How much is too much?

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PTWoody said..

TalkToMe said..


If it is currency related, why have they held out on raising prices this year instead of next year?

I don't quite understand what you are asking here, but I believe prices are set for the year ahead based on exchange rates at the start of the production year.

this didn't make a difference over the last few years when out dollar was high. prices weren't dropped to compensate the consumer. some one along the money chain must have been " makin' hay while the sun was shinin' "
I was hoping to get into a new 14ft board later in the year, but I had a budget of around $2200-$2300. was not wanting a top of the line carbon board either, but I could very well be out of the market with the big board names. Have looked at Australian made boards as well and they might be the go. Also like to support the local products as they are few and far between these days. I say this from a windsurfing history where this is the case.

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TalkToMe said..
So the 30% starboard increase next year will be matched by all brands, no?

If it is currency related, why have they held out on raising prices this year instead of next year?

Also, if retailers in OZ take on that novel idea of order-when-sold approach with their distributors, as in only having a brochure and ordering a board when a customer passes over the coin, will the retailed still ask/expect to get their regular profit margin? Which is what, 35% markup?

I don't know actually what the margin/markuo on boards is, just guestimating here. Anyone in the industry here?

Nice idea T2M, the order-when-sold approach. We already take custom orders on SUNOVA boards direct from the factory. Lead time is 8-10 weeks plus delivery.

With many of the big brands orders are being placed now for next season. If the retailers, who are closest to the market, do not take a risk on ordering a product then the distributors will reflect this in their commitment. With brands like JP you can place orders with your local dealer who can place an order with the factory. Allow about 3 months lead time.

As I said it is not all doom and gloom. Between the local guys and the smaller brands there are plenty working hard behind the scenes to keep the pricing down to a reasonable level.

Hi Justcruising,

We took on Imagine last season and really appreciated Dave coming into our store and spending a lot of time talking to us and our customers and then spending a bunch of time on the water with us as well. True to his word, the Kalama/Imagine boards were affordable, good shapes, well made and looked good. They sold quite well in our store for an "unknown" brand. You have to remember that the name Kalama is unknown to anyone outside the windsurfing/big wave surfing communities. Imagine's range was clearly defined and constructions were simple to understand and obvious as to what you were getting for your dollar.

We do buy direct through a brand manager and receive good margin, problem is we forecast sales volumes three to four months ahead and we shoulder ALL of the risk. Take last season for example with one of our brands, we placed orders in late June for early September arrival. Invoicing begins the week before it arrives. Our season didn't really start firing until December which means our cash flow was drained paying off gear that was sitting in a warehouse or showroom floor that should have been selling from early October. As the first shipment arrives, we need to place the second orders which drop in early December. We were unable to gauge customer buying patterns for the second order which meant if we made mistakes in the first order we were likely to repeat those same mistakes in the second. We were effectively paying for two shipments of boards before we started selling anything. Add to this a flagging WA economy with job uncertainty and housing market in the toilet and people not spending money and your have a potent concoction of the type that brings small businesses down.

With a distributor model we run reduced margins but at considerably less risk. Distributor model is barely profitable when overheads and fixed costs are factored into a slow year. Direct model is great so long as you can read the market, and choose wisely, because one mistake in ordering can dissolve the entire additional margin and land you right back at square one. There is no gain without risk and unfortunately, risk in a difficult economy, and over saturated market can finish you.

Retail is a perilous game at best in an average year, and a good way to tear up hard earned profits in a difficult year. I know a lot of retailers this year are struggling to stay afloat and we are likely to see a few more casualties throughout this coming year. Please remember most small businesses are family owned, one owner who usually works in the business full time. I know of only few (Australia wide) who are making reasonable money and none who are getting rich, but I know lots struggling.

Surprised this topic has become so enthusiastic. Good to hear everyone's thoughts. I just thought I would give a retailer's perspective.

Paddle on!

DM

The excuse in relation to the Australian dollar is starting to wear thin.

So for the purposes of brevity lets refer to the following: www.x-rates.com/graph/?from=THB&to=AUD&amount=1 If you have a look you can set the parameters for the last 12 months which you will see that there has been some movement
although marginal when comparing the AUD to the Thai Baht. These are outlandish increases in board prices and my prediction is that unless the major players are willing to pull their heads in
then it will lead to the death knell of the sport, at least in terms of purchasing the more popular boards. The pricing simply does not
reflect what you are getting. There is far far too much emphasis made on paying the guys endorsements which the companies have to
recoup by upping the price of the boards. Whilst I appreciate the skill set of someone like Kai Lenny I am not willing to pay the extra
dollars to buy a board simply because Kai rides that particular brand.

