Equipment prices, the economy, exchange rates and the future

Shoot the breeze and stay in the loop with the unhinged and unhooked word on the street.
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Mike B
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Tue Nov 18, 2008 3:12 pm

zook600 wrote:Mike, I appreciate what you say regarding cost, but where do we stand with Manufacturers giving out an extended warranty, are they prepared do 'do their bit' in the current climate. Am I right in assuming most have a year's warranty, why not extend this to 2? This would defintly make me a little happier about spending more. Quality and back up is worth a little hike in my opinion.
It's a good point, and a definate possibility. Speaking from the viewpoint of someone who lives and works in the industry on all levels... it's rare we have a warranty problem after the 1 year purchase. The main brands we deal with have a few niggles here and there, but all problems tend to be in the first few months, after that everything is stable for the rest of the life of the kite. They could definately offer a bigger warranty but I doubt it would be of any use.

I've seen some shockers but they have been release problems that were soirted out pretty quickly.. (north bladders for example) but all those kites are happy and well now... all sorted. If you do get problems they surface very quickly... after that it's wear and tear.

A good retailer will back up your kite throughout it's life, and if there is something that the brand won't help you with, chances are your local shop will. A good kite from a good shop is the answer!

I know that Airush and Nobile are putting up the warranty terms on their products; 666 and shinn are now 2 year warranty, and the X-Pact, FS and switch are now a 3 year warranty so I believe.

One of the upsides of this debacle is that used kites will hold their value, and as such the % change between old and new may offset the pain of the initial purchase price. But it's going to be a shakey transition!

One other thing to make us sound like poor impoverished urchins... say we have a stock of 100 kites worth £10,000, if the average price of these kites rises 30% then next year our operational stock of 100 kites will be £13,000 so we have to invest an extra £3000 to next years stock to be in the same position... This money has to be earned, so the operational costs of the business just continue to rise, as inflation eats all our profits!.. in effect if we sold all last years at a 20% profit we would be at at 10% loss trying to continue with the same busines next year... before we paid any bills..

oh woe is me.... lol
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CoNaN
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Tue Nov 18, 2008 5:05 pm

pooly wrote:
CoNaN wrote:This would be the time for you to make a killing pooly, that famous cheap blue rope is now looking like a more and more attractive alternate to normal kitelines. :-D
Ssssshhhhhhhh, i was hoping that wud be forgot about... Ive been very busy in my shed and ive got more cheaper options for us yet to come out..... My R & D has been relentless 8)
oooh the anticipation :-D are we gonna have the grand unveiling on kiteforum? they do like a good idea over there :P especally one that will have had so much R & D
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BUK
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Tue Nov 25, 2008 9:57 am

Zook 600

Check out the new Best warranty , for 2009 equipment and beyond it is a fair and reasonable warranty , there is no time frame .

This will give people who pay good money for a new kite , extra assurances that they will be looked after.

As you say , the brands need to help too.

Looks good for the weekend !!!! :wink:
M Shinn
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Tue Nov 25, 2008 2:48 pm

Hi all,
It's a long time since I read 8 pages of a forum topic but this one has had me interested. Mike has raised a good discussion.
I'm not going to comment too much apart from some FACTS as a manufacturer in the kite business. Please note these are FACTS as regards to our business not suppositions.

The cost of making a kite in China is way, way higher than you imagine. I am not talking about R and D or marketing simply the cost of manufacture. Several Chinese companies have tried to make cheaper kites and failed to do so and with the amount of patents and propriety designs in the market it is unlikely to change in the next year or 2. At this time the cost of the raw materials is rising and due to new labour laws in china the cost of workers is much higher. Most Chinese factories I work with or have sampled with have advised of anticipated 15 to 25% pricing increases for 2009. There is no way for this to be passed on down the chain of supply so this hit has to be largely taken by the brand. Every brand looks for ways to reduce their manufacturing costs as much as possible without effecting the quality of their product but if there was an easy solution someone would have found it by now and once one company had done it the rest could copy and follow very quickly.
Kiteboarding is a very competitive market due to the comparatively high number of brands in the market. The easiest way for a "name" brand to sell more units is a lower price. If it was possible for the brand to have a lower price and still make money one of them would have done it by now........ if brand "x" is having a bad year the simplest solution would be to drop RRP pricing and move through more units......

