Originally Posted by
bjoerges
Many LBS's can't help but gouge, as you put it, on price. For most products in a lot of industries, the retailer's cost of a product is close (if not exactly) half of it's MSRP. There are a few things where there is a bigger markup (and those tend to be on high volume necessities). So for example, you are coming in to buy a tool that the MSRP is $30 and the retailer has it marked $30. They paid a distributor ~$15 each for 5 of them to sell. An online merchant buys 500 of them directly from the manufacturer for $9 each then mark it $14.95 on their website. The LBS can't price match down to $14.95 because they lose money on paper even before factoring business costs like rent, wages, utilities, credit card processing... A very good retail business has a 10% profit margin, meaning 50% of sales is direct costs, 40% of sales is overhead, and 10% goes to profit.
If such a business were to sell you the tool that has a bottom line cost of $27 for $15, that means they lose $12. They have to sell the remaining 4 at full retail price just to break even on the 5 tools that they had in the first place.
Our shop runs into this issue slightly with some odd-ball items like Clif Bars. The best price we can get is about $0.80/each and then we sell them at $1.39. A half-mile down the road there is a Trader Joe's that has them for $0.89/each!
Yup, the music instrument industry is about the same. If you cut MSRP in half then you can figure out the dealer's cost. Of course, the more you buy the better your dealer cost is. I figured this was what was going on with tools at the LBS. Music stores at least have the protection of minimum advertised price meaning that no one can advertise a price lower than the minimum no matter what their cost is. We used to try to talk the owner into discounting accessories at least a little bit because we knew that there were people who came in that would buy almost everything off the internet.