More power to the independants like Deep and Vanguard. You guys should prosper.

Ozzie

Are these the 2016 ones?

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I know of only few (Australia wide) who are making reasonable money and none who are getting rich, but I know lots struggling.

DM

I see. If the retailers aren't making money the distributors aren't either I gather?

I've heard that the big brands online make money in the States and that's it. Does that carry any weight around here?

The factories are smarter than that. They want to be paid in a secure currency so it is all USD.

I've been following this thread with interest as we had exactly the same scenario play itself out in South Africa, I'm the local importer of Naish so clearly with vested interests in securing a healthy sport and industry.

Last year our Rand took another 20-30% dive. To put in context we went from R6.65 to the USD in 2011 to R12.40 at present - that's made our boards twice as expensive as they were 4 years ago!

And, same story here, the local custom guys could suddenly compete as they were now significantly cheaper, (low overheads, direct to market, no contribution to events or getting newbies into sport) and they have made significant inroads in the sub-150 liter SUP market. We don't have as many custom guys as you have and few are skilled enough either in shaping or production to really compete with the imported brands. So what happened here was that everyone became an importer - we must have at leat 30-40 brands in a tiny market with most selling less than 20-40 boards a year. It's clearly not enough to make a living but it is giving the customers options outside of the bigger established brands - but again like the small custom guys they cannot/will not contribute to growing the sport so they don't put on events or demo days or sponsor prizes etc (they can't, it makes no financial sense).

Unfortunately (for me) this proliferation means chunks are being taken out of the established brands who invested to get the sport to where it is today. This is not a whine, this is purely the reality. I agree wholeheartedly that the sport seems prohibitively expensive, but the technology required to make high volume boards light and strong enough for normal consumption is unfortunately such that SUP's will be costing substantially more than surfboards.

The only way to really cut costs is to reduce the links in the distribution chain - IMO this is a very dangerous route as it means local retailers will fall by the wayside and customers will be forced to shop online and straight out of garages or smaller warehouses. I think we all agree that for a sport to thrive we will require some level of retailers whom are able to carry a reasonable amount of stock, demo's and spares - especially in SUP which is dependent on try before you buy in many cases.

Not sure where it will end but everyone will have to HTFU and hope the sport goes more mainstream so that it can support an industry. Higher prices don't help achieve this.....

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Surfrod66 said..
Every one seams keen to talk about the major brands! As most people know I am the Starboard demo guy so lets look at my weekend last week. Drive 5hrs to Scotts head with a trailer with 17 demo boards ( lets say at an average of $2000 rrp per board). That's $34000 return fuel $200 accom $250 we provided prizes for the event $500.. So that you the consumer can try a board before you part with your hard earned $..Yes this helps us generate sales.. Naish also paid freight both ways for 8 inflatable boards and provided prizes. Who is the first person a club or event organiser turns to for sponsorship when they want to hold an event? So there for if everyone buys a custom board enjoy having no event to surf or race at with no prize if you win. Not a winge I enjoy the driving and meeting people but without the major brands I think as a spot we would be about 8 years behind where we are now. Lets not forget it was Naish who took a chance on the sport spent the money to make a mould and production boards, just my thoughts

Not having a go at you mate, but your description simply sounds like the majority of businesses, regardless of the nature, comprising of: a product, stock, employees, advertising and other overheads. I agree that without the big company's support and extensive R&D who knows what we would be riding, but at the end of the day, all manufacturers are running a business, they aren't doing it without financial objectives.
If, hypothetically, everyone shyed away from the big manufacturers to buy custom, on the grounds of price alone, I suspect the big companies would find a cheaper method of production.

The vast majority of regular standup surfers in CA and HI ride customs, at least in my experience. I see very few surfboards from the major brand names actually in the water being surfed.


infinity-sup.com/

www.patrawsonsurfboards.com/boards/sup/

www.kingspaddlesports.com

rjsurf.com

www.sailboardsmaui.com

foote-surfboards.com/bill-foote/

www.nectarsurfboards.com


Is this a large enough selection? If not, there are many others...

It is a totally different business model in the US. Greater LA alone has the population of the whole of Australia. It is a lot easier to survive as a custom shaper with a market that size at your back door

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PTWoody said..
I'd have to go to QLD. The guys who are shaping race boards in QLD are no more local to me than the people in Thailand or China.

Excuse me for butting in again but that is the saddest thing I've ever read on Seabreeze.



On the up side I totally agree with everything AA has posted,great topic btw.

