Profit margin on crankbaits

[GreenGhostMan]

Wasn't sure where to start this thread... may need to be moved.

 

I was thinking the other day about the crazy prices on some crankbaits.  I'm in the automotive industry and we have some injection molding machines that produce plastic components for some of our finished goods.  Most of the plastic components require 50x the resin per piece compared to crankbaits and still only cost pennies to produce.  I would assume that plastic crankbait blanks are pumped out in mass quantities by the lure manufacturers.  I would also assume the resin used in crankbaits is of lesser quality than plastic automotive components that are exposed to higher exertions and more rigorous activity.  This leads me to believe that the crankbait blanks themselves should only cost pennies.  I have a hard time believing the paint jobs, assembly, hooks and overhead per crankbait amounts to $10-11 (Spro little john).  

 

I understand that the price of something is whatever the consumer is willing to pay...  Maybe there is an added cost I'm missing and someone that is more familiar with lure manufacturing can enlighten me.  But geez, seems like us fisherman are getting robbed!

[J Francho]

So, the only cost of the cranks is the plastic used in the mold?  Sounds a bit naive to me.  Many of the higher end baits have quite a bit of R&D into the final product, along with testing, and not to mention the molds themselves and some of the expensive materials used, like tungsten weights. The cost of manufacturing material is probably a small percentage of the overall cost of each new bait.

 

Then there are Chinese made baits, that you can buy in bulk (I'm talking huge quantities) at various price points, buy packaging from another maker, and label the things as "Joe Schmoe's" baits.  The price per bait from these sources ranges from around $.50 to $5.  Though even then, that's FOB country of origin, and there may taxes/tariffs involved.  I can't remember the exact rules.  The quality is not what I'd call the same as some of the premium baits out there, like LC, MB, etc.

[Kevinator1]

Oh yeah....we are getting robbed....but they are so pretty! We tackle hoarders can't help ourselves....it's kind of like the tobacco industry....get people hooked and they will continue to buy buy buy...no matter what they cost. I'm sure since most are made in China, they probably are being made by kids at pennies on the dollar so that the owners of the companies can make about an 80% profit margin off of a piece plastic, a couple of cheap hooks that you have to change out and a paint job that they act like Picasso painted. I mean at least Strike King cranks are priced halfway decent....but they are starting to go up too.....

[GreenGhostMan]

4 minutes ago, J Francho said:

So, the only cost of the cranks is the plastic used in the mold?  Sounds a bit naive to me.  Many of the higher end baits have quite a bit of R&D into the final product, along with testing, and not to mention the molds themselves and some of the expensive materials used, like tungsten weights. The cost of manufacturing material is probably a small percentage of the overall cost of each new bait.

 

Then there are Chinese made baits, that you can buy in bulk (I'm talking huge quantities) at various price points, buy packaging from another maker, and label the things as "Joe Schmoe's" baits.  The price per bait from these sources ranges from around $.50 to $5.  Though even then, that's FOB country of origin, and there may taxes/tariffs involved.  I can't remember the exact rules.  The quality is not what I'd call the same as some of the premium baits out there, like LC, MB, etc.

 

I never said the only cost was the resin in the mold.  I just said I don't think the other costs add up to the difference.  

 

But how many wiggle wart blanks do you think are produced each year?  I would guess tens of thousands, maybe more.  The packaging for those has to be pennies.  We pay pennies per for much more sophisticated packaging.  There is no tungsten in them.  And they do not have high end hooks.  The paint jobs are very simple.  When you are talking about high volume production, the cost of everything is minimized because it is spread out over a vast number of pieces.  Maybe a lot of the cost is advertising and sponsorship money spent by the companies?

[RoLo]

Them buggers are really cranking it in  

[fishballer06]

Unfortunately, crankbaits don't build themselves. Think about how many hands that lure has to go through before you purchase it and tie it onto your line. 

 

Someone has to put the bait into the mold machine

Someone has to put the weights/rattles in the lure

Someone has to paint and clear coat the lure

Someone has to put the split rings and hooks on the bait

Someone has to test each bait to make sure to swims properly and passes QC

Someone has to place each bait into the packaging and seal the sticker seal

Someone has to place all the baits into a box for shipping

Someone has to be the carrier (USPS, UPS, FedEx)

Someone has to unpack those lures for storage

Someone has to either hang those lures on a shelf or package them up to ship to you (and repeat earlier carrier step)

 

Keep in mind, none of the above takes in account for R&D, damaged baits in the manufacturing process, lures that fail QC, promotion and advertisements, attending trade shows and events, sponsorship of tournaments and professional anglers, warehouse costs, insurance, etc...

 

And at the end of all of that, you end up with a $4.39 cent wiggle wart from websites like TW.

[GreenGhostMan]

That is all true... But my company builds and manufactures a 1000x more complicated piece of equipment than a crankbait and sell it for half the price of a megabass or lucky craft crankbait.  This includes an electronic motor, pulley systems, anti rust coatings, welding, injection molding parts, 2-3 years of R&D, months long quality testing and continuous testing throughout production, and American labor costs.  I'm just not buying it.

