to keep trading as well as make money.

 

EVERY single item you buy is subject to all this and you can't expect a business to survive without making a decent profit.

 

If you buy a Chinese Les Paul you get inferior quality, cheap parts, cheap labour, a product that doesn't sound or play as well and will not last. It won't stand up to the rigors and demands of a professional musician. You get what you pay for . . . it's your call.

 

It would be possible to manufacture Gibsons in China using the same raw materials and parts and you could make exactly the same guitar cheaper. Would you want that? Or would you prefer the American economy to prosper and for American citizens to remain employed? (I don't live in the USA by the way).

 

How much did it cost to make the last pizza you paid $10 for? Maybe 50 cents?

[Riffster]

True but I'll never buy another American brand car again. That's just me. But I don't see myself ever buying anything but MIA Fender. And I'm sure I'll buy another Gibson or 2. but they will most likely be used.

 

And you really can't knock the Japanese or Korean stuff. If you do, you're just stubborn in my book.

 

Chinese: crap. Indonesian: crap.

 

 

I am not knocking that stuff, I own several import guitars including Korea, Indonesia and China and all are great price, simply good guitars but that is what makes me spoiled, we can get a good import guitar for $500 and then don't understand why a Gibson has to cost more when there is a very good reason.

 

Your car is it really built overseas? some non-American brands are made right here in the US.

 

I am looking into buying a Smith & Wesson revolver but I am not going to complain about the price. Know what I mean?

 

All I am saying is that we are (in general) spoiled by cheap imports including myself.

[rokker2010]

Well i heard that Gibson actually does have a plant in China, and they make the Les Pauls there and then "assemble" them here in USA. Not sure if that's true or not.

[Riffster]

That's the second mental dump you take today.

 

Whatever man...you are right everything is Chinese even the stuff that is not.

[mrktwn]

$600 to manufacture a reissue? that is crazy talk. That must be a figure isolated of fixed costs and other costs.

 

A local retailer told me the mark up on Fender products is 40%, I would assume about the same for Gibson.

 

It is nuts that the manufacturer charges 60% of the final price for their "Art" and the retailers get 40% for hiring imbecils ~GC..cough~ to bother you while you browse in their stores.

 

Frankly I do not think Gibsons are overpriced, they are priced as a product made in America just like any other COMPARABLE guitar MIA be it Gretsch or PRS, etc.

 

What happens is that as a society we are spoiled with Chinese made stuff and their sweat shop labor costs and disregard for the environment. Which is by the way unsustainable long term. Chinese laborers are already demanding higher wages, what happens next? a $2,000 Chinese guitar? nah they'll move production to the cheapest bidder. Just like Epiphone moved from Korea to China when Korea got expensive.

 

Think about it, we are (America) a society that pride ourselves in quality and well being of employees that produce that quality but we do not want to pay the price for it anymore.

I've seen that expensive Chinese guitar. Is it Eastwood I think? Kinda arch-toppy semi hollow/hollow jazz box like things.

I wonder if the profit margin on everything not Gibson (Epiphone, Baldwin etc.) is really where they make the money. 5,000.00 dollar

Custom Shop guitars are keeping the company afloat? I find that hard to believe.

[MojoRedFoot]

 

Your car is it really built overseas? some non-American brands are made right here in the US.

 

I said American BRAND not MADE. My Honda was built in Ohio. It's the Japanese engineering that I am a fan of. I had a Ford. It was crap. I had an Oldsmobile. It was crap. My Honda: Awesome. I'm definitely buying another after this car.

 

I too am spoiled but the Korean and Jap made guitars. But the Japanese strive for perfection in like everything. It is the way of the samurai. All about honor.

 

To the point of the thread, other companies make great stuff in the USA and sells for a hell of a lot less than Gibson. I am willing to pay more for excellence but they have yet to deliver it IMO. I paid a lot for "good enough" Gibson and slightly less for excellence from Ibanez. I'm just saying there is some serious slack to make up for. And robot technology is not how to do it. Fix your current process before creating a new one. Just my $.02

[MojoRedFoot]

That's the second mental dump you take today.

 

Whatever man...you are right everything is Chinese even the stuff that is not.

"mental dump" made me laugh out loud.

 

I have never heard of Gibsons being only assembled in USA form parts made in China. That would be a waste of money and time.