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Obama gun boom ends: Background checks fall from record-breaking 2016


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#21 ONLINE   Flesh Wound

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Posted Jan. 10 2018 - 04:06 PM

Yup. Buy on the dips.




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#22 OFFLINE   gmor

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Posted Jan. 10 2018 - 09:34 PM

Because for the past 8 years they have been charging more than they really needed to.
 
I like to use the Ruger LCP as my example. 3 years ago they dropped the price on them overnight by $100. Was it that they suddenly discovered a way to make them for $100 less? No. It was that they had been charging what the market would bear since they started making them. People were willing to spend $300 on a pocket gun and that was what was being offered by everyone.
 
Ruger dropped their price by $100 and redefined pricing on the entire category. Manufacturers either followed suit or quit the category.
 
Everyone seems to think that firearms manufacturers operate on the same razor thin profit margins that dealers work with and that is categorically false. Manufacturers operate at a much higher profit margin than dealers. They set the prices at what the market will bear. In boom times they can set them high, in bust times they can set them lower and still be making money.
 
And we have to remember that the "Obama Boom" was for the most part confined to "Assault rifles". Sales have slowed on them since 2016 without question but they only made up a small fraction of the guns that were being purchased during that time. Sales on concealable handguns dominated the sales then and continue to dominate the sales now. Sales for those categories remain strong. 
 
And we are still selling most of the categories which weren't the targets of the antigunners at rates consistent with those before and during the boom. All of the gun control talk and potential legislation never targeted over/under shotguns for instance.

It is still hard for me to understand how any money was made by selling me a Remington RM380 for $99?

Edited by gmor, Jan. 11 2018 - 12:33 PM.



#23 OFFLINE   Pepper

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Posted Jan. 11 2018 - 04:30 AM

It is still hard for me to understand how any money was made by selling me Remington RM380 for $99?

Maybe because it only cost them $60 to produce? Profit is profit. If they can sell 10,000 of them with say, $40 profit each, would they rather do that than sell 1000 of them with a profit of $70? My number is a guess, but they're not going to sell them for a loss. They're making money on every sale. If they can sell more, then they make more. Profit is profit, whether it's 15% or 150%. As long as everyone is making money, why get in the way of it? It may not be $100 a gun profit, but that's not what has to happen to make a business grow.

 

Machined parts and molded plastics are dead cheap to make, and only take semi-skilled labor to assemble. There's no hand fitting, every part is interchangeable. Even if the slide is forged, it's still cheap to do on such a small part. It's probably investment cast steel, making it dirt cheap to manufacture. Most of the internals are probably either stamped parts, or MIM, or plastic, all of which are dirt cheap methods. Most guns cost very little to manufacture. The real cost is in the initial engineering and bringing it to market initially. After that, it's just mass production. Some higher order QC, but beyond that? Dead simple, and cheap. 

 

Other industries do it too. My son busted a marker light on his car. Through the dealer, the Chinese made light housing was $140. I ordered the same Chinese made light housing for $9 online. It's an injection molded part glued together. Actual cost to make the thing is probably less than $1 to the factory in China, with almost all of it being automated and they can churn out those lights by the tens of thousands per day. How can they make money? Economy of scale, and the actual cost for making their product is dirt cheap, even if the finished product is a beautiful, reliable doo-dad. Profit is profit.




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#24 OFFLINE   gmor

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Posted Jan. 11 2018 - 12:31 PM

Maybe because it only cost them $60 to produce? Profit is profit. If they can sell 10,000 of them with say, $40 profit each, would they rather do that than sell 1000 of them with a profit of $70? My number is a guess, but they're not going to sell them for a loss. They're making money on every sale. If they can sell more, then they make more. Profit is profit, whether it's 15% or 150%. As long as everyone is making money, why get in the way of it? It may not be $100 a gun profit, but that's not what has to happen to make a business grow.
 
Machined parts and molded plastics are dead cheap to make, and only take semi-skilled labor to assemble. There's no hand fitting, every part is interchangeable. Even if the slide is forged, it's still cheap to do on such a small part. It's probably investment cast steel, making it dirt cheap to manufacture. Most of the internals are probably either stamped parts, or MIM, or plastic, all of which are dirt cheap methods. Most guns cost very little to manufacture. The real cost is in the initial engineering and bringing it to market initially. After that, it's just mass production. Some higher order QC, but beyond that? Dead simple, and cheap. 
 
Other industries do it too. My son busted a marker light on his car. Through the dealer, the Chinese made light housing was $140. I ordered the same Chinese made light housing for $9 online. It's an injection molded part glued together. Actual cost to make the thing is probably less than $1 to the factory in China, with almost all of it being automated and they can churn out those lights by the tens of thousands per day. How can they make money? Economy of scale, and the actual cost for making their product is dirt cheap, even if the finished product is a beautiful, reliable doo-dad. Profit is profit.

But then there needs to be profit for the manufacturer, distributor and merchant. If they all can eek out some profit from my $99 all that I can say is that I am more than a little impressed with their efficiency! American made too!

