Chris Willemse on imports

[Icycling]

Thank you Korbach - I suspect you have a PHD or a higher qualification - you right on the money!

 

 

 

Unfortunately SA currently does not produce any bicycles and thus cannot explot this sytem directly - I beleive this will change very quickly! After all we already producing high end carbon bicycle wheels for export. But once again if I still have anything to do with it it will be through your LBS - they are so important in the chain in keeping the sport alive a whole in RSA!

[Chunky]

Brendon Els....

Firstly, I dont know how your company is actually still in business. Starting with an idiot like you at the helm and the crap products that you sell.

I was a witness to the endless crap those Raleigh frames gave begining of last year. Every second one that were given to Microsoft team came apart within a few weeks. What a load of crap.

All you have done by trying to drag CWC through the dirt is highlight the fact that the prices in his shop are as rediculously low as he is advertising. If the consumer can get the same product at a cheaper price elsewhere he is going to take it. Loyalty to the LBS who buys from approved dealers go right out the window when there is a few grand to save elsewhere.

I for one know what markups are used by yourselves and the LBS. I regularly buy direct from the suppliers at way below average prices and still sometimes the items are offered from CWC cheaper.

 

The local Bike shops and importers are digging a hole for themselves. You cant blame anyone trying to save a buck. Your common defence will be 'what happens if something goes wrong with the part from CWC?'. I got a set of Zipp wheels from one of those pieces of crap that you sell. The wheels started to give problems after only 2 weeks. I sent them back to a local Raleigh dealer and told him they were from the 25k package deal thingy majigy ( Bike was stripped for parts and wheels. The frame was given away. It also later broke). Sorry I was told, not Probikes problem. Contact the local agent for Zipp.

 

Your products are sh*t and your service is sh*t. If CWC does a better job good for them.

Chunky2008-01-03 14:59:03

[Chunky]

This is going to be a bit long winded but it will give some insight into the grey market pricing being practised by CWC.

 

Manufacturers of bicycle components number in their thousands around the world and the fight for market share is fierce. Big volume orders which are awarded to any manufacturer' date=' means the economies of scale kick in and they in turn, can push for higher discounts from their own suppliers of either raw material or finished and semi finished components.

 

Bicycle manufacturers are the best source of big volume orders for component manufacturers as they have annualised production runs of tens, to hundreds of thousands, of units per bike model. Any component supplier winning a contract to supply these bike manufacturers becomes an OE (Original Equipment) or OEM (Original Equipment Manufacturer) supplier.

 

Component manufacturers and suppliers are forced to discount their products heavily to win these contracts. They are prepared to do this in the interests of exposure for their brands in the retail markets of the world. A second important factor is that they are automatically the first consideration for replacement or upgrade by cyclists owning machines with these parts fitted as original equipment. Keeps the wheels turning.

 

The working profit for component manufacturers comes from the retail trade, not from parts supplied as OE at huge discounts.

 

This working profit operates throughout the supply chain and is what keeps the industry alive. We are now talking about the entire profit structure which is essential to keep cycling a going concern. The  manufacturer sells to the wholesaler, the wholesaler to the retailer, and the retailer to the end-user. Each of these is entitled to a reasonable profit (they would be dead without it), and market forces, as in everything else, will keep these prices honest.

 

Manufacturers have to factor in warranty claim costs (nothing is 100% perfect), wholesalers have to factor in promotional, advertising, and distribution/delivery costs, and bike shops have their own long list of expenses from stock holding through to rent, staff, advertising, etc.

 

So, how are Chris Willemse and other grey market distributors able to sell goods in their retail shops at prices which are often cheaper (believe it or not) than the importer or wholesale distributor can buy from their own suppliers overseas who are, often as not, also the manufacturers of the components?  It boils down to two things. Greed, and unscrupulous business practices. Here's what happens in the main.

 

Bicycle manufacturer ABC calls for contract tenders on a planned production run of 250,000 premium grade bikes. To a wheel rim, or crank, or tyre manufacturer, that means a standing production run in their factory of 500,000 units if their product has been accepted and specced on the bike. Unhappily, saddle or handle bar manufacturers will only get orders for 250,000 units if they win a contract!

 

This is business to die for. There are (say), maybe 5 or 6 manufacturers who can supply the volumes of this size with the necessary quality control measures to ensure the integrity of the brand-name bike being built.  These component manufacturers now submit their tender contracts with prices shaved to the bone as the orders are big enough to keep their production lines running for months. They are all in a severe price war where  winner takes all.

 

It is under these conditions that the greed and unscrupulous business methods emerge. Let's let's assume ABC Bikes wants to make some quick easy money on the side. Here's what he does.