[J Francho]

9 minutes ago, GreenGhostMan said:

I'm just not buying it.

 

That's probably your best plan - don't buy them.  It's $4.  I have some old Rebels in the box fom 25+ years ago.  They were $2 then.

[fishballer06]

11 minutes ago, GreenGhostMan said:

That is all true... I'm just not buying it.

 

Well, I'm not sure what to tell you if you think that companies shouldn't operate in a fashion that makes them profitable. 

[GreenGhostMan]

34 minutes ago, fishballer06 said:

 

Well, I'm not sure what to tell you if you think that companies shouldn't operate in a fashion that makes them profitable. 

 

No need to be defensive.  And I'm not saying lure companies shouldn't charge what they charge.  Heck, if someone is going to pay it, then charge it.  That's good business.  Just making observations.

 

I'm going to continue buying crankbaits.  Just stating that my opinion is they appear to be making good money off them.  Even while believing that, I can't make them myself, so I'm going to buy them.  

[deaknh03]

Lets not forget advertising, sales people, shipping, sponsorships etc...also spro doesn't get $11 for a little john, they probably get $6 and the retailer marks it up from there.

[junyer357]

Its pretty common for companies to mark up their product to double the cost for retail sale price. Wholesalers pay prices between 60-80% of retail, depending on sales volume and history with mfgr. 

Im ok with paying higher prices for a premium lure (to a point). Its cheaper for me to buy a $12 lucky craft that runs perfect right out of the box than it is to buy 2 or 3 cheaper ones to get one that runs right. I have a preferred crank by a diffrent mfgr that is that way. I can buy them at the same time but one will consistently catch fish but the other will not, my dad and i have experienced this firsthand, throwing identical (model, color, etc.) lures at same time, in same areas.  Its less common than it used to be, especially with plastic instead of balsa, but it happens. 

[RoLo]

4 hours ago, J Francho said:

 

I have some old Rebels in the box fom 25+ years ago.  They were $2 then.

 

 

    Only two bucks, 25 years ago?    Pretty soon they won't be worth anything   

 

 

[Cgolf]

What I found interesting was after Lucky Craft first started selling crankbaits in the 15 dollar range with ease, I noticed Rapala all of a sudden upped the price on their baits a couple of bucks pretty much across the board. Also more recently the increase in the price of Bandits after Pradco bought them. The latter really doesn't make sense since Pradco is a larger company. 

 

So some of it is they will price them till we won't buy them, heck I even see this in stuff like the cruise vacations I take with my wife, they are just trying to maximize profit, which yeh many times screws us.

[J Francho]

How many fish can you catch off a single $4 crankbait?  How about a $7 bag of plastics?  How many seasons do you get out of your line?  Four seasons from $40 spool of Tatsu.  I hear about guys changing out their $5 mono every couple weeks.  A single $25 top water bait has accounted for more fish than most of my other baits COMBINED.  Did I get ripped off by the $25 bait, or the thousands I've spent on other stuff?  Think about what you feel is "over priced" here.  A $4-ish crank bait, that even if it's marked up ten thousand percent, is still $4.  Not a big deal, considering I have Wiggle Warts older than half the members here that are still catching fish.

 

Personally, I think rod prices have gotten out of hand.  Makes a custom stick an attractive deal.

[Team9nine]

This topic reminded me of a great quote from Len Hartman, at one time considered to be one of the top muskie anglers in the country, and who manufactured his own plugs:

 

"If you are thinking of going into the lure business let me set you straight. There is very little profit in a single lure. It is a volume business. My Muskie bug sold to the consumer for $3.00. Sounds like a lot of money. Advertising cost $2,000 for a single two inch add in three different outdoor publications. Cost of 10,00 lures; $7,200. UPS delivery on these lures $165. Add to this 12 cents Federal excise tax on each lure in those days. Cost of plastic box to ship it in 8 cents each. Shipping individual lures 22 cents each. So when I sold it to consumers directly, I made 81 cents. Jobbers you sold on a 50% - 10% and 2% and waited well over the thirty days to collect your money and they still took the 2% for cash over thirty days. You made close to a half dollar per lure and hoped you would eventually get your money. So you see its a tough game to go into, and Muskie lures are limited to less than 5% of all the fishermen. Now bass lures are different. 95% of the fishermen fish bass at some time or another and bass lures sell. But here again the profit per lure will come under 25 cents. If you are considering the lure business better have enough money to carry you until sales start coming in. Even with all the publicity we had created in the Muskie world, we couldn't realize a profit and had to eat many of our lures we couldn't sell and sold to discount houses to get our money back."

 

Len Hartman, 2000

[Paul Roberts]

2 hours ago, GreenGhostMan said:

That is all true... But my company builds and manufactures a 1000x more complicated piece of equipment than a crankbait and sell it for half the price of a megabass or lucky craft crankbait.  This includes an electronic motor, pulley systems, anti rust coatings, welding, injection molding parts, 2-3 years of R&D, months long quality testing and continuous testing throughout production, and American labor costs.  I'm just not buying it.