The cost of transport is high. I think if you can find transport of a 20 foot container for 500 quid door to door from China to UK you would have alot of takers! If you bring a 40 foot container the costs are not double so theoretically you could save more on transport there too...... unfortunately for us shipping takes 4 to 6 weeks by sea, we all know that trends in kiteboarding are changing very fast and the market is very seasonal.....I don't know too many distributors that would be happy to ship (for example) 200 kites in a container the sizes and models of which are pretty much guesstimated unless they were 200% sure of their product and the demand. Bear in mind that in all probability the next shipment would be leaving china BEFORE the first one arrived thus you are talking (in this instance) about a 400 kite risk....... it's not only the cost of shipping that is relevant, also the volume you can safely bring in one go.

The shop has the worst end of the whole supply chain deal. As manufacturer I sell equipment to the distributors months and months before it hits the shops. The distributor can sell through to all areas of the country and has normally many outlets selling in volume. 10 kites over stock is alot for alot of shops to have in stock but a distributor can move one kite to 10 different shops and the problem goes very fast..... a shop has a small margin and has the highest exposure to risk. If one shop starts to discount your local shop will likely have to follow to sell through their stock and the distributor is unlikely to mirror that discount. That means the shop margin evaporates and they lose money whilst the other parts of the supply chain have had no reduction in margin at all. It should be added though that this is why shops have a much bigger margin in the first place than distributors or manufacturers however they are in a hard environment.

The exchange rate is a tricky situation and hedging may help in the short term but in the long term we are all exposed to it. If anyone has a solution then they are probably not going to be in the kiteboarding business as they would be making MILLIONS by employing their idea to big businesses. Banks and financial institutions are in the game to make money too so if they offer you a hedge rate then you can be sure they are confident of making their money back somehow. The rate you get of exchange is the one the banks experts are sure they can't lose on.......

There is a very positive side to all this though, manufacturers are acutely aware of the financial situation that exists and are doing everything in their power to keep the costs down and the value of the product as high as possible.... fiscal value and quality/performance value. If you buy a new kite in the next 2 years it might cost a little more in terms of pounds spent but you are for sure getting the best "value" for your pounds since many years.

Regards
Shinn
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waverider
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Tue Nov 25, 2008 4:57 pm

Thanks for taking the time Mark.

Respect.

I suppose it was inevitable that the Chinese got tired of being the worlds sweat-shop, those of us with any morals should be happy the work-force are getting a better deal in the future. It'll be interesting to see if it is the work-force who benefits rather than the fat-cats.
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CoNaN
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Tue Nov 25, 2008 5:06 pm

waverider wrote:It'll be interesting to see if it is the work-force who benefits rather than the fat-cats.
in an ideal world, in reality the extra cash will go to fill up the fat CEO's imported executive portable shag palace and to filling up the navel of his current lapdancer with cocaine ...
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dbinit
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Tue Nov 25, 2008 5:17 pm

I deal with manufacturing in china, shipping and global import export , and have to agree with mark. There is no big solution to this.

Lower borrowing rates and VAT sound great in theory , but when the interest rate is lowered, those who have investments in our banks dont get such good value anymore and move their money elsewhere. Among other reasons for it , the Sterling then becomes weaker and weaker, making the cost of anything imported even more expensive.

On the plus side, resale values of used kit will also become much better. Best to get on the kite ladder quickly , before it becomes unaffordable to those not already on it.... :wink:

As for £500 to ship a container... More like £1500 then you got another £350 in Haulage and Dock charges.
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waverider
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Tue Nov 25, 2008 5:41 pm

We-all have to do some hedging then, everyone who can afford it needs to buy another quiver regardless of whether they need another or can afford it or not. (If you know what I mean)

I think. :?

Just ignore me, I'm amusing myself.
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TheAdebo
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Tue Nov 25, 2008 7:09 pm

waverider wrote: Just ignore me, I'm amusing myself.
Stop that, you'll go blind!
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waverider
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Tue Nov 25, 2008 7:19 pm

TheAdebo wrote:
Stop that, you'll go blind!
:lol: :lol: :lol:

In the 'Autumn-of-my-years' I have this habit of setting myself-up. Thanks, I laughed so much it made my face hurt.
M Shinn
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Tue Nov 25, 2008 7:21 pm

In fact the change in laws in China will only help the workers, the factory owners etc stand to lose out from it. They realise there is a limit to the amount any one will pay for an item.

The new laws are much better from the human rights stand point.

Now chinese workers
-have paid holiday (but something like 5 days A YEAR)
-fixed minimum wage
-some measure of health cover
-some control on working hours

The changes don't exactly help my business however, I certainly feel better knowing that if the prices have to go up, they at least go up to improve the quality of life of the workers there.

