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Most profit / biggest rip off in gear?

billski

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I would be stunned if skins cost of production was anything less than $75 (don't forget R&D costs). /QUOTE] And distribution, warranty, returns, marketing and insurance costs. Granted, the high end stuff devotes far too much money to marketing, to promote an image, but that aside, the others are fixed costs. If you really focused on profit margins that would be a more telling indicator.
 
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Uh, those funeral home directors in NY who got caught traffiking body parts are now in jail, sorry :p

When business is dead you have to find revenue on the black market.

On topic..it would be great if we had the dude from the Killington food is expensive commercial and have him visit a boutique ski shop with $150 goggles that are $46 on Steep and Cheap and $100 fleeces and have him walk around and saying how he could fill up a shopping cart at Kohls for one Patagonia fleece made from recycled hippie farts. For reference..

 

Philpug

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Why does something that is profitable for a manufacture make it a big rip off?
 

Geoff

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Business 101..... for example....sunglasses cost $30 to produce, distributor pays $60 and sells to shop for $120, shop sells for $240. The more middlemen involved, the more the retail price is.

In high volume consumer electronics, the numbers are quite different. Linksys or Netgear, for example. The contract manufacturer gets 5% gross margin. Netgear gets 10%. The distributor gets 10%. The retailer gets around 40% if they sell for MSRP. That home WiFi router in Best Buy is roughly 2x the parts cost. Netgear has practially no intellectual property in the product. It's a reference design from a semiconductor company like Broadcom. They design the plastic case and pay somebody to tailor the web interface to their taste.

The big carrier class phone systems I built for a lot of years were at the opposite end of the spectrum. We'd pay our contract manufacturer around $100K for the printed circuit boards and chassis. We'd sell the box to Comcast for around $3 million. When you have 100+ engineers on staff developing and enhancing the box, you have to charge those kinds of numbers to make any kind of money.

And then you have Microsoft that has basically zero product cost. It costs pennies to cut a CD-ROM and put it in a shrink wrap box.
 

marcski

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Skis. It's crazy how much a ski shop will rape you for a pair of skis and bindings. Nuts! With production in the thousands....it just doesn't cost hundreds of dollars to make a ski. All of the cheap prices online reinforces this. I spent less on skis and bindings for myself and my wife online than I think I spent on the last pair of skis I got at a ski shop.
 

marcski

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In high volume consumer electronics, the numbers are quite different. Linksys or Netgear, for example. The contract manufacturer gets 5% gross margin. Netgear gets 10%. The distributor gets 10%. The retailer gets around 40% if they sell for MSRP. That home WiFi router in Best Buy is roughly 2x the parts cost. Netgear has practially no intellectual property in the product. It's a reference design from a semiconductor company like Broadcom. They design the plastic case and pay somebody to tailor the web interface to their taste.

The big carrier class phone systems I built for a lot of years were at the opposite end of the spectrum. We'd pay our contract manufacturer around $100K for the printed circuit boards and chassis. We'd sell the box to Comcast for around $3 million. When you have 100+ engineers on staff developing and enhancing the box, you have to charge those kinds of numbers to make any kind of money.

And then you have Microsoft that has basically zero product cost. It costs pennies to cut a CD-ROM and put it in a shrink wrap box.


http://www.newegg.com/
 

riverc0il

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And then you have Microsoft that has basically zero product cost. It costs pennies to cut a CD-ROM and put it in a shrink wrap box.
Don't forget R&D and techs. Maybe the box and CD don't cost much but a lot goes into producing the "product" even if individual delivery costs are low. Look at downloads of software further reducing cost of the actual distribution method to just bandwidth and a global web site and server. Lots go into the software behind the scenes though. Not that I am defending Microsoft ;)
 

Philpug

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Skis. It's crazy how much a ski shop will rape you for a pair of skis and bindings. Nuts! With production in the thousands....it just doesn't cost hundreds of dollars to make a ski. All of the cheap prices online reinforces this. I spent less on skis and bindings for myself and my wife online than I think I spent on the last pair of skis I got at a ski shop.

Gotta love the ignorant and monoptic views that are posted on the internet.
 

deadheadskier

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Gotta love the ignorant and monoptic views that are posted on the internet.

I'll take that over throwing insults.......

Why not offer something constructive instead? If you have intricate knowledge of a ski production cost, by all means share it with the group. It's fairly easy for a consumer to believe otherwise when you see a ski that MSRPs for $1200 last season, go for less than half that one summer later. Don't see that with cars or numerous other products, which would lead the consumer to believe that they are being gouged. But in your opinion, no, consumers are just ignorant. :rolleyes:

As for your original question, 'What is wrong with profit'....the point of this thread was not slam profit. I just feel there are certain things that border on gouging. In my view skins are one such item. No one has told me the production costs, but I have a hard time buying that some fancy plastic and glue and a couple of clips costs more than $20 to produce. So, when you see them listing for $150, that to me seems like exorbanate profit.
 

RootDKJ

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The big carrier class phone systems I built for a lot of years were at the opposite end of the spectrum. We'd pay our contract manufacturer around $100K for the printed circuit boards and chassis. We'd sell the box to Comcast for around $3 million. When you have 100+ engineers on staff developing and enhancing the box, you have to charge those kinds of numbers to make any kind of money.
On the video side, it's a little different. Some major manufacturers give us the hardware (and sometimes even the software) for basically nothing, but have us enter multi-year support agreements and upgrade contracts. That's where they make their profit.

