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How does Gibson stay in business?!?!


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I don't know what Gibson's profit margins are.  But most companies are lucky to make 10%.  If Gibson cut their prices by 20% - 25%,  they would experience a Net Loss and would be back in bankruptcy.  As JVI noted, their alternative would be to try to produce more guitars  ( {sarcasm font enabled}  to offset their loss per unit by increasing production {sarcasm font disabled} ).   Assuming they are smart enough to be using their full capacity efficiently, the only way they could offset a 20% reduction in Cash Coming In  -  would be to reduce quality.  Cheaper Materials,  Labor, Etc.  by trying to produce 20% - 25% more guitars.   Believing Gibson can just tweak their 'modern equipment' to get it to crank out 25% more guitars is ...  well, like believing they can acquire 25% more aged tone wood at the same price.   Can you say  "sapele" ?    Option 2 is to a subset of  'reduce quality'  - move all production offshore.  Of course, that is why we have Epiphone as an alternative. 

Either way - if Gibson went out of business or reduced quality to offset a 20% - 25% reduction in revenues -  the 'value'  of the Gibsons we currently  posses would drop.  Probably by the same rate.   

So - if you want a  $4000 guitar for $3000 ...   buy a used one in "excellent' condition.    If you want a used $3000 guitar for $2400 -  buy  one in 'fair' condition.  And so it goes...

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Are Gibson's prices too high?  Yes. Have they always been too high?  Yes. But they make the best electric guitars you can get so you suck it up and do it.

When I see the prices of the new Gibson's here in the UK its ridiculous when you look at the poor finishing.  Bad nut and fret ends being the main parts.  When you look at comparison guitars like PRS,

Guitars are the cheapest of instruments. Generally, USA guitars are realistically priced IMO. They just look expensive compared to Asian ones which are not realistically priced. Those are way too chea

8 hours ago, Larsongs said:

I’ve been in the Real Estate business for 30+ years....

I stayed at a Holiday Inn Express and read a few posts on a guitar forum. See what you can learn here?

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Are Gibson's prices too high?  Yes.

Have they always been too high?  Yes.

But they make the best electric guitars you can get so you suck it up and do it.

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most companies make more than 10% as forty suggests,  they would go out of business if the margin was 10%,    and,  how have the high prices worked  for G in the last number of years ?  (sell a 3k git for 3 k not 4 k as it seems to be.   if asia can do it so can we. have a nice day ....

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this thread is amusing.

Gibson has been in bizz for over 100 years

I don't think they are going anywhere anytime soon.

Edited by kidblast
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53 minutes ago, kidblast said:

this thread is amusing.

Gibson has been in bizz for over 100 years

I don't think they are going anywhere anytime soon.

No they wont and look Guitar Center is still in business too.

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7 hours ago, jvi said:

most companies make more than 10% as forty suggests,  they would go out of business if the margin was 10%,    and,  how have the high prices worked  for G in the last number of years ?  (sell a 3k git for 3 k not 4 k as it seems to be.   if asia can do it so can we. have a nice day ....

First company I looked at - General Motors.   In their past 36 quarterly reports only ONCE was their net margin above 10%.  Average was around 5% and that one quarter was only 10.15%.     Margin is after taxes.  Asia can do it because they pay their workers  $.50 an hour  and we pay them $20.  Asia can do it because they don't have all the laws regarding safety, environment, etc. we do.   

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5 hours ago, fortyearspickn said:

First company I looked at - General Motors.   In their past 36 quarterly reports only ONCE was their net margin above 10%.  Average was around 5% and that one quarter was only 10.15%.     Margin is after taxes.  Asia can do it because they pay their workers  $.50 an hour  and we pay them $20.  Asia can do it because they don't have all the laws regarding safety, environment, etc. we do.   

Key word being “Net”....

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11 hours ago, fortyearspickn said:

First company I looked at - General Motors.   In their past 36 quarterly reports only ONCE was their net margin above 10%.  Average was around 5% and that one quarter was only 10.15%.     Margin is after taxes.  Asia can do it because they pay their workers  $.50 an hour  and we pay them $20.  Asia can do it because they don't have all the laws regarding safety, environment, etc. we do.   

so asia can do something we cant ? bs-  all Im saying is gibson could sell base models like j 45s for less, make a profit and sell more. the car companies have needed repeated  bail outs and are getting in trouble because cars and trucks are over priced too. Corporations are for profit not for people, thats fine,  but I wont pretend they are there to make me or you happy. I can like a  guitar without corp-love for the company. Im NOT saying there is anything wrong with Gibson...have a nice day and stay "tuned",,,

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7 hours ago, Larsongs said:

Key word being “Net”....

Yep.  Basically means  'cash left over... aka PROFIT'.   There are other "measures' sometimes used:  GROSS margin, - which is your revenue less the cost of materials and labor that directly went into producing your product, and  Earnings Before Interest and Taxes -  which is your Gross Margin less your General/Administrative Costs except Interest and Taxes.   They measure different things - but Net Profit is how much you have left over after ALL your operating costs/expenses are taken into account.  Net Margin/Profit is how much you can put into the bank - so you can save to buy new equipment, etc.   If you have  no 'Net Margin' - you will soon fall behind in not being able to repair, renovate and replace your Plant & Equipment.  And then, one day, you will have to shut down.   

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16 hours ago, SteveFord said:

I'm going to have to swing by a GC this Summer.

Last time I was in one it was mostly empty shelves.

