Price gouging or just uneducated customer?

[Maksim 1,504]

So was shooting today... walking around the range, talking to others there, meeting many new faces and shooters.

Walk into the store, look at the new toys, talk with the shop folks.... All of this got me thinking.

 

We all know the prices today on ammo, firearms, accessories are priced higher than ever. Seeing $9.99 sticker on one of my older bricks of ammo, and then shelling out $25 for a brick at the range. $10.99 out of stock 9mm at Natchezz or $16.99 at a store, or $20.99 at the range.

 

Is this price gouging, or just good business? Are we just failing to adjust to the new realities of higher everything?

 

Why is it all of the sudden an insult to NOT want to pay sticker price for a firearm and want to negotiate because you can pick up the same firearm for 30% less from a distributor online... or at least what we paid before.

[PoorSoulInJersey 1]

It's kind of none of the above. It's the simple economic concept of supply and demand.

 

In "normal" times, supply and demand come to an equilibrium price where things remain calm for a while. People get used to a price, stores order based on that demand level, and manufacturers make enough to meet that demand level. At that price, people are both willing and able to buy a certain amount and manufacturers are both willing and able to sell a certain amount.

 

It's when both things change in opposite directions at the same time that it gets ugly.

 

1) If there is less of something available and the same number of people want it, the price goes up

2) If there is less of something available and more number of people want it, the price goes up A LOT.

3) If there is more of something available and the same number of people want it, the price goes down.

4) If there is more of something available and fewer number of people want it, the price goes down A LOT.

 

#1 and #3 are just normal cyclical corrective actions. When things get slightly out of whack, they tend to go back to normal. #2 and #4 tend to be bad and are indicative of a problem, either with sudden shortage and excess demand or excess supply and demand shortage.

 

#2 is what's happening to the ammo market now. It also happens to some poor unknown toy each Christmas.

#4 is what's happened to the housing market over the last few years (like most supply bubbles, a whole boatload of something becomes available and no one wants to pay what it was going for, so people take a loss just to sell it at all).

 

When #2 happens, it's usually because no one saw it coming. Like the Mighty Morphin Power Rangers years ago, no one had any idea that they would be THAT insane of a hit. Even a couple month's notice wouldn't be enough to meet the enormous demand that occurred. Supply chains can't ramp up that fast. Every component along the way had to be ordered, shipped, processed, manufactured, packaged, distributed, and put on the shelf. When the suppliers see an increase coming, they can raise the prices, delay shipments, and generally mess with the buyers to get more money out of them. When this happens at each step of the way, it can seriously delay the process. The tin-foil types think the delays are intentional. It's usually because some market forecaster got it wrong. Weather forecasters can barely get the weather TOMORROW right. These folks have to guess what the market for some product will be months in advance. It's more luck than anything.

 

Go to a toy store six months after a major movie with a toy line comes out. Some hit movies sell barely any toys at all. Imagine how the bad ones do. Someone got stuck with the bill for all that because someone guessed the demand would be higher than it was. Most companies are willing to risk manufacturing too little instead of too much. It pushes the risk/reward scale into their favor.

 

It can take several months to get things moving just to make a more of a plastic toy that any plant with the right machines can make. I posit to you: how many factories do ammo manufacturers have? What are the regulatory requirements of opening a new production line? And just how many would YOU build if you were not sure how long the increased demand would last?

 

Now, ammo doesn't expire really. Why not make a boatload of it and take the risk? Then you run the risk of not being able to pay your supplies if the demand drops and then you have to store a couple million rounds (incurring even more costs)

 

Why not keep prices as they are? Why not be the low-price guy and keep prices down? Because no business wants to leave money on the table. If they can make the money now, and may not be able to make any money at all next month, they will make it now. If supply dries up, stores can take enough of a hit that they go out of business. The extra money made on the ammo this month might let them hang on a little longer. Would you rather pay a couple bucks extra for a box ammo or see your local range go out of business? They are both bad things, but you may e forced to choose between the two.

 

It's the downside of economics. The deeper you dig, the more unintended consequences you find.

[Maksim 1,504]

not talking about normal market supply and demand.... i am talking about prices beyond where they should be.

 

ie, $1800 base ar 15's. that can be ordered online for $1,200

 

No one is saying Saiga 12 prices should be $250.... but Selling them for $850 or $900 ?