I particularly like this model. I think it forces the vendors to build a better box.This keeps the amount support necessary to maintain the product down, to increase the profit ratio.
 
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I'll chime in as someone with an intimate knowledge of the costs associated with ski manufacturing...the whole manufacturer cost gets doubled to the distributor and the distributor doubles the cost then the retailer doubles the cost...otherwise known as a "keystone" simply isn't the case in ski production. Ski manufacturers hope to realize a margin in the low 30% range, the US distributor hopes to realize an overall margin in the low to mid 30% range, at the end of the season, the retailer will be happy to have a hardgoods margin in the mid to high 30's. There are some skis on the market that neither the manufacturer nor the US distributor are making more than a 10% margin on...I've sat in pricing meetings and joked that, after we've paid the sales rep his single digit commission that we'll have enough gross $$ profit left to buy a sandwich...not a resort sandwich mind you, but a sandwich at the local sandwich shop for less than $4. That's GROSS margin...not net...gross needs to cover all the other costs of operating...payroll, healthcare, marketing, heat, rent, etc etc etc. If the ski industry was as lucritive as some of you thought you wouldn't have seen Rossignol sell for over 240 million to quicksilver a few years ago and then get sold a few years later for 78 million. I could go on and on and provide example after example...I've been working in snowsports retail/wholesale for the last 20 years...and not because I think it'll make me rich someday, but because I love the sport...and its an industry that is full of people who do it because they love it. If you want to complain about margins and feeling like your getting ripped off, take a look at the perscription drug industry, jewelry industry, or professional sports. There aren't any ski industry "tycoons" with a second home in the Hamptons or a multi million dollar Manhattan apartment. A ski that's bought at 50% off means that somewhere along the line, there's someone who didn't make any money...and may have lost some...either the retailer or the distributor. There's an old saying in the industry....how do you make a small fortune in the ski industry? Start off with a large one.
 

mondeo

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I have a hard time calling anything for entertainment as gouging. Skins don't have that high of volume, so the margins have to be higher.

My guess is that the summer ski prices are just above or at cost, and are just a way to clear inventory for the next year's skis that they actually make their money on. Plus being a seasonal business, there's high overhead associated with needing a building for a full year.

I don't think you can get away from basic economic theory on this one. The right cost for a product is the one that makes the most profit for the seller. I don't care if skins only cost a cent a piece, if $150 is the price that makes Black Diamond or G3 the most money, then that's the right price.
 

riverc0il

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I will echo eastcoastpowderhound's thoughts on this but from a different realm of the retail service industry, one in which that gets slammed frequently for price gouging on items that we only make a 10% gross margin on our most expensive product after commissions paid for the right to operate a store front. As eastcoastpowderhound notes, that is prior to expenses and some items are sold at break even or even a loss meanwhile the consumer complains of rip off pricing.

My perspective change on some subjects has been interesting since I graduated college as a wet behind the ears grad with a semi-mixed socialist perspective. Economic theory can not explain everything and has a hard time predicting the future. However, some things it can explain very well. And one of those is prices when mixed with competition. So long as their is appropriate competition without collusion, then price gouging can not happen because the competitor, even with an inferior product, could drop prices low enough to corner the market.

So I don't see the "rip off" perspective so much as blindly assuming certain products are making more than 50% margin (again, as mentioned, no retail product that I know of has a higher margin than clothing which tops out around 60%). But rather what products are not worth the money that is being charged. eastcoastpowderhound's post suggesting that ~30% margin is really good for hard goods in ski retail seems sound. Every market has various margins depending on numerous factors. But there are not many industries that are ripping people off, IMO. There is a lot of junk out there that is not worth buying for the price, though.
 

deadheadskier

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I appreciate the input regarding the channels of distribution and everyone's cut. That is something a consumer is not going to know. I guess my beef with skins are that the MSRP on the skis I recently purchased is $620, fairly inexpensive actually. When I look at skins with an MSRP of $150, it doesn't add up. It would seem to me the cost of materials and build process to produce my skis is well over 4 times that of skins.
 
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I appreciate the input regarding the channels of distribution and everyone's cut. That is something a consumer is not going to know. I guess my beef with skins are that the MSRP on the skis I recently purchased is $620, fairly inexpensive actually. When I look at skins with an MSRP of $150, it doesn't add up. It would seem to me the cost of materials and build process to produce my skis is well over 4 times that of skins.

i wish i knew more about the production process and steps involved with skins...I'd shed some light if I did.. I do know from my past life as a retail buyer that G3 skins were not a high margin item...low 40% margin...we did a lot better on lip balm, turtle fur and hand warmers. If we sold skins to a season pass holder our margin was toast...employee sale...fuggetaboutit,not even worth stocking...
 

deadheadskier

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i wish i knew more about the production process and steps involved with skins...I'd shed some light if I did.. I do know from my past life as a retail buyer that G3 skins were not a high margin item...low 40% margin...we did a lot better on lip balm, turtle fur and hand warmers. If we sold skins to a season pass holder our margin was toast...employee sale...fuggetaboutit,not even worth stocking...

all about perceived value. There are just certain things that make me scratch my head. Skins are one, Arctyrx or obviously the ball punch clothing mentioned earlier being others.
 
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