Bike retailer cartel

[dries109]

Those minutes were apparently not official' date=' so I hope they have got more to go on than that. Besides, like SB, its not going to go very far and will take forever anyway.

[/quote']

official or not, even if it takes a long time - the public will know and the reputational risk....

[racman]

I agree, it's most or some of the importers who are charging ridiculous prices. I know that the margins of some retailers are very low. Campag items and anything distributed by J&J is just plainly absurdly expensive.   racman2009-03-05 08:17:43

[dries109]

 
Exactly why campy is so expensive in SA ' date='  J&J load the prices to pay for their expensive lifestyles
[/quote']

 

Agree!!! 

[TCRCARBON]

I like.

I wonder it it will be safe to ride past Cyclelab and FPC in my Hub top?

.

 Ride fast bru!!

[Johan Bornman]

The anti-competitive behaviour in this industry didn't start with this supposed meeting nor did it end there. Although, I was surprised at just how overt the anti-compeitive sentiment was when the scandal broke. Just before that meeting we had the winter Hub ride from Midrand. At that ride a Jhb bike shop owner told me about the meeting and specifically mentioned how they are going to *&^% up Chris Willemse Cycles.

 

But the mafia attitude goes deeper. A well-placed phone call to a supplier with a little implied threat and boom, someone is cut off from supply of this or that. This is particularly aimed at players with an unconventional business model outside the classic retail outlet scenario.

 

That's one of the reasons online sales have not taken off in SA as it has elsewhere.

 

It is thus not just a margin issue but an exclusivity issue as well. Now that the case has been taken up by the Commission, I'll be making a submission and I hope I'll get the opportunity to testify.

 

You'll be amazed at what happens inside this exclusive little club.

 

 

 

 

 

[Legpower]

Can I claim back on my new bike I just bought.

[fandacious]

interesting post jb.

 

but are you referring to botique bike shops only? There are of course hundreds of other bike shops that do not cater for the rider with thousands of rands to spend, yet still use the same suppliers as those botique shops.

 

so where do they draw the line?

 

[flats4life]

 

 

Ja' date=' the weaker currency takes its effect immediately on the rand prices on chain reaction cycles. The differences in prices between CRC and the local bike shop are sometimes outrageous. But I'm not convinced that these prices are fixed at a retailer level. I suspect that the high prices might be the fault of the importers. I for one would not like to own a bike shop. I think it's a tough business to be in. [/quote']

 

Correct. The Cycling industry is a tough one to be in in this country.

 

If people want to question the prices they pay they must first understand the systems that each bicycle or part need to go through before they get here. I am disgusted by the idea of certain people trying to impose price fixing, but also believe very few people know what it takes to get these bikes to the tip of Africa.

 

1) Shipping to South Africa is one of the most expensive destinations in the world. Far more so then the UK or USA. This additional cost goes directly into the price of our bikes. A USA made product will always be cheaper in the USA, as will a European product in Europe. Their shipping charges are far less then ours. Similarly all the goods that are made in the east cost less to ship to other countries. This is one of the joys of living in Africa!

 

2)  Local distributors have to order as per a manufacturing schedule. These orders are normally 3 times per year. They cant simply "top up" their stock as it gets low, or buy when the currency is favorable. The brands themselves have a schedule that you have to stick to, and when its ready to ship you have to pay. If the dollar drops from R8.00 to R10.00 the day before they have to pay its tough luck. Similarly, if the currency suddenly gets strong between orders they cant ship goods as there is nothing ready at the factory.

 

This is why the prices dont drop whenever the currency comes down, as they are determined by the dollar at the time the order ships. There is no big warehouse out there that is full of stock that these people can order from as and when it suits them (or when the currency is right). They are bound by and order schedule and have to stick to it.

 

3) Quantities of bikes sold here are also a lot smaller then in 1st world countries. As in any business the more you buy the cheaper your unit price gets. Distributors in SA dont even order a fraction of what the USA and Europe order, and as a result our unit costs are also higher. Once again, the joys of living in Africa.

