Thursday, 30 August 2007

Time is money

We've all heard the saying "Time is money" and it can often be true.

What I want to talk about though is the actually "The measurement of time is money" or "How to rip people off".

I'd rather like to get myself a new watch, this one.

It's made by Skagen, a US based company run by two Danes. Their design is superb. Very smooth and understated. Have a look at the range on the Skagen website.

At first glance you would think the prices are going to be high. Not so! Hunting round on the web I found the model I want available online for US$73-97, which is hardly expensive. At the current exchange rate that's NZ$106. Yes, I will have to pay to get it sent from the US, so call it NZ$130 to cover that.

I found there is a dealer for Skagen here in Wellington. Instead of the shipping cost I'll use about $20 worth of petrol to get there and back so there isn't much to choose between the US and getting it locally.

Or is there? The US have it in stock and even allowing for shipping I would have the watch within 7 to 10 days. Wellington haven't and it would be "late September" before they would even be putting the order in! Apparently they maybe able to "source one locally". "May" does not light my fire.

Hmm... online from the US is looking better.

There is another difference that makes buying online from the US a certainty.

Online from the US... NZ$106.

From my local dealer... NZ$220. Yes, that right, more than DOUBLE the price! The dealer in the US are making a profit so it's reasonable to assume they can buy for about US$50., which is about NZ$72. There is a sales tax here of 12.5%, so the local price of NZ$220 is actually NZ$195.

Please read the update.
So the dealer here appears to be making 170% profit. Now whilst I have no problem with making a profit; we all have to live, there's profit and profit. ONE HUNDRED AND SEVENTY percent mark up is extortion in my book.

*** UPDATE ***

I contacted the supplier in question about this and also gave them the opportunity to read this post and comment on it.

It appears that they are NOT making that level of profit and the price they sell at is the recommended retail price for New Zealand. They are forced to purchase from the main agent in Australia and the price is set by that agent. They tell me that the recommended retail price for this item in the US is US$100 which converts to NZ$143, which makes me wonder why the hell we in New Zealand should have such disparate recommended retail prices.

Economies of scale, as pointed out by the supplier, is an obvious issue but, well, why should there be economies of scale? The cost of manufacture of a good is fixed for the quantity manufactured. The shipping cost is variable but is a small proportion of the sale price on small, high value items. Why can retailers here NOT buy direct from the manufacturers, as I presume they do in the US and at the same price? I'm sure the same applies in other countries too.

My view of this may be rather odd but is it that unrealistic? Let us say I produce a widget and to service the world market in widgets I need to make 10,000 of them and the cost of manufacture is $100 each, including amortizing the development cost, etc. I fix a markup of , say, 40%, making the sale price to the retailer $140 plus whatever shipping cost there is. The retailer puts his mark up on that and that's it. Everyone pays pretty much the same price. I make the same, the retailer makes the same and the customer gets a decent price too. With the added bonus that the small guy gets as much of a chance as the big guy, totally fair, one constant price.

The whole thing seems to me to be grossly unfair on retailers and small businesses. The final customer has the choice of buying from where so ever they please. In this case, I'd be a fool to buy locally, the price difference is just to big. This saddens me greatly, I am a small business man myself and I would much rather support others like me.

I've just done a little investigation. I can buy an Intel Q6600 CPU retail in the USA for LESS than I pay wholesale here!

I think we are ALL being ripped-off, not only the consumers but the suppliers too!

1 comment:

caramaena said...

Nice watch.

Years ago I used to work for a large department store here in Australia - in the women's clothing department. When the stock would come in, they'd have the markup listed on the stock docket. I was amazed! 200% markup was common - often it was more.