That doesn't necessarily reflect the reality of a dynamic market where currencies like the USD may seem to be safe but are not. Are you suggesting that that Thai Bhat is prone to more market volatility than the USD? You would need to show evidence of that and so far none has been forthcoming. Certainly the last twelve months would reveal less movement than what we have see with AUD against the Greenback. Ultimately any price differential will impact upon import/export ratios and it has to be said that resting on the USD for currency transaction has only served to facilitate inflationary pressures. Expect the consumer to adjust accordingly. I have no doubts that distributors will cry poor but in reality you can hardly expect consumers to keep footing the bill. There is another real potential to be borne from this. Let's assume you venture out and purchase a 2016 board for $3k. Now fast forward to the release of the 2017 boards and the AUD is at parity. This equalisation results in a price reduction for new boards. So what does you think your second hand 2016 board is now worth? Yep you guessed it you have just taken a massive hit on your board because most assuredly your board will have to be less than the new current models. The only way to avoid this is if you artificially maintain a high price on boards. That's what happens when you trade exclusively with one currency which is great when it loses value to make things cheaper here but hits you hard when it increases is value.

In Windsurfing GUN SAILS has become an important vendor and remained important: they sell directly.
In kitesurfing SWITCH has become important: they sell directly.
I expect the same to happen in SUP - the only issue: SUPs are rather big to ship by mail - hence the iSUP will conquer even more market through direct online channel.
(Gong SUP sells direct)

The main brands are that have world wide distribution:
- Boards & More (North ION) = Fanatic
- Neil Pryde: JP Australia (dropped Cabrinha in SUP)
- Naish: Naish - Brand name Robby Naish sells
- Starboard: not so much leading in other watersports but gambled on time on SUP with their glossy catalogs and succeeded
- BIC: at the lower end of the market

They have the distribution, the channels, the marketing, the influence in the magazines.
They will set the pricing for SUP (BIC will set the low price)
What brands will the major part of the buyers buy ? Big names as their local shop advices ? probably
Local brands: unlikely for a first board: unheard - unknown - uncertainty (= risk when buying)
On line: only those with some SUP experience will buy online.

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TalkToMe said...
I've just re-read the entire four pages and picked out a few lines that stood out:


"(Prices are high) Like in sailboarding, (due to) the sponsored riders with their hands out, and everyone else trying to make some $ out of a passion, force up the final selling price."


"Cheap , cheap , cheap the majority will always go the cheapest. the smart ones go for middle of the road the one percenters go for the top"


"SUP may be heading the same way as sailboarding. Bought my first wave riding board and rig for $1200 within a few years everything went high tech and just a hull was $2000 then the rig was extra on top of that. During the late eighties there would be 60 sailboarders at Cronulla or Gerroa on a good day. Now just a handful. Hope SUP doesn't go that way because of pricing."


"So what happened here (South Africa) was that everyone became an importer - we must have at leat 30-40 brands in a tiny market with most selling less than 20-40 boards a year. It's clearly not enough to make a living but it is giving the customers options outside of the bigger established brands.


"The only way to really cut costs is to reduce the links in the distribution chain - IMO this is a very dangerous route as it means local retailers will fall by the wayside and customers will be forced to shop online and straight out of garages or smaller warehouses.


So it looks like the standard distribution model of manufacturer/brand/importer/retailer isn't ideal as this sets the prices generally too high.

Knowing that a few, or even a lot individuals in some markets, have started their own brand and have started selling straight from the importer level and in turn removing the retailer and their $400-$800 markup and more with some models. Customers are in turn willing to buy a brand with no community/history/brand value. So with that, is the big brand distribution model really working for all? There are so many brands out there that every Tom, Dick and Harry thinks they can sell SUPs.

Furthermore, it seems that most people don't want to pay over 2K for anything or even $1200 - $1500 for an Al Rounder. Would you agree?

All said and done, it seems it is hard to make a buck in the SUP market. And that is in a so-called rising trend. That is a little concerning.

Any thoughts?

Good points.

I agree, it's gotta be difficult for the retailers to make a living out of this and I feel for them. And with the prices jumping each year it's only going to get harder. But that's the bullet point I guess. Is this going to continue to happen each year? At what point, if at all, does it stop? Will a Hokua or Starby Pro cost $4000 in 5 years?
Rod made a point of saying that the big brands send their demo gear and guys around the country all year and absorb those costs into the company. And I'm certainly grateful for that because I get to try all the goodies for free each year. And last year I actually bought a Starby Carbon board as a direct result. But does that then justify the prices? It doesn't really matter though because the reality is at some point some customers bow out because they simply can't afford the product anymore.
This in my opinion is why the big guys need to work out a happy medium. Price more and sell less, or price less and sell more?