 

4) Raw material pricing has gone through the roof in the last 18 months. Manufacturers are charging more and more to make bikes. This is a fact that no bicycle company can get around. Even the price of butyl (a seeming insignificant product to all of us) has pushed the price of grips and tires up exponentially. Thats not even touching on the costs of metals etc.

 

These are the main factors that make bicycles and bicycle products more expensive in SA. Shipping / currency / volume / materials. It is not the fault of our retailers or distributors that these things effect our imports.

 

With that being said I do not condone any form of price fixing at all. And any parties who try this will no doubt feel the wrath of our local cyclists. However senseless moaning about pricing without taking the above factors into consideration is pointless at best.

flats4life2009-03-05 08:34:59

[Sammajoor]

 

The anti-competitive behaviour in this industry didn't start with this supposed meeting nor did it end there. Although' date=' I was surprised at just how overt the anti-compeitive sentiment was when the scandal broke. Just before that meeting we had the winter Hub ride from Midrand. At that ride a Jhb bike shop owner told me about the meeting and specifically mentioned how they are going to *&^% up Chris Willemse Cycles.

 

But the mafia attitude goes deeper. A well-placed phone call to a supplier with a little implied threat and boom, someone is cut off from supply of this or that. This is particularly aimed at players with an unconventional business model outside the classic retail outlet scenario.

 

That's one of the reasons online sales have not taken off in SA as it has elsewhere.

 

It is thus not just a margin issue but an exclusivity issue as well. Now that the case has been taken up by the Commission, I'll be making a submission and I hope I'll get the opportunity to testify.

 

You'll be amazed at what happens inside this exclusive little club.

 

 

 

 

 

[/quote']

 

You do the ride from MB with Cruzer and myself

 

 

[Jules]

 

Ja' date=' the weaker currency takes its effect immediately on the rand prices on chain reaction cycles. The differences in prices between CRC and the local bike shop are sometimes outrageous. But I'm not convinced that these prices are fixed at a retailer level. I suspect that the high prices might be the fault of the importers. I for one would not like to own a bike shop. I think it's a tough business to be in. [/quote']Correct. The Cycling industry is a tough one to be in in this country.If people want to question the prices they pay they must first understand the systems that each bicycle or part need to go through before they get here. I am disgusted by the idea of certain people trying to impose price fixing, but also believe very few people know what it takes to get these bikes to the tip of Africa.1) Shipping to South Africa is one of the most expensive destinations in the world. Far more so then the UK or USA. This additional cost goes directly into the price of our bikes. A USA made product will always be cheaper in the USA, as will a European product in Europe. Their shipping charges are far less then ours. Similarly all the goods that are made in the east cost less to ship to other countries. This is one of the joys of living in Africa!2)? Local distributors have to order as per a manufacturing schedule. These orders are normally 3 times per year. They cant simply "top up" their stock as it gets low, or buy when the currency is favorable. The brands themselves have a schedule that you have to stick to, and when its ready to ship you have to pay. If the dollar drops from R8.00 to R10.00 the day before they have to pay its tough luck. Similarly, if the currency suddenly gets strong between orders they cant ship goods as there is nothing ready at the factory.This is why the prices dont drop whenever the currency comes down, as they are determined by the dollar at the time the order ships. There is no big warehouse out there that is full of stock that these people can order from as and when it suits them (or when the currency is right). They are bound by and order schedule and have to stick to it.3) Quantities of bikes sold here are also a lot smaller then in 1st world countries. As in any business the more you buy the cheaper your unit price gets. Distributors in SA dont even order a fraction of what the USA and Europe order, and as a result our unit costs are also higher. Once again, the joys of living in Africa.4) Raw material pricing has gone through the roof in the last 18 months. Manufacturers are charging more and more to make bikes. This is a fact that no bicycle company can get around. Even the price of butyl (a seeming insignificant product to all of us) has pushed the price of grips and tires up exponentially. Thats not even touching on the costs of metals etc.These are the main factors that make bicycles and bicycle products more expensive in SA. Shipping / currency / volume / materials. It is not the fault of our retailers or distributors that these two things effect our imports.With that being said I do not condone any form of price fixing at all. And any parties who try this will no doubt feel the wrath of our local cyclists. However senseless moaning about pricing without taking the above factors into considiration is pointless at best.

