Selling to dealers?

[jdlange]

Howdy all,

I recently sold a couple of my pieces to a dealer who has a shop and travels the shows. I am thinking that this is a good thing in that it will get my work and my name in front of other people. Any thoughts, should I continue to do this?

[george tichbour]

If you can afford to, why not?

It takes a lot longer to build a name without help but the profits are higher when you sell direct.

[cactusforge]

When you don't have name recognition use every way you can to get your name out there. I have a dealer that can out sell all others when he gets going in a TRUCK STOP. ####### like knives and don't have time to get to shows. I sell more knives through this dealer than all others combined. I set a list price and then give the dealer a 35% discount this is figured into my cost so I don't lose money. This dealer sells for a little over cost make no mistake this man knows what he is doing, if there were more like him we would all be better off.

Sales are hard to come by, I have been at this for 12 years and used a lot of different dealers some good most BAD. I can't get to a lot of shows so need to use every means available.

Gib

[jdlange]

For me right now this is a part time thing, I have a full time job and make my knives at night and on the weekends so I don't turn out the kind of inventory that I know a lot of people on this board can with some of them being full time. I do however want to get my name out there, that makes this being a full time thing for a possibility in the future. Up until now I have stuck to selling pieces on ebay and to individuals which has worked for me to a degree, a number of the pieces I have sold have come back to give me orders for custom pieces which is what has kept me going. This dealer bought a piece from me through an auction and then asked if I had anything else and bought the rest of what I had available, I kept the prices low and figure that if he sells them in his store or at a show then that is helping me get my name around a bit (he also asked for a short bio to distribute with my knives), also that way if I have inventory in the future and he is able to sell my work I would always have a buyer to a certain degree. Is this line of thinking correct?

[Les Robertson]

JL,

You have made an excellent choice. Utilizing a dealer network will help your sales.

Many knife makers are confused as to what dealers can offer. Although the opinon of dealers has been changing for the better for the last several years.

I think the makers are starting to do a little math. The top 10 dealers easily buy and sell over $5,000,000.00 every year.

That being said, when a person presents himself as a dealer, many use the term custom knife dealer. When in fact they are not.

If, as many "custom" knife dealers do, sell factory knives. This makers them a knife dealer. Nothing more, nothing less.

Those who sell factory and custom, generally sell less expensive custom knives. It is almost impossible to know everything about custom knives. So selling both custom and factory, limits your knowledge even more.

Additionally, ask them what they are going to do to earn the % you give them. Just putting the knives on a web site will only do you good if you don't have a web site. When a dealer tells you they attend shows. Ask them if that means do the set up at the show.

As showing your knives without a table at the show is called "Brown Bagging". If your dealer is caught doing this, they will be asked to leave the show.

Working with dealers can be an excellent way to increase both your sales and your presence in the custom knife market.

Gib,

You give 35% and the dealer thinks they need to sell your knives for more than retail?

Long term this will hurt your sales. A question for the dealer is....Does he take your knives back in trade (if they are in mint condition) and give their customers what they paid in trade towards a more expensive knife?

If he doesn't do this, he is sending the signal to his customers, he doesn't think your knives are worth the money. As such he doesn't trade.

The truth is, since he sold the knife for over it's retail price, he doesn't want them back, as he will be into them for too much. After all he can make 40-45% off the new ones he is getting you.

Long term this can effect (in a negative way) peoples perception of your knives in the aftermarket. After all if the dealer who sold the knife, doesn't believe in the knife enough to take it back in trade, then why should the customer buy one.

Dealers and makers have to work together to form a marketing and sales strategy to benefit both.

If you work with a dealer long enough, they will become associated with you and your knives. Consequently, collectors will, in many cases, go to the dealer first. Mostly to avoide the wait from the maker.

The good news is, as the dealer sells the knife to this client, they are ordering another one. In many case, each knife you sell to a dealer results in two sales.

If you have had bad experience with makers in the past, it was probably due to lack of communication.

From my perspective I can tell you that I have worked with knifemakers that were a nightmare. So it goes both ways.