I was in the one in North Myrtle this last weekend. 3 Martins (two were 000-15's and one was a cutaway, not sure of the model) in the whole store, and 0.0 Gibson's in the acoustic room. I got new set of the hydration packs so I don't have to mess with the water and sponge things and a peg winder for a drill or cordless screwdriver to wind the strings.

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1 hour ago, jvi said:

... bs-  all Im saying is gibson could sell base models like j 45s for less, make a profit and sell more ...

IF  they can sell J45s for less and have  $ left over for a profit ...      you must know how much it costs Gibson to make J45s.

Care to share?   

While you're at it -   you must know how much Gibson sells them for?   What do they actually get paid from Guitar Center?   You know, before GC marks up that Wholesale price to get to their Retail price of $2749?     

 

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14 minutes ago, fortyearspickn said:

IF  they can sell J45s for less and have  $ left over for a profit ...      you must know how much it costs Gibson to make J45s.

Care to share?   

While you're at it -   you must know how much Gibson sells them for?   What do they actually get paid from Guitar Center?   You know, before GC marks up that Wholesale price to get to their Retail price of $2749?     

 

Im just saying that  pricing at the right point increases sales and a LOT of product is OVER PRICED. Easy credit fuels this rise in cost and we just go along and end up supporting off shore companies The chain of profit dosnt help either. Again, if a j 45 was less expensive myself and others would buy more of them .Is a house in Victoria worth 1.2 million NO ...but people pay. 

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27 minutes ago, fortyearspickn said:

IF  they can sell J45s for less and have  $ left over for a profit ...      you must know how much it costs Gibson to make J45s.

Care to share?   

While you're at it -   you must know how much Gibson sells them for?   What do they actually get paid from Guitar Center?   You know, before GC marks up that Wholesale price to get to their Retail price of $2749?     

 

Do you have any idea what’s involved & how long it takes to build a high quality Acoustic Guitar? Then there’s the Materials, Labor Cost & other Overhead costs.... There are many YouTube Factory Tours that go through the process.. Well worth watching..

I’m pretty sure Gibson still establishes the MSRP & MAP Pricing.

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3 hours ago, jvi said:

so asia can do something we cant ? bs

As stated above, they have:

1.  Lower minimum wage

2.  Different laws regarding safety, environment, etc. 

Little known fact: The smog in China is so bad, they have considered temporary driving bans.  Can you imagine that happening here? 

original.jpg

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6 minutes ago, ghost_of_fl said:

As stated above, they have:

1.  Lower minimum wage

2.  Different laws regarding safety, environment, etc. 

Little known fact: The smog in China is so bad, they have considered temporary driving bans.  Can you imagine that happening here? 

original.jpg

Im not saying we could match the price just lower ours. 

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2 hours ago, Larsongs said:

Do you have any idea what’s involved & how long it takes to build a high quality Acoustic Guitar? Then there’s the Materials, Labor Cost & other Overhead costs.... There are many YouTube Factory Tours that go through the process.. Well worth watching..

I’m pretty sure Gibson still establishes the MSRP & MAP Pricing.

Yeah. I've seen the videos.    What's your point ?   

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40 minutes ago, jvi said:

Im not saying we could match the price just lower ours. 

Ever use c-rap from China its junk. I never have or never will own a guitar that doesn't say made in USA.

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5 hours ago, fortyearspickn said:

Yeah. I've seen the videos.    What's your point ?   

The numerous Man hours involved + Materials + Overhead + Profit is the point... How much do you think a high quality Instrument capable of playing & sounding beautiful that is also capable of lasting 100 years or maybe more should cost? 

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3 hours ago, ghost_of_fl said:

As stated above, they have:

1.  Lower minimum wage

2.  Different laws regarding safety, environment, etc. 

Little known fact: The smog in China is so bad, they have considered temporary driving bans.  Can you imagine that happening here? 

original.jpg

No wonder they cant drive.  How can you see where your going in that?  

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7 hours ago, Larsongs said:

The numerous Man hours involved + Materials + Overhead + Profit is the point... How much do you think a high quality Instrument capable of playing & sounding beautiful that is also capable of lasting 100 years or maybe more should cost? 

I think you're confused.   I'm the one arguing that Gibson should NOT be expected to lower their prices.   

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5 hours ago, fortyearspickn said:

I think you're confused.   I'm the one arguing that Gibson should NOT be expected to lower their prices.   

My apologies friend.. I guess I misunderstood or mistook you for someone else...  The guy who thinks USA Gibsons should be cheaper  ..

Edited by Larsongs
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As someone who has had a fair few Chinese/Asian guitars I can attest that its not all about labour rates. 

The very cheapest guitars (£130 for a Jaxville starter kit) have hardware so cheap its not fit for function. I bought one at the local tip for £15 (I got it for the body). 

You couldn't even change the strings. Because they drilled the holes in the trem block undersize. Why? Because that way they could make the trem block a bit thinner. 

I plugged it in and the cable just fell straight out again. Why? Because the metal they used for the output jack didnt 'spring back' into place like proper steel. 

The 'copper' pickup wire is pink. How much copper is in that alloy?

Its a sure bet all the hardware is made from recycled soda cans. That much is well known. They do work, but that alloy was not designed to be guitar parts. So it wont last as long a hardware made from alloys chosen by the draftsman that designed the original hardware.

Guitars this cheap are not made to be guitars. They are made to be sold.

Most Chinese guitars are much better than this, but this example shows how bad they can be down at the really sh1tty end of the market. 

So yes, let all embrace some of these affordable methods of production at incorporate them in Gibsons shall we? 

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