Price Fixing Solution

[The Saint]

Been away for a bit and got back to find 70 pages of some interesting reading.

 

Firstly let me say that not many solutions to the problems were expressed by anyone within the 70 pages.

 

However having said that I will make it very clear that as of now NO LBS will see one cent of my money until THEY approach me and inform me that they were no way involved in the proceedings which took place. I will leave it at that as I do not want this topic to be based on my reasons for my standpoint.

 

Now it seems as if everyone from Wholesalers to Retailers to the Consumer all seem to agree that the cycle industry is in trouble. Not many of us would like to see our LBS close down due to low margins or economic pressure and there is the question of this 15% floating around which as it looks would sort out most of the current problems for the retailers.

 

As for the retailers who got together to up prices you all do things a little ass about face don't you? What you need to realize is that the consumer can be your biggest friend or your worst enemy. Currently it looks as if you have made more enemies than friends.

 

You need to ask yourselves how do you get that 15%? You think pass it onto the consumer - incorrect that just pisses us off.

 

Do the following.

 

It is not your problem to approach government to pass legislation. Make it the problem of the wholesaler.

You have all stated that you do not know the profit margins of the wholesalers so put the squeeze on them.

This is achieved by boycotting their products. In other words do not stock them unless the wholesaler starts giving YOU a 15% reduction in price as of 1st October 2008.

You carry no stock, you do not sell the products in your shop, you return all consignment stock and inform consumers via notices in your shops or here on the Hub that various items will not be available until the wholesaler comes to the party so to speak. See how quickly THEY approach government to get their 15% back.

 

Your business as well as the consumer might suffer a bit in the short term but your business is already suffering and so is the consumer. I can guarantee you one thing that the consumer will support you 100% throught the transition period as you are trying to help them and not screw them over.

 

Now this is a very broadbased nutshell posting so please don't over analyse it and YOU retailers are welcome to contact me should you need any further assistance but I am sure you get the gist of it.

 

Try this and let's see how quickly Steven tells us all to go ride our bicycles which are equiped with Campag and not Shimano.

[fandacious]

dude... its capitalism... if u dont like it move to cuba (or zimbabwe where the government regulates the prices of commodities) 

 

seriously tho - they're in business to make money. Like u said, you're gonna vote with your feet, which is the most sensible thing to do.

 

Pick n pay dont publish their margins on their goods, and they have been implicated in how many price fixing "scandals".

[porky]

I have never heard of P & P ever been involved in a price fixing scandel?

 

Care to elaborate?

 

.............dont feel too sorry for the LBS, nobody held a gun to their heads and said open a cycle shop, if they were any kind of businessmen they would have done a bit of an analysis of the market BEFORE they got involved, so one assumes they KNEW the margins before they opened their doors and figured they could hack it.

 

If they didnt, well, I have even less symapthy.!

 

No shop opens on the basis of "a cartel arrangement" everyone gos into business hoping, that with their business model, they can get some of Joes, business, some of Freds business, some of Janes business and hopefully generate enough of their own to be profitable.

 

Somewhere along the way here though, the "principles" they started with, changed, and it became easier to form cartels and collude on price than improve their own business model and generate new and profitable business. 

  

[dirtrider]

another funny thread jsut started ? seriously you okes should start these things on a friday so I can get agood laugh before the weekend .

[markStockton]

 

Pick n pay dont publish their margins on their goods' date=' and they have been implicated in how many price fixing "scandals".

[/quote']

 

What a load of garbage. Pick n Pay have a reputation for breaking cartels, NOT BEING PART OF ONE!!!

 

Well done Mux, I was starting to think I was the only one pushing the idea of getting the extra margin from the wholesaler.

 

[splat]

I stand under correction, but in many cases it seems that the bike shops are being bullied into higher prices. The importers, agents and distributers should be pressurised before a lot of the shops.

 

Ask around, you will find how many shops are unhappy stock and distribution from some of the big names. How many of them are sitting without spares or waiting for replacement parts?

 

So we gotta put up with high prices on stock on that isnt available. No wonder CRC and CWC are so popular!

[Canaris]

The idea of price fixing ext requires a bit of analysis of the entire manufacturer-consumer chain.  Each actor in the chain has a expectation and purpose.

THe manufacturer makes a product and wishes to sell the product to as many people world wide as possible.  Obviously, he wants to create a strong brand identity, and therefore along with the product he offers a support service to sort out any "problems' the consumer has with the product.  (warrantees ext)  The manufacturer may have a certain pricing strategy in mind to support his brand identity, as exclusive/ value for money ext.

 

When a manufacturer wishes to penetrate a foreign market (like South AFrica) he enters a deal with a local distributor to distribute his product in the market.  As part of the deal he gives exclusive distribution rights to the distributor in exchange that the distributor will handle the support service end for that market.  The manufacturer may also dictate the brand identity, marketing strategy and pricing.  THE bottom line is the distributor manages the brand identity in the market in exchange for exclusive distribution rights (TAKE NOTE:  here is the first chink  in the network armour).