Gib, Im glad you did find a dealer to work with. It is essential that makers put together a "team" and a dealer can be an integral part of that team.

[dogman]

Just stay away from that Robertson character

[jdlange]

hahaha!!

[cactusforge]

Les, The reason for the 35% discount is that it is for a couple of knives, if I give a 50% discount the price gets too high and if I use
list price then I don't make much profit. If a dealer will bye a quantity of pieces I use a 50% discount. My dealer in the truck stop I consign to, he sells several thousand dollars worth of knives a year and yes he is one of a kind. The other byes twice a year at a 50% discount or better, I am getting ready to ship about 14 0r 15 pieces to him. Both of these dealers will trade my knives for others if thy are in mint condition.
The bad experiences I have had with Dealers has not been from lack of lack of communication. I sold a quantity of pieces this summer to a Gift Shop/Trading Post owner in southern California ( he owns 4 of them) He got these at better than a 50% discount and ordered 5 more, when thy were done he would not take them, this left me holding the bag for $875.
I have used A.G.Russell Cutting Edge in the past with good results but then thy stoped selling them.
I prefer to sell most of my production through dealers for several reasons, if any are interested check out the web site and contact me.
Gib

[jdlange]

My plan is: Make what I like, let the dealer see it, if they want to buy it great I will sell it to them, if not I can sell it elsewhere. I don't think I really have enough time to produce enough to sell to dealers on a large scale anyway, if I was asked to make a quantity of a type of knife by someone who purchased from me before I might consider that though. That way I'm not putting myself in debt with materials and taking the chance on the deal not going through. Sound like a plan?

[george tichbour]

Let's examine the economics selling through dealers.

Assume your retail price is $100 each, the out of pocket cost is $30 each and the dealer discount is 40%.

If you sell 10 knives to the dealer which will retail at $1000 you recieve $600, spend $300 on materials, and end up with $300 in your pocket.

If you sell half that amount (5 knives) directly you recieve $500 and spend $150 for materials and end up with $350 in your pocket. The same return for half the work.

Extend this to 10 knives and you have $700 in your pocket which will buy two 1/6th page advertisements in a magazine with your name and phone number on them and about $100 left over.

[Les Robertson]

George,

First, your assumption is that you will sell all 10 knives.

Selling the knives on your own for full retail.....maybe.

Selling to a dealer...guaranteed.

Second, you are not taking into account the time value of money.

If you can sell 10 knives at one time to one person. You have your money back, plus some profit immediately upon completion of the knives.

This leaves you more money to buy materails, perhaps at a lowered price because you can now afford to buy in bulk.

What about paying off interest early on credit cards or loans that you have taken to help your business.

What if you work with a dealer who runs a 1/3 of a page ad as opposed to a 1/6th of a page ad who features your knife or mentions your name.

Afterall, isn't this part of what you give the discount for.

George, what about attending shows. How much would it cost you to attend a show in the US. Especially, in Canadian dollars.

How much of that 40% profit would you spend attending a show like the New York Custom Knife Show (since it's the closet major show to you ). It would probably cost you close to $2,000 CDN to attend this show.

How many knives do you have to sell in order to make enough profit to just break even?

How much would it cost you to ship 10 knives to a dealer attending that show?

Lets say a dealer sets up at 8-10 shows a year (most of them major shows). The maker again takes 10 of your knives to these shows. How much would your show expenses be compared to shipping knives to this dealer?

That is a lot of exposure and your knives being put into the hands of collectors.

Time value of money George!

George, back to your "advertisement" spending.

What about dealers who routinely get interviewed in knife publications? If your a maker who gets your name mentioned in a "Best value in knives" type article. How much is that worth?

Geno Denning told me he specifically got 3 orders within the first week from my comments about his work in the recent Blade Magazine.

How much did this cost him? $0.00.

How much does this dealer get from those sales? $0.00

How much of the profit is Geno's? 100%

I suspect he will get more orders as will others mentioned by myself and the other dealers interviewed in this article.

Time value of money George.

What about dealers who conduct seminars?