 

He has actually planned to produce 240,000 bikes, not the 250,000 he's asked for tenders for. He knows that the wheel, or tyre, or group-set manufacturer he awards the supply contract to, has come in with prices which are even lower than those extended to their own distributors around the world. The wheel maker may have gone in at cost plus 10% or 15%. The tyre guys may be looking at 5% or 10% and the group-set maker at 20%, give or take a few percent. Only the huge manufacturing volumes are able to sustain such low pricing. Correcting profits have to be recovered from supplies to wholesale purchasers at normal margins (say 50% mark-up), so the manufacturer can survive.  

 

ABC Bikes now cashes in on the extra 10,000 wheels (and cranks, tyres, levers, etc) by selling them off as loose parts for cash at (say)

cost plus 20%, to anyone willing to buy them. ABS Bikes may even smoke-screen this by saying they're selling the stuff as OE replacement parts. Brand name products like Mavic, Shimano, Campagnolo, Continental,  Michelin, Fizik, etc etc, are generally the hardest hit by this type of marketing because of their status as industry leaders where quality comes at a price which makes these discounts financially rewardable. 

 

CWC is doing nothing wrong. He has, in some way, found a supplier or suppliers probably selling under these circumstances and, because of it, has an unfair pricing advantage over local retailers.  Great for CWC who advertises retail prices at (or even below), dealer cost in nationally distributed magazines and is regarded (by some), as the saviour of cyclists in South Africa. The situation is false and raises huge negative perceptions in an industry which (on the whole), is a long way from being owned or run by wealthy people.

 

The sad point to the whole scenario is that distrust is developing at all levels in the cycling fraternity. Cyclists think their regular shop is ripping them off. Shops who experience lost business to CWC think their wholesalers are ripping them off. Wholesalers (who's prices are dictated by market competition, not huge profit margins) suspect that their own manufacturing suppliers are profiteering at their expense. The whole thing is destabilsing the cycle trade here and around the world and creating an unhealthy atmosphere of mistrust between suppliers, cycle shops, and cyclists.

 

CWC is not looking after cyclists (as many appear to believe judging by comments now being posted on this forum).  He's looking after No. 1 and it's costing him very little. He does not have to carry the costs of nationwide distribution, sponsorship of cycle teams like Microsft MTN, Proline, Neotel, Harmony Gold , or pay for expensive national promotional and advertising programs and campaigns for the products he is importing.

 

The official importers of the brand-name products which CWC pirates carry these costs for him, yet he points a finger at them because these costs have made the goods more expensive.  CWC is merchandising brand-name components and accessories without any commitment to things like product loyalty or passion for the brand. He merely makes money out of them and when they are no longer available, he'll move onto something else. And make more money.

 

CWC's confrontational attitude and threats of legal action against people involved in the industry are not going to do it any good. There are precious few bike shops that make a lot of money, and to point a finger at them and their suppliers and say they are rip-off artists is unfair and opportunistic.  

 

 

 

 

[/quote']

 

Hi Ray

 

I see even the tyre dealers are now in on the action.

 

I wonder if you can help me on this one. When I was still racing as part of the National team I only used Conti or Dugust tyres on the track. We also had a special deal with you guys where we were able to get things direct from you and other suppliers.

 

I am a bit perplexed about the markups that you use in your examples. You are stating 10 to 20 percent by the LBS. Why is it that the prices I got from you were on average half the price or even cheaper then in the LBS. They are adding on far more than 10 to 25 %.

 

I also just bought a new groupset for a friend of mine direct from the importer. Now he was able to supply me much cheaper than teh price from CWC and MUCH cheaper than the LBS. I assume I get the things for the same price as the LBS. If that is the case average Joe is getting pulled through his ring by the LBS.

 

If online shops are able to sell products at discounted prices, perhaps the LBS should move out of the expensive show rooms and sell from a warehouse and keep everyone happy.

[SwissVan]

.... I got a set of Zipp wheels from one of those pieces of crap that you sell. The wheels started to give problems after only 2 weeks. I sent them back to a local Raleigh dealer and told him they were from the 25k package deal thingy majigy ( Bike was stripped for parts and wheels. The frame was given away. It also later broke). Sorry I was told' date=' not Probikes problem. Contact the local agent for Zipp.

 

[/quote']

 

Did you buy the bike from probike and use the ZIPPS on the original bike they came with i.e. the bike to which the warranty would apply?

 

The wheels (Zipps) started giving problems and you took them back to Probike AFTER the rest of the bike was stripped for parts and the frame given away  ?

 

Sounds strange...

 

 

 

[SwissVan]

I shop around for the best service and usually price is secondary except where it is over the top.

 

 

 

That about sums it up WB ...