Edited by gmor, Jan. 11 2018 - 12:32 PM.



#25 ONLINE   MontanaLon

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Posted Jan. 11 2018 - 01:06 PM

But then there needs to be profit for the manufacturer, distributor and merchant. If they all can eek out some profit from my $99 all that I can say is that I am more than a little impressed with their efficiency! American made too!

In that particular case and the R51, and the RP9 in particular, Remington is probably losing money on these and will likely exit the category. Sales on the items were soft. Really soft.

 

After the disastrous launch of the R51 and then the $100 price cut to the LCP by Ruger right after the RM380 came out, the release of the Hi Point look alike RP9 was expected to be a complete failure and it was. In a way it is kind of showing what happens when you put non "gun people" in charge of gun companies. It may seem like the thing to do, make a compact 380, or a polymer 9 and you should make money because everyone else is. 

 

The R51 was actually a good pistol beset by manufacturing difficulties on the first release. Likely the people putting them together knew they were crap and the higher ups decided they needed to launch anyway because they had so much money tied up in it. 

 

Even then I bet they are not losing much and are likely still making bank on all of their other items. 




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#26 OFFLINE   TomJefferson

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Posted Jan. 11 2018 - 01:52 PM

But then there needs to be profit for the manufacturer, distributor and merchant. If they all can eek out some profit from my $99 all that I can say is that I am more than a little impressed with their efficiency! American made too!

It had a $100 rebate which means everyone down the line made their usual margin. 

 

Now I'm not going to be able to teach you business accounting on the internet but the basics are cost is material (the actual cost of the components to make the gun), labor (the actual cost dollars per hours this many hours to make the gun), and overhead (your plant, utilities, staff, or basic shared resources).  Now keep in mind, higher the volume on something, the lower the cost to manufacture because you enjoy certain economies.  For example in high volume parts, one man can operate three automated screw machines.  The same applies to a plastic mold machine and molds not only can be hopper fed plastic but have have multiple mold cavities. 

 

Look at that little gun then and determine what the material cost is?  For simplicity and btw could be, assume all the components were outsourced, for example barrel from a machine shop, plastic from a molder, etc.  You don't have to be exact.  Now take a guess at how much they pay their people to assemble the gun and package it and how many minutes per gun? 

 

Now here's where it gets radical.  Its called incremental sales.  If you are already making a profit as a company,  then your overhead is being absorbed so anything above material and labor goes straight to the bottom line.

 

Inventory is a financial handicap as its valued by the IRS and adds to tax burden.  To a company reducing inventory is like giving to a charity for us.  If you are already making money as a company then any inventory reduction that then reduces tax burden goes straight to the bottom line.

 

What a company is judged on, all companies, is the bottom line.  Its really not how much they make on every part. 

 

The ability then to do incremental sales is by its nature then a window in time.  Last I heard the gun manufacturers are all making money these days.  That means anything they made over their material and labor cost would be profit.  Now if I took a guess they aren't out there making these guns to feed current demand and when they're gone, they'll be gone and the rebate will end.  That's just a guess but it is customary on retail products.  

 

That sale wasn't about the retail store or distributor making more money or less even.  It was about Remington.  That's who's doing the rebate. If they are making money as a company even if their material and labor cost was $99 and all they saw was a reduction in inventory, it would add to the bottom line in the form of profit.  

 

This btw is what other countries do to us which we call dumping.  Dumping isn't selling at a loss.  Its selling less then they sell in their own countries and incremental sales.  Its a way to move inventory, reduce tax burden, move obsolete product that indeed if you did hang on to it would be a 100% loss, and thus increase profit margin not on the by part but company level.  

 

One of the first things that I noticed visiting China is, damn, does the average Joe Chinese have nice TVs.   :D:

 

Now you know why Tj was a VP in a Fortune 500 company. 

 

Tj 




#27 OFFLINE   gmor

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Posted Jan. 11 2018 - 11:54 PM

In that particular case and the R51, and the RP9 in particular, Remington is probably losing money on these and will likely exit the category. Sales on the items were soft. Really soft.
 
After the disastrous launch of the R51 and then the $100 price cut to the LCP by Ruger right after the RM380 came out, the release of the Hi Point look alike RP9 was expected to be a complete failure and it was. In a way it is kind of showing what happens when you put non "gun people" in charge of gun companies. It may seem like the thing to do, make a compact 380, or a polymer 9 and you should make money because everyone else is. 
 
The R51 was actually a good pistol beset by manufacturing difficulties on the first release. Likely the people putting them together knew they were crap and the higher ups decided they needed to launch anyway because they had so much money tied up in it. 
 
Even then I bet they are not losing much and are likely still making bank on all of their other items. 

I think you are correct about Remington exiting the handgun market. They started with the R1 1911 and of course everyone knows how to make one of those. Thier first original pistol was the R51 which was a diasaster for the company and set the reputation for failure. Although the Rohrbaugh clone Rp380 was a good product it was not a game changer for Remington. As they say, first impressions are lasting and the R51 certainly did that! I see Remington exiting the handgun market shortly although the R1 1911 production may hang on for awhile?