Classic Arms, distributors selling for $450 to $590.

[PoorSoulInJersey 1]

You only asked about ammo. I don't have the energy for another thesis ;-)

 

Dude, I'm gonna submit that post to one of my professors.... (I'm working on my MBA part time)

[Lublin 3]

I think it's mass paranoia amongst conservatives caused by the recent influx of liberals.

[Maksim 1,504]

You only asked about ammo. I don't have the energy for another thesis ;-)

 

hehe, perhaps should be more clear.

 

Lets put it this way. Wasr 10. Buy it a year ago for $350, or less before that. Now, you can buy one for about 500 from a distributor... yet some stores have sold them for far more... double.

 

They could of put $1,500 on the tag and I am sure it would of sold because there is such an amount of new people who just go into the store and pay any price they ask as they dont know any better.

[tbtrout 141]

I think if you combine your question you have 80% of your answer.

[Mauser88 0]

That's why I don't buy from gun shops like Prick Armory. I'm not dumb enough to pay his rent. No one here should either. You should support FFLs' like PK90 this way you get the best value out of your hard earned money.

[Yotafan 1]

Maksim

 

It's about being a smart consumer. 20 years ago when people went to puchase a new car they went by what the deal sticker said then tried to bargain via that price. Now with the internet you basically walk in and say what your willing to pay X+invoice. Of course there are going to be some dealerships that set their price high and wait for someone to purchase the car. There is an ass for every seat

[PoorSoulInJersey 1]

I have no problem talking to the folks I know at a gun store and being open with them.

"Hey, I found this same thing that you want $1599 for online for $1099. Can you move at all on the price?"

 

If you're polite and have bought there before, most places are willing to work with you. If they don't, then I can understand not buying there. At the same time, if you're rude about it and they've never seen or heard of you before, they don't have much reason to budge. Remember, they can always sell it to someone else. They have to be willing to sell it to you for less than they could to someone else, and that usually means being a decent guy and/or having a history of buying with them.

 

I expect to see online prices a little lower (maybe 15% or so) than local ones because of shipping warehouse vs. retail store business differences. If it gets beyond that (as it has recently for online firearms sales), I don't think the differences will last.

[BMWR12 35]

not talking about normal market supply and demand.... i am talking about prices beyond where they should be.

 

ie, $1800 base ar 15's. that can be ordered online for $1,200

 

No one is saying Saiga 12 prices should be $250.... but Selling them for $850 or $900 ?

Classic Arms, distributors selling for $450 to $590.

 

Everything in today

[ben 0]

To simply put it, it is price gouging. But that's the price you pay, no pun intended, for a living in a mixed market economy. At any opportunity to make an extra buck, you will take it as a business owner.

 

PourSoulInJersey,

 

Classic demand-pull initiated inflation. I don't think this is really an increase in demand, rather an increase in quantity demanded. The number of consumers of firearms in this country have remained relatively stable. Seems its only the number of guns, ammo, etc. purchased that are on the rise.

[PoorSoulInJersey 1]

I don't think this is really an increase in demand, rather an increase in quantity demanded.

 

What's the difference? You don't want 6, you want a half dozen? ;-)

[ben 0]

What's the difference? You don't want 6, you want a half dozen?

 

The difference is noticeable if one were to graph the demand and supply schedule. An increase in demand, absolutely, moves the curve to the right. An increase in quantity demanded moves ALONG the curve to the right. An increase in absolute demand will create a new market equilibrium price (higher). An increase in quantity demanded creates a shortage in supply and the price paid for the quantity supplied and demanded is above the equilibrium price.

 

Usually the market will move back toward equilibrium price after producers realize that consumers are unwilling to pay the inflated prices. The prices everyone sees now will go back down after this temporary increase in quantity demanded goes down, as long as the current administration doesn't do anything drastic.

 

Logic and history has shown us the more an administration attempts to curb gun ownership, along with government intervention in any market operation, the absolute opposite effect occurs. E.g. rent control creates a lower than market equilibrium price, profitability of renting units become nonexistent, landlords end up selling and rezoning into commercial.

 

Don't even get me started on what's going on now with the banking and auto industries.

 

Laws and theories of economics state that if the Government were to outlaw gun ownership, the black market for weapons will open up exponentially, having the negative externality of criminal gun ownership. In the meantime, let's all enjoy paying 200% above MSRP.