 

 

I wonder how many of the CHEAPER options (various on line shops) could supply a bike or bike part in a last minute emergency at 4:30 on a Saturday afternoon for that early sunday ride / race ???

 

I know a few LBS here and in SA and I dont see any of them living in mansions living the high life from all the money they supposedly make, no more than any other small business owner that is.

 

Life is not a conspiracy, its what you make of it...

 

 

SwissVan2008-01-03 15:28:01

[Jules]

Finally Korbach has provided us with a credible and informed reason for the price discrepancies

 

 

[Chunky]

.... I got a set of Zipp wheels from one of those pieces of crap that you sell. The wheels started to give problems after only 2 weeks. I sent them back to a local Raleigh dealer and told him they were from the 25k package deal thingy majigy ( Bike was stripped for parts and wheels. The frame was given away. It also later broke). Sorry I was told' date=' not Probikes problem. Contact the local agent for Zipp.

 

[/quote']

 

Did you buy the bike from probike and use the ZIPPS on the original bike they came with i.e. the bike to which the warranty would apply?

 

The wheels (Zipps) started giving problems and you took them back to Probike AFTER the rest of the bike was stripped for parts and the frame given away  ?

 

Sounds strange...

 

 

 

 

Hi SwissVan

 

Yes, the bike was bought for everything but the frame. The wheels were taken back by the original owner only 1 month after purchase.

 

I think the problem came in when ProBike found out that the frame was stripped and decided not to honour the warranty.

 

BTW, the local Zipp agent changed teh wheels at no charge.

 

BTW, The Raleigh frame broke after only 2 weeks of use. Chainstay broke during H2H. A lady was riding the bike.

 

 

[Korbach]

The figures I used are abritrary ones for example purposes. I have no idea what the manufacturers make on OE supplies, I know it is only marginally above production cost.

We used to supply you guys direct on a semi-sponsor basis as at that time, very few dealer's would keep tubbies as shelf stock so we only imported for track racing. Since the huge growth in fancy tubular composite and hi-tech wheels over the past 18 months or so, demand for tubbies has outsrtipped supply on a few occasions. Shelf stock is now the norm at many specialist shops and has become a standard stock line at wholesale level.

CWC's prices on group sets or any other of the products he sells would be dependent on what he can buy from grey market suppliers at any given time. You would observe over a passage of time that his continuity of supply for many things would be very much hit-and-miss.

Always shop around. If a product is expensive at one shop and cheap at another it may be due to stock levels which were imported at good/bad exchange rates and not just discounting or profiteering by the LSB.

Saying the bike shops should consider moving out of expensive premises and operate out of warehouses would definitely be good for pricing. However, display and lighting, and visibilty are huge factors in allowing you to see and consider what you're buying. A pile of group sets in a crate in a dingy warehouse is not going to light your enthusiasm for spending money as easily as you think if the presentation is lousy.

On-line business will continue to grow I think.

 

 

[Christie]

Korbach, are you saying that all on-line shops like totalcycling.com, chainreactioncycles.com and comobike.com are so much cheaper sell grey products? I can't agree with that.

 

Secondly, why are the prices of some stuff at my LBS, like Zipp, Cervelo  and Speedplay in line with what is available from on-line shops, but Campagnolo are almost double the price?

[Pantani]

*Bump*

 

There you go Brandon...

 

[ewep]

 

Korbach' date=' are you saying that all on-line shops like totalcycling.com, chainreactioncycles.com and comobike.com are so much cheaper sell grey products? I can't agree with that.

 

Secondly, why are the prices of some stuff at my LBS, like Zipp, Cervelo  and Speedplay in line with what is available from on-line shops, but Campagnolo are almost double the price?

[/quote']

 

Just about to ask EXACTLY the same!!!  Let's see if he/she answers.

 

[Velouria]

 

T

Unfortunately SA currently does not produce any bicycles and thus cannot explot this sytem directly

 

Morewood, Producx

 

 

 

[widget]

Hmm, I would like to say, Mr Els plays the crying game well, he wants all and sundry to think he is the ONLY person doing the retailers a favour, well let me just say that I am also involved in a supply and distribution business, and like Mr Els I also supply most of the major retailers, plus the independants, and its NOT only the independants who use delay tactics and extend the wholesaler / distributor, but the multinational conglomorates with daily turnovers of millions as well (but I guess he forgot to mention that).

.......... plus, most of them (major retailer) import and retail their own lines in direct oposition to Mr ELS  (and me) but I doubt he will be stopping their account anytime soon, because its generally too lucrative financially and quantity (units moved) wise in the long term, however a small dealer like CWC wont dent their bottom line, so its easy to play "groot crocodil"

 

Anyway, I have had my say, I wont comment on this anymore.