 

(Between the distributor and the manufacturer there is the import/export agent who deals with insurance, shipping taxes ext.)

 

Now the distributor adds his mrak-up, calculates the RRP ext based on what the market can handle, what the pricing strategy and BRand Identity dictates ext, and ships to retailers.

 

Retailers place stock in their shops and hope for the consumer to buy.

However, not all retailers have invested their own money in their shops.  Notr all retailers see their profit as "my salary, pluss a bit of equity".  MAny retailers have taken out loans from investors that demand better than bank interest rates from the "investments".  So now not only do shop owners need to make a "respectable salary" they need to return better than interest dividents to their stake holders.  SO when you buy from  the LBS you have to pay the bank loan, the salary and the dividents that he needs to declare at the end of the year.  (Now the RRP does not allow for that)

 

So the solution:

 

Running a cycling shop is a business, not an investment oppertunity.  If you invested your money in a cycle shop, it is a bad investment.

 

Selling bicycles is a bad profit generator (only 35%) maintaining a bicycle (and selling spares) is good business (up to 100% mark up, and you don't pay impoirt dutied on parts).  So if your business model is based on selling complete bikes, it won't work.

 

Distributors have to follow the manufacturers brand identity.  If they don't and sales drop, the manufacturer may enquire why the "market" is not responding.  Also if new distributors constantly approach the manufacturer to replace the present distributors, maybe they will.

 

Lastly, competitors are like sharks, they love bloted markets.  If SRAM undercuts SHimano prices then they get SHimano's market share.  Customers will always like this. 

 

I hope I have added to the debate.

[Velouria]

 

dude... its capitalism... if u dont like it move to cuba (or zimbabwe where the government regulates the prices of commodities) 

 

seriously tho - they're in business to make money. Like u said' date=' you're gonna vote with your feet, which is the most sensible thing to do.

 

Pick n pay dont publish their margins on their goods, and they have been implicated in how many price fixing "scandals".

[/quote']

 

Yip, and to prove the point:

 

Dairy farmers club together to negotiate better prices

July 24, 2007

 

By Tom Robbins

 

 

Cape Town - Dairy farmers in the KwaZulu-Natal Midlands have formed a

company to negotiate better prices from buyers and say early

indications are that the strategy is paying off.

 

 

 

Allan Penderis, the manager of the newly formed Midlands Milk Company,

said yesterday farmers had allowed a situation to develop where they

were paid low prices because they had negotiated individually with

processors.

 

 

 

However, dairy farmers across the country, including a grouping in

Ficksburg in the Free State, had started clubbing together to improve

negotiating power.

 

 

 

The 33 Midlands farmers were now being paid a delivered milk price of

R2.70 a litre, up from R1.86 a litre at the end of last year, he said.

 

 

 

From 2003 until this year there had been only marginal increases paid

by the six independent processors that Midlands Milk had signed the

supply contract with, Penderis said.

 

 

 

The processors were HoneyDew, Fairfield, Stonelees, Greenacres, Oaksprings and Melda.

 

 

 

Clover, the country's largest processor, has raised milk prices this

year in a bid to stimulate production after some supermarkets battled

to keep shelves stocked due to shortages.

 

 

 

Farmers have moved out of dairy farming to try and find more viable

income streams because of historically low prices coupled with the high

maize price - an important input cost.

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Previously the Milk Producers' Organisation said the biggest milk

processors, such as Clover and Parmalat, had used the alternative of

cheap imports as a negotiating tool to keep prices paid to farmers down.

 

 

 

But this year, global prices have climbed on growing demand from countries such as China - leading to the shortage.

 

 

 

Penderis said the agreement with the six medium-sized processors had

achieved higher prices and aimed to encourage more consistent

production.

 

 

 

Farmers would be paid a premium during the seasonal low-production

autumn months and there would be penalties for overproduction during

the high-yielding spring months.

 

 

 

Penderis said traditionally farmers were paid lower prices during the

surplus spring months and this frequently had the effect of setting a

precedent for prices throughout the year.

 

 

 

Consistent production would also help the processors meet consumer demand throughout the year.

 

 

 

Current production by Midlands Milk shareholders was 6.5 million litres

a month, though this was expected to rise as new farmers joined the

company.

 

 

 

National production for the year was projected to be 2.5 billion litres, down from 2.6 billion litres last year.

 

[AndreZA]

My solution is that distributors but supply at a competative price to shops and let the shops fight it out. If you want to charge me R1000 more because you offer me a 5 free services, let it be my choice. Don't charge me R1000 more when I know I'll never use your added on services.

 

 

[masood]

Its about time the distributors supply online shops too.