Edited by gmor, Jan. 12 2018 - 11:07 AM.



#28 ONLINE   MontanaLon

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Posted Jan. 12 2018 - 01:18 AM

It had a $100 rebate which means everyone down the line made their usual margin. 

 

Now I'm not going to be able to teach you business accounting on the internet but the basics are cost is material (the actual cost of the components to make the gun), labor (the actual cost dollars per hours this many hours to make the gun), and overhead (your plant, utilities, staff, or basic shared resources).  Now keep in mind, higher the volume on something, the lower the cost to manufacture because you enjoy certain economies.  For example in high volume parts, one man can operate three automated screw machines.  The same applies to a plastic mold machine and molds not only can be hopper fed plastic but have have multiple mold cavities. 

 

Look at that little gun then and determine what the material cost is?  For simplicity and btw could be, assume all the components were outsourced, for example barrel from a machine shop, plastic from a molder, etc.  You don't have to be exact.  Now take a guess at how much they pay their people to assemble the gun and package it and how many minutes per gun? 

 

Now here's where it gets radical.  Its called incremental sales.  If you are already making a profit as a company,  then your overhead is being absorbed so anything above material and labor goes straight to the bottom line.

 

Inventory is a financial handicap as its valued by the IRS and adds to tax burden.  To a company reducing inventory is like giving to a charity for us.  If you are already making money as a company then any inventory reduction that then reduces tax burden goes straight to the bottom line.

 

What a company is judged on, all companies, is the bottom line.  Its really not how much they make on every part. 

 

The ability then to do incremental sales is by its nature then a window in time.  Last I heard the gun manufacturers are all making money these days.  That means anything they made over their material and labor cost would be profit.  Now if I took a guess they aren't out there making these guns to feed current demand and when they're gone, they'll be gone and the rebate will end.  That's just a guess but it is customary on retail products.  

 

That sale wasn't about the retail store or distributor making more money or less even.  It was about Remington.  That's who's doing the rebate. If they are making money as a company even if their material and labor cost was $99 and all they saw was a reduction in inventory, it would add to the bottom line in the form of profit.  

 

This btw is what other countries do to us which we call dumping.  Dumping isn't selling at a loss.  Its selling less then they sell in their own countries and incremental sales.  Its a way to move inventory, reduce tax burden, move obsolete product that indeed if you did hang on to it would be a 100% loss, and thus increase profit margin not on the by part but company level.  

 

One of the first things that I noticed visiting China is, damn, does the average Joe Chinese have nice TVs.   :D:

 

Now you know why Tj was a VP in a Fortune 500 company. 

 

Tj 

What TJ is saying here is spot on. I may not be the guru at it but I have learned a bit doing what I am doing now. Most if not all of the product we sell is purchased with credit. That is money we do not actually have. Frankly it is how many businesses particularly in retail do things. And it is good and bad. Good in the sense that you don't actually own the product on the shelves, because while you list it as an asset, the money you paid for it is a liability that cancels it out. If it is sitting on the shelf and we have paid for it then we will pay taxes on it at the end of the year just like we would if it were money sitting in the bank. It is the same thing for a manufacturer. If the money borrowed to produce the item has been paid back then it is a taxable asset. Now, whatever the effective corporate tax rate is is the loss you will take on that item. 

 

Now one of the things that happens every year is "free guns" or really any other free merchandise. The problem happens when you take those free items you don't have to pay anything for them. But the taxes you pay aren't based on what you paid for them, but what they are worth if you had actually paid for them. Some companies are good about it and will send you the free items throughout the year as you earn them. But sometimes they don't. And it can add up to serious money fast. I had 1 vendor that our purchases got us $100,000 in free goods in 6 months. And then they "forgot" that they owed us for them. All of a sudden they want to ship it all to us. I was all, "Woohoo, free shat!!" and took immediate delivery of it. That ended up being a huge mistake as we were suddenly on the hook for the taxes on the "free stuff" and it suddenly wasn't free any more. 

 

Now, I am not an accountant by any stretch. I just call them like I see them and I don't want to ever make that mistake again. I don't know how much my mistake ended up costing my company in taxes but I know I saved the manufacturer from having to pay their share on it. 

 

So even if they are "losing money" on paper, they may be reducing their tax liability by doing so which is saving money. What was the corporate tax rate for 2017? 37%. It doesn't take much paying that level of taxes on something to lose money and you definitely don't want to do it 2 years in a row. Any profit you may have made on the item is gone. 

 

It is all a shell game it seems. You learn to play it and there is money to be made, you don't learn it and it will cost you money.

 

And remember shops that aren't purchasing on credit take the whole tax whack on everything in the store every year. It is almost like the government wants businesses to not make money.




#29 OFFLINE   TomJefferson

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Posted Jan. 12 2018 - 06:16 AM

My guess is they got $40-$50 in material and labor in that little gun.  Remember the old Raven's?  They sold or $40 and we've gotten a lot better at making things these days.

 

Tj







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