 

........and by the way, I am NOT in the cycle industry.

 

However, I am interested in "Korbachs" post - firstly Korbach you use the term "GREY" quite liberally, I doubt thats true and leads to unpleasant connotations, lets stick to "PARALLEL IMPORTS" and assume, until we know differantly, that CWC and all others who sell in opposition to the official distributor are paying all relevant taxes.

 

In other words no unfair advantage.

 

You seem to be stuck on the notion that its unfair to ride on the official distributors back - thats clearly and simply a "moral" point not a business one.

 

A PLEASANTRY reserved for tea and cucumber sandwiches on the porch, in reality and in fact, every single major retailer in this country dos exactly the same, they rely unashamedly on the brand holder to do all advertising and get the product into the market, and then once its established, they simply start parallell importing the same line, and start discounting AGAINST the official importer, companies like LG, SAMSUNG, BOSCH, BLACK AND DECKER to name a few are ALL in the same boat - this is not new, the retailers, AND GENERALLY CONSUMERS are not interested in paying for the official distributors problems and sponsorships, the RETAILERS want the sale, they know what the customer is willing to pay, and will do whats necessary to get the cash (and that usually means price discounting).

 

Be Honest now Korbach, will you pay R20,000 for a Plasma screen from an official distributors shop because he sponsors some sporting team, advertises the brand, holds massive stock, has a big warehouse and a smart computor system with a telephone which plays pretty little ditties while you wait, or are you going to run into HI-FI CORPORATION (who do nothing like that) and buy a parallell imported Plasma for R12000.00 (an R8000,00 saving)??????????????

 

 - I shall bet you will go for the Hi-Fi option.

 

If a wholesaler / distributor wants to get involved in sponsorships etc, this is a cost for them, not to be passed onto the consumer, as the consumer gets no benefit from it directly.

 

Importing and distribution as well as retail has changed dramatically over the last 5/10 years, EVERY SINGLE MANUFACTURER, IMPORTER,DISTRIBUTOR AND RETAILER WITHOUT EXCEPTION IS TRYING TO GET CLOSER TO THEIR TARGET MARKET - THATS YOU AND ME.

 

No longer can an importer sit in an ivory tower, dictate who sells what and how, control price and outlets and above all say "I dont want to deal with the public"  - at least not if you want to stay in business that is.

 

Unfortunately importers in SA (and not only in the cycle industry) are stuck in a time warp 10 years back, they want to carry on as it was 10 years ago because its easy and convenient for them, but consumers are moving forward, they are computer literate, knowledagable, mobile and know what they want and how much they are prepared to pay for it.

 

If your price is padded by sponsorships, glitzy shop fronts, excessive staff, high rentals etc you WILL find somebody stealing your market, you can be PRO-ACTIVE about as some are or you can be RE-ACTIVE as we are seeing here - as the famous saying gos - ITS NOT PERSONAL - ITS BUSINESS.!!  

 

As far as your comment gos on over supplier over runs, yes in some instances true, however, in my experience its not the main source, there are countless international distributors who will supply anyone at a small margin to keep up their sales figures with their supplier and ensure a continued low initial price to them.

 

Its really just the numbers game, 10,000 units costs XYZ but 15,000 costs 5% less - the distributor cant sell the extra 5000 units locally, so gos international at a 3% margin - simple. 

[markStockton]

Well said Wdget. I'm in the FMCG industry and agree that it is time for the Importer / Distributors (off the past) to get with the times or go out of business. It's their choice which option they take.  

[Brakkies Sport Fotos]

Widget..

 

 

 

Well done.. The first time someone said something understandable and worth reading.

 

 

 

Well done.

 

 

 

MTN sponsership... I dont give sh*t about that. With the internet, most of us will go into a shop, already knowing what we want and how it looks. No bright lights needed to sell it to me. Just a normal 100w bulb and eskom power will be good enugh.

 

 

 

Than he attack Klein Chris on-line shop and tell him that he need to be carefull, because Mr.Els will open Chris Snr. account history in court?

 

 

 

What I understand is that there is 2 "different" shops under one roof:

 

 

 

1)The On-line shop = Pay cash or by Debit Card

 

 

 

2)The normal shop = Can pay by C/C , but their prices is more expensive than Klein Chris on-line shop.

 

 

 

So in short, If you do not quote or show them the on-line shop price, the "second shop = Chris Snr. one", charge more.

 

 

 

 

 

 

 

popeye2008-01-04 02:55:27

[Brandon Els]

*Bump*

There you go Brandon...

http://www.raleigh.co.za/blogs.php?blogId=190&authorId=2