Consigning guitars seems to be a new craze among guitar salons and dealers. But who really benefits when you consign your guitars? Certainly not you the guitar maker. The guitar salon or dealer that’s who.
New builders might be enticed into consigning guitars to dealers in order to get them into whatever shop for the press and free advertising. Nothing is free and if the dealer did not pay for your instrument he or she is certainly not going to advertise it. They have no investment in it.
New builders think its going to give them credibility. It won’t. If this is your plan will need to be extremely lucky to sell a guitar. Luck is not a good business model. Consigning guitars will probably postpone your paycheck for quite some time. I don’t know about you, but I like to get paid when the job is done.
Guitarists Face a Similar Problem
When I was playing guitar regularly I did gigs at restaurants, gallery openings, wine tastings, parties, fundraisers, and weddings. It was always amazing to me how many of these people would ask me to play for tips. After all many other musicians did. Usually not very good ones.
A restaurant owner in Mendocino once asked me if I would play for tips,. So I said, “I am having a party next weekend. Would you cater it”. “Sure”, he responded. I said, “ok, would you do it for tips”? He then went on telling me that this was his business and he has been doing this for 30 years and so on and so on. I replied, “I’m in the same boat. This is my business, and I have been doing this for 30 some odd years. Why would I do this for free or with the odd chance of maybe making a few bucks”?
Consigning Guitars Screws it up for Everyone
Just like the restaurant owner, once a dealer gets a few people to give them guitars on consignment it is difficult for them not to demand this from everyone they represent. After all its a win-win business model for them, but a lose-lose for you. Don’t forget this is a business when you strip away all the bullshit. And what a better business model if you don’t have to pay for your inventory until you sell it? Art galleries pull the same crap. I used to sell my furniture in art galleries. Galleries are famous for using furniture on consignment to decorate their shops to help sell low ticket stuff. If everyone stopped consigning guitars. Dealers would be forced to pay for them.
Here are a few more reasons why this is a terrible way to do business:
Accepting Future Money for Past Work – You are not a Bank
Ask any business man if he will defer payment for work that has been done. The only way this works is if you will be guaranteed interest compounded over time on the payment when it comes. After all. it is a loan. And that’s how loans work. And that is how it should be viewed.
Two years from now when your guitar is sold the money you receive is actually worth less than it was when you completed the guitar. Depending on the economic climate that could be a substantial amount. Most luthiers are not making so much money than they can’t spend it all, so any money saved is money earned.
The Dealer has Absolutely No Incentive to Sell your Guitar
Do you honestly think the dealer is going to try and move your guitar quickly if he hasn’t paid for it. No, he is going to put real effort into selling any guitar he has paid for before he even thinks about selling yours. These guitars are pushed first because they are on the dealers inventory.
A dealer once told me that he had been hammered with taxes at the end of the year once because he had so many guitars in his inventory. This forced him to change his business model so he no longer buys guitars outright. So in effect he is asking luthiers to assume a terrible business model and work without being paid, rather than learning how to manage his own business better. This should not be your problem.
You are Assuming all the Risk
What if something happens? Say the guitar is damaged by a customer, stolen or develops cracks because it was not properly stored? Unless you have insurance, which you will be paying for, you are now faced with a repair. And you can be sure the dealer is not going to want to pay you what the repair is really worth, or he will have his own crack repair team do it. In which case the guitar may be compromised further. In any case it will be off the market for a longer period making your eventual payment worth even less. Your profit margin for the guitar is even lower than it was before and you still haven’t gotten paid.
The Dealers Shop is Full – Yours is Empty
Say someone comes into your shop and says, “hey, do you have any guitars available”? If your consigned guitar is the only finished guitar you have its going to cost you to get it back from the dealer. But the more important question is will this guy wait a few days until I can get it back? Probably not.
And if you have a bunch of finished guitars in your shop and you have one on consignment you should probably look for another line of work because your guitars are not selling and there is probably a good reason for that.
Dealer is Lowering Overhead at Your Expense
The dealer has decorated his shop with a bunch of shiny new guitars that he has paid noting for. Regardless of how well you think you know your dealer, or how nice a guy you think he is, he is in business to make money. And one way to increase profits is to lower expenses. And he has done that by not paying you. how good a friend does he or she feel like now?
I’ve been making guitars for over twenty years now. I stopped consigning guitars almost twenty years ago after a bad experience with a dealer. Dealers can be good, and there are a few good ones out there. And sadly every year there are less and less. Remember, if the guy really believes you have a good instrument he should be willing to pay for it. Otherwise find somewhere else that will.
If you are consigning a guitar please don’t. It screws up business for all luthiers. If a dealer is worthwhile, they can certainly afford to buy your guitar. There are other ways to sell your guitars. Stay tuned and find out more.
Thanks for the advice. As a luthier relatively new to the business I have been advised to get a foot in the door with dealer guitar shops by providing guitars on consignment. Once the guitars sell, and some legitimacy is established, the possibility of a new business arrangement can be explored. What is a typical consignment percentage by guitar shops? What is their take on your retail price? Do they reserve the right to change the price on your guitar? More importantly, how is a wholesale arrangement structured — in the event that I can find a shop to purchase my guitars outright? Many thanks.
Sorry this took so long. I am going through restructuring here and its taking all my time.
Getting your foot in the door is important, however consignment is not the way to get the best results. I have heard more builders say the same thing only to be bitterly disappointed a year or two later and end up taking the guitar back. If a dealer believes your instrument to be good enough to sell he should prove it to you by purchasing it. Only then will he have the motivation to sell it.
This is why it is so important to honestly evaluate and price your guitar. So many builders want to get 10K or more for a guitar to be perceived as best in class so they hang it with this price without earning it first. You may sell one eventually but it will take a good while but you may loose some weight waiting. Many of the guitars out there with huge price stickers are just mediocre high priced instruments
Since I don’t sell through dealers any longer, and its been quite a while, I’m not sure what the percentages are anymore. But when I did the dealer took 25%. If a dealer changes your price without asking, you take the guitar back. You don’t know what his motivation is for doing that. He may be lowering the price just to make a quick buck, or he may want to make room for a guitar he has purchased that will make him more money. If he sells the guitar for x amount of dollars lower than your price, then that is what customers will expect the price to be. So in effect he has lowered your asking price as well.
The way it is done , at least my experience, is very informal. The dealer gives you 25% less than your price up front and that is that. The down side to having the dealer purchase the guitar is that he can lower the price if it doesn’t sell and you cannot do anything about it. So only sell a dealer a traditional guitar made from the traditional woods typically used as those guitars take longer to sell and the dealer will be more likely to lower the price if it doesn’t sell for a good while.
Great blog John.
It never ceases to amaze me, how many times this philosophy needs reinforcement.
I prepped a document on this subject, but for a totally different IT industry, many years back when I was responsible for training and technical support. It seems to be human nature to attempt to acquire training/education FOC by various and sometimes nefarious methods. Answering questions on your support pages sometimes fits this example.
Those that succumb all want to be seen as a ‘real nice guy’ 🙂