Bob Neal and I do a seminar at the Blade Show each year. Yes, people ask us for recommendations on which knives to buy.

Bob and I, as well as other dealers. Have sent numerous customers to makers. Who then purchased knives directly from those makers.

How much did this cost the maker? $0.00.

How much does this dealer get from those sales? $0.00

How much of the profit is maker's profit? 100%

Time value of money George.

In addition to The Blade Show I have been invited to the BACKA Show next year to do a seminar for collectors there as well.

What about dealers who do exclusive series? Take the Vanguard series for instance. 90% of the Vanguard knives in current production have been featured in at least 1 knife magazine.

The LDC series, 100% of the knives were in at least 2 magazines.

Actual cost of exposure (according to the magazines) well over $15,000.00

Advertising Cost to the Maker? $0.00

Time value of money George.

Since you brought up material George.

What if the dealer paid for all the material cost, all the shipping, the auto cad work, all the advertising and bought every knife produced

Yes, I have done this for the majority of the Vanguard knives.

George, I will grant you that most dealers have not taken the business aspect of custom knives to this level.

Time value of money is one of the most overlooked aspects of business. Not just among custom knife makers, but most self-employed people.

Example, you make $35.00 hour shop time. However, you haggle with the teenager who wants $15.00 to mow your yard which takes an hour.

That kid just doesn't appreciate money, back in my day you got $5 to mow a lawn. So you show him. You mow it yourself.

Congratulations, you just lost $20.

I knew a knife maker who spent 2 1/2 months (the whole summer) repairing equimpent. I aked him how much it would have cost him to buy new equpiment, he said "almost" $6,000.

Now this is a maker who routinely got $1,000+ for his knives. He could have gotten a loan for $6,000. Built 15 knives in that time frame. Taken the profit, paid back the bank and had all new equipment.

Instead, he produced no knives (hence no money), had to go into savings to pay bills (since he was making no knives) and at the end of the day....he had nothing more than re-built equpiment that would eventually break again.

Sadly, he is no longer making knives.

Next, George do you give a 40% discount? The reason I ask is that most of the makers I work with are closer to 25%. Some give no discount at all.

If you are giving 40% then you really need to insure that your dealers are working very hard for you.

None of this I attend shows, but don't set up because I have an Internet Site crap.

From a purely business perspective, discounts should be given on the amount of exposure a dealer can give you.

If you have a web site and they have a web site. Your not going to get much extra exposure. Why, because people looking for one of your knives will do a search for your name.

If they find your name and a dealer with your work on their site. They will got to your site first. Thereby negating any added benefit that the dealer's site might give you. The exception...the dealer may have knives for immediate availablitiy or an exclusive.

Obviously, if they advertise that is a benefit. Doing shows is even a bigger benefit.

Being self-employed myself and in the custom knife business. I can appreciate what new makes or makers trying to go full time are going through.

Remember, it's your money. So before you give that discount, pre-qualify the dealers. Find out what working with them can do for your business.

For some you may find George's point of view will work for you. For others, maybe less of a discount and one ad.

Right now there are more quality knife makers in the market place than I have seen in the last 18 years. Competition is getting fierce. Sales at shows are slowing down (for several reasons).

For many knife sales are slowing down.

For others knife sales are at an all time high?

If you don't know why this is happening, your buisness could be in trouble.

[cactusforge]

Les, In your ansure to me you indicated that I was not giving a large enough discount. In you're ansure to George you indicated that you normally get a 25% discount from your dealers which is less discount than I stat with. WHAT GIVES. Gib

[Les Robertson]

Hi Gib,

I wasn't implying you werent giving a big enough discount.

I was saying that for the discount you were giving the dealer should not have been selling over your retail.

Working on the margins I do, makes me very selective about which knives I will carry.

One well known dealer currently has 180+ makers on his site. When I heard that the first thought that came in to my mind was, I'll bet he can't list every maker he "represents".

The point to all of my replies is:

Yes, you should work with dealers.

Yes, you should pre-qualify these dealers (as in what are you going to do to earn your discount).

Lastly, try and form a partnership that will benefit both the maker and the dealer.