Shinn
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dbinit
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Wed Nov 26, 2008 9:41 am

Much of the price rises will be dependnig on the local government and their relationship with the factories. A large percentage of government are very corrupt in china. Its likely you will see big price differences between factories in different provinces.

2 years ago a 10% export Tax went onto solid wood products. I deal with 8 different factories all over china , some added the tax because they had too, some added it But where not payi9ng to the govenment and some didn't.

Its the same with the holidays , minimum wage etc etc. Some factories will be paying it and some some wont. One factory in Jiang Su province last year, waited 3 months to get an electricity connection. They had to wine and dine the local government officials first.


One good thing that may come out of all of this is export. Many Uk riders who were buying their kit aborad , because of cheaper prices. That wont be the case anymore, and kiters from other countries could be looking to the UK for cheaper prices.
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Mike B
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Wed Nov 26, 2008 10:09 am

dbinit wrote:Many Uk riders who were buying their kit aborad , because of cheaper prices. That wont be the case anymore, and kiters from other countries could be looking to the UK for cheaper prices.
This is true and a ray of light to the UK shops, who need to get their overseas shipping rates dialled in, and their export advertising... I hear parcelforce does good international rates....
M Shinn wrote:In fact the change in laws in China will only help the workers, the factory owners etc stand to lose out from it. They realise there is a limit to the amount any one will pay for an item. I certainly feel better knowing that if the prices have to go up, they at least go up to improve the quality of life of the workers there.
Agreed, me too..
And although it will be harder for us initially our rejuvinated export industry should balance up the balance of payments, bring some money back into the country, and raise the value of the £... As I understand it a lot of weath in the UK / the counterweight to the huge trade defeit we have was made up by the banking sector which, after going pop, explains why we are in so much trouble! It's been a very skewed economy for the last 10 years. Looking at the bigger picture we have a good life over here, and it's wrong to deny the chinese the same...

I'm sure it will all even-out long term, we just have to knuckle down in the short term.
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GRF
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Wed Nov 26, 2008 10:53 am

Well my three happorth having done this before back in the early nineties.

Don't expect Cable to recover and use 1.50 as the rate going forward, if it hits 1.60 buy options it's unlikely to go any higher for some time.

Your Government have talked it down, lots of reasons, but essentially it's standard practice in a recession, think about it, you owe money what better than to devalue it, everything decreases.

The £ in your pocket will not buy as much overseas and nor do they want you upsetting their balance of payments with imported goods.

Why is the dollar so high?

It's a safe haven in times of crisis, think about who have all the cash, Chinese and Oil States, what is their principle trading currency and in who's interest is it that that currency remains of some reasonable value.

Now as to what's going on, and all the scare stories of borrowing, you have to look at the comparitive value of what our GDP was back in 1992 compared to the borrowing undertaking back then and compare it to our current situation to get a more complete picture.

There's a very good article here that explodes the current media myth.

At the moment y'all here what do you care? You have kites, the cost going forward that us in the trade will have to bear and deal with will be born by any more newcomers that the schools system bring into the market, which is why dealers and schools are so important and why I've been cracking on about it and internet only businesses that f*ck that up with their direct marketing since day one.

Lucky me I have an interest and have encouraged a small chain of such a store/schools to continue to introduce those newcomers, even though it has had to put up with the pikey activities of brands like Best and a few others who may or may not survive this upheaval in the worlds finance system.

Kitesurfing will survive all this, there may not be as many players, and customers will become more discerning as to what they spend their hard earned bucks on, but at the end of the day, so you're made redundant, what have you got?

A bunch of cash and time on your hands, what are you going to do?

Learn to weave baskets or buy a new board or kite and go rip..

Bit of a ramble, but bottom line, the world moves on, inflation or deflation starts, and boy do we need it if ever wages are going to match property at entry level ever again..
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CoNaN
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Wed Nov 26, 2008 12:36 pm

"Local shop, local shop, yadda, yadda" im getting fed up with being expected to support someone else's business interest when in fact that business interest puts nothing back into the area
We have had 3 such "local shops" around here and they have all done f*ck all for kiting in the area, except sell their stock, customer support was shite and all the owners understandably were interested in was profits, i worked in 2 of these shops as an instructor so i know the game. Please stop with the "support the local shop" as its a beautiful lovely furry charitable organization. its a business with up to 50% markup.

BTW this is not pointed at anyone in particular, its just a moan that we have nowehere to get gear from as all the shops in this area turn to shit for various reasons, hence i now get stuff off the internet
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