Might your markets be bigger than for most fishing lures? And how often do your products change over time? Lotsa lures -and good ones- come and go. I bet we all have quite a few that don't get tied on anymore. What's the "shelf life" for a given lure, that is, how long does it stay popular? Is it a reliable product for a manufacturer? I'm guessing that putting out a new lure is riskier than for products with larger and more stable markets.

[Mumbly]

I am not sure what the final cost to make them is but after watching the video on how the Rat-L-Traps get made, I can honestly say that $5.49 retail is a good price.

[Paul Roberts]

Years ago I had a Berkley rep tell me that the then $40 Lightning Rod cost $0.39/unit to manufacture (in Korea, I believe). The rest was eaten up by a long list of expenses, advertising being a large one.

[Choporoz]

I'm just thankful that nobody has said they caught a big 'ol LMB on an epi-pen

[GreenGhostMan]

15 minutes ago, Paul Roberts said:

Might your markets be bigger than for most fishing lures? And how often do your products change over time? Lotsa lures -and good ones- come and go. I bet we all have quite a few that don't get tied on anymore. What's the "shelf life" for a given lure, that is, how long does it stay popular? Is it a reliable product for a manufacturer? I'm guessing that putting out a new lure is riskier than for products with larger and more stable markets.

 

Depends on the vehicle program.  Some are only a few hundred a month and others are several thousands a month.  A particular product will last on average 3-5 years, never to be produced for mass production again.

Edited February 16, 2017 by GreenGhostMan

[J Francho]

Are these widgets sold retail in single unit quantities through typical retail channels?

[blckshirt98]

Also remember these lure companies have hundreds of SKUs they need to keep in stock when you consider model/size/color.  For a $6 price tag, the manufacturer is probably selling it to the retailer for $3.00.

 

The big question is how much do some of the "JDM-For-USA" baits really cost, like Megabass and LuckyCraft, that oftentimes charge more than double the price of similar domestic baits.

[RoLo]

3 hours ago, Team9nine said:

This topic reminded me of a great quote from Len Hartman, at one time considered to be one of the top muskie anglers in the country, and who manufactured his own plugs:

 

"If you are thinking of going into the lure business let me set you straight. There is very little profit in a single lure. It is a volume business. My Muskie bug sold to the consumer for $3.00. Sounds like a lot of money. Advertising cost $2,000 for a single two inch add in three different outdoor publications. Cost of 10,00 lures; $7,200. UPS delivery on these lures $165. Add to this 12 cents Federal excise tax on each lure in those days. Cost of plastic box to ship it in 8 cents each. Shipping individual lures 22 cents each. So when I sold it to consumers directly, I made 81 cents. Jobbers you sold on a 50% - 10% and 2% and waited well over the thirty days to collect your money and they still took the 2% for cash over thirty days. You made close to a half dollar per lure and hoped you would eventually get your money. So you see its a tough game to go into, and Muskie lures are limited to less than 5% of all the fishermen. Now bass lures are different. 95% of the fishermen fish bass at some time or another and bass lures sell. But here again the profit per lure will come under 25 cents. If you are considering the lure business better have enough money to carry you until sales start coming in. Even with all the publicity we had created in the Muskie world, we couldn't realize a profit and had to eat many of our lures we couldn't sell and sold to discount houses to get our money back."

 

Len Hartman, 2000

 

However, I wouldn't place too much stock in anything Lenny Hartman said (He had 3 versions of everything).

Len Hartman's riches-to-rags story was among the saddest in the angling industry, he was a man

enshrouded in unethical behavior.  When Lenny finally confessed to a multitude of laws & rules

that he & Betts had broken, I literally threw his book in the trashcan ("Before I Forget").

 

Roger

[mixel]

I've got some experience in the manufacturing side of things. Companies take into consideration many things besides materials, labor, and R&D when establishing their prices. They also consider where they want to position themselves and their products within the market hierarchy which is typically 

• ultra premium (special and limited edition stuff)
• premium (top of the line gear)
• prosumer (consumer level but with a few premium features added)
• consumer (average)
• bargain (dirt cheap)

Now consider for a moment, designer handbags (Gucci, Coach, etc.) that women swoon over. Looking at just the material, manufacturing process, packaging, and shipping to get it to the store, does the expense come close to matching the outrageous price tag? Not even close. 

 

Companies also consider their competition, customer demographics, market trends, fixed and variable costs of the business, etc. 

 

Also, what RoLo said is spot on. Just look at how many lures companies have been acquired by Rapala. It's all about volume (the walmart and costco way). I've chased bad (from profit potential perspective) business ideas when I was young. It's beyond frustrating figuring out later that you could have put all that time and effort into something that was actually profitable. Trying to make any kind of real profit selling lures, when you consider cost of branding, marketing, manufacturing, shipping, and labor just seems like a poor career path, unless you enjoy it as a hobby, or have plans to actually grow the company.