Thus far the opinion pieces I have written have been well received, but not controversial. Well, time to change that. I have my NOMEX suit on.
First, take a peek at this video from SoloKnifeReviews:
I think that the market for Hinderer knives is completely out of whack. Supply is artificially limited in a way that harms the people Hinderer tries to benefit. You see, Hinderer knives are available directly from Hinderer only to military, law enforcement, and EMT folks. A few occasionally leak out on to the market when Hinderer sells directly to a dealer and a few more leak out via B/S/T boards on forums and at knife shows, but the primary source is the stream of knives originally sold directly to service folks.
Hinderer's knives are amazing. Having handled, though never owned, a few, each is a real gem, both in terms of design and fit and finish. I am also deeply grateful to Hinderer for giving special preference to service folks. They are both the people that need and use the knife as well as people whose pay is most radically incommensurate with the value and service they provide. It is a very nice way to say thank you and give these folks some preferential treatment.
But like all things economic, the law of unintended consequences has powerful and sometimes exploitative consequences. From childhood, American kids learn about supply and demand. It is part of our cultural heritage and it is a good lesson to learn. The demand for Hinderer knives readily outstrips demand. They are, after all, among the finest hard use work folders ever made. But the prices are so high that they regularly sell on the open market for three or four times their suggested retail price. The only place I have seen them sold for MSRP is J.S. Burly's (which happens to be the store for EDCF). Hinderer gave Jon a few XM-18s and Jon, being the paragon of honesty, sold them for MSRP--around $387. Look on other sites and XM-18s rarely sell for anything less than $800, with $1000 being around the average.
But Jon is a rare individual. No other dealer, to my knowledge, has sold their direct-from-Hinderer knives at MSRP. Check other places and you see all of the Hinderers, regardless of source selling for four figures. This isn't a crime. This is how the market works. Low supply, high demand = high retail prices. My issue is that many of these dealers, because of the high prices Hinderers command, take advantage of the some folks Hinderer's policy seeks to benefit.
Suppose I am a police officer--I am not, but just suppose. Suppose I am not into knives, but I ask a buddy who is. He tells me that I should get a Hinderer. I see the price and I balk. Then he points to the Sig Sauer on my hip and tells me that you get what you pay for. Seeing the wisdom in that and trusting my buddy I decide I want a nice beefy folder and I sign up for and buy a Hinderer directly from the man himself. I pay around $387 and he ships me my XM-18.
All is well so far, Hinderer's policy is working.
Now suppose, for whatever reason, I want to sell my XM-18 (yes, I know heresy, but some people don't care quite as much about their knives as we do). Again, I am not a gear geek or a knife guy, so I figure, here today gone tomorrow. I decide to sell it to a dealer as they can give me cash the quickest (absent a forum exchange, but again this is not someone as obsessed with knives as we are). The dealer, being a dealer, wants to make a profit so they offer the law enforcement guy $600. More than what he paid, almost double in fact, but about half of what they will sell it for. You see the problem, right?
Admittedly the guy that will lay out even $387 for a Hinderer or the guy that knows about Hinderers is unlikely to be completely disinterested in knives, but I imagine that there are quite a few service folks that match up with my hypothetical person. It is hard to imagine, but not everyone is as obsessed with knives and gear as we are, even folks that have a better excuse to own them than those of us that dwell in the office and cut open packages most of the time.
The secondary market's insane prices are not being passed on to the people Hinderer's policies are designed to support. It is not the case that a person that paid $387 for a knife that will now sell for $1200 is getting proportionally more. The increasing prices on Hinderers, by in large, are simply more profit for the dealer. There are, of course, dealers selling to dealers, and in these cases, who cares. But for the folks that Hinderer wants to help, they will likely see very little increase in the price a dealer pays for their knife. And why would the market ever have that happen? If the unsuspecting LEO/Military/EMT is getting twice what they paid for the knife, will they be aware that the dealer is getting even more profit? Probably not.
The person that is being taken advantage of, the guy or gal that can get a Hinderer but doesn't really care all that much about knives, is not the kind of person that will seek out the highest bidder on ebay. At MSRP, the Hinderer looks like a Strider or a CRK to these folks, at least price-wise. And so if they get a surprise bump when they go to sell the knife, they are probably all the happier for it.
Absent those knives sold directly by Hinderer to honest dealers like Jon, or those that leak out from knife shows, all of the XM-18s and XM-24s on the market got there because of dealers lowballing folks that serve and happen to need a little extra cash OR by getting them from Hinderer and jacking up the prices. The dealers aren't doing anything immoral. It is just the way the system works--they need to turn a profit. But Hinderer's limitations on who he sells to, as many things in economics are want to do, creates an unintended consequence that HARMS the exact people he is trying to give (deservedly) special access to.
As a side note I can say that having dealt with BladeHQ's custom guys, that the Hinderer price gouging doesn't happen there. If you see one on their site for a load of money, they probably paid a slightly smaller load of money for it. My personal experience tells they operate on smaller margins than most dealers. I am not saying this because they are a sponsor, but because it is true. Other dealers might do the same, I just don't have personal experience with them.
If I knew I was buying a knife from a law enforcement person, a military person or an EMT person I would have no problem whatsoever paying the going market price of $1000 for them. None whatsoever. I think of it like a small thank you for people that do not get thanks enough for what they do and the sacrifices they and their families make. I refuse, however, to pay market rate for these knives from an untrusted dealer. If the dealer is selling them like Jon did, again no problem, but those folks out there that are asking for $1200 for an XM-18 they bought off a guy returning from Iraq looking for money for a wedding ring make me ill.
Then there are the dealers that get the knives from Hinderer himself and STILL mark it up. Those folks are robber barons too, but somehow they are just price gougers and not people taking advantage of others. I have less hostility towards them, but I am still not giving them a dime of my money because it only perpetuates the cycle of taking advantage of those that serve.
This is pretty basic economics and logic here. Supply and demand. Mr. Hinderer has indicated that he is trying to ramp up production, so I would imagine that a lot of this will fix itself. SoloKnifeReview's comments about the "bottom falling out of the market" seem prescient. Hinderers are great knives, but, as SoloKnifeReview points out, they aren't especially rare. If you go to an even smallish knife show you'll likely see a few.
Additionally, the economic pressures to change the policy are HUGE. Rick Hinderer himself is leaving a lot of money on the table and the policy that was designed to benefit service folks is probably, in many cases, leaving them in the same position they were in before prices spiked, while dealers reap the reward of the insane secondary market. Why not ramp up production, sell the blades to service folks for $387 and directly to everyone else for $500 and roll in the cash? This seems like an upgrade over the current system where unscrupulous dealers treat service folks like strip mines.
For now though, be wary of the $1000 XM-18. It might have come from someone that served this country, that was in a bit of a jam, and had to sell low and fast to a knife dealer. If it is Jon or Blade HQ or someone you trust to pay a fair value for the blade, that's one thing. If it is some price gouger out there, taking advantage of Rick's service only policy, then beware.