 

 

 

That's all well and good. But it suggests the current business model needs a radical overhaul. Especially when it's possible to buy stuff off Chain Reaction Cycles, get it delivered within a week, pay your VAT, and still beat the local retail price by 40%.

[paulc]

my new parts are on the way from crc

[once-off]

 

 

Just to clear up some confusion.

 

1. it doesn't matter whether the retailers actually implemented the conditions of an agreement or not (increasing prices from 1 October). All that needs to be proved is that it was agreed.

 

2. proving a collusion case does not require "getting all your ducks in a row" in the sense that it is incredibly complicated. Being prosecuted for collusion is much simpler than other anti-competitive behaviour as the authorities don't need to show an effect. They just need to show an agreement, which clearly they have already.

 

3. a 10% penalty may not be much, but it's enough to hurt financially (the point is not to shut down businesses but to deter them from making these agreements ever again). Tiger Brands suffered incredible reputational damage, one of the results actually being that a lot of good people resigned, adding to their financial woes.

 

4. if i was at that meeting, i would run straight to the Competition Commission to qualify for their leniency program to prevent the reputational damage (does anyone even remember that Premier was also involved in the bread cartel - no, because the media harps on about the fines, not the leniency applicants) and the fine that WILL result.

 

 

 

I don't know how on earth the speaker at the meeting could say so definitively that that is not price-fixing. That meeting is the DEFINITION of price-fixing. It is COMPLETELY illegal!

[Johan Bornman]

The anti-competitive behaviour in this industry didn't start with this supposed meeting nor did it end there. Although' date=' I was surprised at just how overt the anti-compeitive sentiment was when the scandal broke. Just before that meeting we had the winter Hub ride from Midrand. At that ride a Jhb bike shop owner told me about the meeting and specifically mentioned how they are going to *&^% up Chris Willemse Cycles.

 

But the mafia attitude goes deeper. A well-placed phone call to a supplier with a little implied threat and boom, someone is cut off from supply of this or that. This is particularly aimed at players with an unconventional business model outside the classic retail outlet scenario.

 

That's one of the reasons online sales have not taken off in SA as it has elsewhere.

 

It is thus not just a margin issue but an exclusivity issue as well. Now that the case has been taken up by the Commission, I'll be making a submission and I hope I'll get the opportunity to testify.

 

You'll be amazed at what happens inside this exclusive little club.

 

 

 

 

 

[/quote']

You do the ride from MB with Cruzer and myself

 

Ya, but not in a Mercedes like some people I know.

 

 

[flats4life]

 

 

 

That's all well and good. But it suggests the current business model needs a radical overhaul. Especially when it's possible to buy stuff off Chain Reaction Cycles' date=' get it delivered within a week, pay your VAT, and still beat the local retail price by 40%. [/quote']

 

Agreed, the current model is very weak and does need an overhaul. I suspect that in the future you will see more Brands buying out their distributors around the world and opening up their own offices in those countries. In doing so you work off one order which is split per your branches as opposed to one order per distributor. This model is already being adopted by many other industries and I suspect it will happen in cycling in the near future.

 

As for CRC, they sell more shimano in one day the Cool heat sells in a month. No doubt their unit costs are much lower then the local guys. When you move volumes like they do you dont need to make the same margin either. Its a vicious cycle and they win either way.

 

[nochain]

Oh my

 

Went throught legal training last week re anti-competitive behaviour. Very complex indeed' date=' one need to have a lot of ducks in a perfect row.

 

Penalties aren't that stiff (10% of annual turnover), but legal fees will bump it up quite a bit.  And the bad publicity!!

 

Wait for the dawn raid!!!

[/quote']

 

Just out of interest.

Why is it that there is only 1 agent for example Sony products in SA?And if you don't buy from a channel that get there product from them the only other option you have is to use Parallel imports like High Fi corp.

Same goes for only one local agent for Campag parts.If Campag then don't allow another agent in SA does that also consitute as anti-competitive behaviour??

[splat]

I think everyone is pissed off about the idea of price fixing - the high cost of cycling stuff is a seperate rant and rave topic.