Distributors what they do for us

[Bat-ass]

import a car ?

 

Now we talking!!!! you can by a Toyota Hilux D/C 4x4 for the equivalent of under R180k in Quatar. That Hilux is built 25km from my house and list price here is R394 000.00

[eggsovereasywithteandtoast]

The same situation is true for all sporting and other goods imported into SA from overseas. The distributors here pay for shipping and clearing and are contractually bound to purchase a certain amount of product from the manufacturers. They have a minimum GP that they feel they have to make and sell at this price to the LBS, who in turn has to make a certain GP to survive. In SA we have one too many people in the chain of supply, ie the distributor. This is why we pay between 20 and 50% more for stuff here than is available overseas or from sites like CRC.

 

I used to own my own dive centre and the exact same was true in that industry.

 

I am in favour of the "global market" theory and retailers should be allowed to buy from the manufacturers. I can see how this could be challenging in SA due to our difficult logistical situation, hence the succes of online shops. We sit in a difficult situation in SA, where it's very tough to survive as a retailer. I couldn't survive in scuba retail so I quit that game.

 

I also don't think that there's any easy answer to this problem....

 

Good statement.

Lets also throw in the concept of the guarantee.

This is where the selling price discussion may be interesting for the distributor and not the LBS.

Who covers this and which part of the costs i.e. handling costs and freight costs to return the frame / article twice?

Are most goods shipped or airfreighted?

[Guest coenie]

I just wonder what saving would / could be passed on to us if there was no distributor? LBS could submit their order to Spez manufacture directly? Like car dealers...you go to MB and say I am looking for car X...sorry we do not have it...I will order one from the factory for you...4 weeks delivery....done

 

I am thinking..Manufacturer wants lets say

R10 000

Distributor puts on his cut of 35 %

LBS 10%

 

We pay....

 

I vote for LBS getting 20-30% as they are the people I deal with....the way CWC does it....

[DaLoCo]

Not having a distributor would mean that each shop would have to get their order straight from the manufacturer. This would mean higher transport cost to the shop, which is passed to you. The shop would have to deal with customs, another can of worms. The manufacturer would have to make up a gazillion small packages to each shop...a logistical nightmare. If the wrong product is received, the hassle to sort it out becomes a strain on the local shop...

 

Considering all these things, most local shop will close their doors, or bounce the price in any case to compensate for extra hours needed sort sort all the crap out.

 

In the music industry there is a certain very famous brand that is almost unavailable here, because nobody is willing to buy the amount of stock the manufacturer requires as a minimum purchase. The reason for this is that our market is too small, it would take years to move the stock. I can get certain intruments for cheaper (including shipping) online than my cost price, but I am not willing to run the risk of not getting support.

 

The same goes for bicycle parts.....comparatively, our market is too small. The cost price of the LBS is almost the same as some of the online price, as our market cannot negotiate better prices due to lack of volume.

[GrumpyOldGuy]

These goods arnt made in the UK or US.. they made in China... The UK and US ditributors also have to pay forwarding and clearing, and duties for there country.

 

Quite correct, the differance really is that the USA and the UK can support vast quantities from China and hold the stock, the SA market cannot, so in most instances the local market will have to buy from the USA or UK Based wholesaler - this then ADDS their costs of importing and holding into the equation.

 

In my engineering business we could buy steel cheaper from India than from a local Mittal distributor 20 kms down the road - its really economies of scale - SA simply do's not have them.

[Guest coenie]

Good statement.

Lets also throw in the concept of the guarantee.

This is where the selling price discussion may be interesting for the distributor and not the LBS.

Who covers this and which part of the costs i.e. handling costs and freight costs to return the frame / article twice?

Are most goods shipped or airfreighted?

CWC handles this just fine....Thus no distributor NEEDED!

[DaLoCo]

I just wonder what saving would / could be passed on to us if there was no distributor? LBS could submit their order to Spez manufacture directly? Like car dealers...you go to MB and say I am looking for car X...sorry we do not have it...I will order one from the factory for you...4 weeks delivery....done

 

I am thinking..Manufacturer wants lets say

R10 000

Distributor puts on his cut of 35 %

LBS 10%

We pay....

 

I vote for LBS getting 20-30% as they are the people I deal with....the way CWC does it....

 

The average GP for a retail store to survive is around 33% depending on the area. this means you have to mark up around 80% of the cost to make that GP.

[Guest coenie]

So deleco and grumpyoldguy are you saying that we should accept this behaviour of Distributors since nothing else will work?

 

I am trying to put pressure on a distributor to up their game...

 

Or must we all sit back and say...well this is Africa?

[GrumpyOldGuy]

Good statement.

Lets also throw in the concept of the guarantee.

This is where the selling price discussion may be interesting for the distributor and not the LBS.

Who covers this and which part of the costs i.e. handling costs and freight costs to return the frame / article twice?

Are most goods shipped or airfreighted?

 

The theory of a distributor is an American one and because most American companies dont have a clue of how business is run anywhere but in the USA they stick to the distributor system and enforce it on their customers.

 

Howver with the surge of the Asian economies this is fast becoming one of the dinosauer legacies, in my engineering business we have to use diamond tipped cutters, the local distributor can charge between 5-8k per tip, now there are Asian reps of the same company that makes the tips for the local distributor who will walk from door to door and take orders, ship the product in and deliver it for less than 3k per tip - guess who we support.?

 

Warranties.........its the usual scare tactic by a business who really has lost the plot and refuses to move into the new world, people forget the MANUFACTURER and NOT THE DISTRIBUTOR hold the warranty, hense all they need is an office with a telephone and access to DHL - its that simple.

[covie]

The average GP for a retail store to survive is around 33% depending on the area. this means you have to mark up around 80% of the cost to make that GP.

 

What do you base that on, a generalised statement like this shows us whats wrong with the world today, there are retailers asking 15% and making fortunes becuase they get the volumes because of a lower price.

 

The flip side is a company like cycle lab that grossly overcharge since they target the niche high end market with a client base that dont care about price.

Edited January 6, 2011 by covie

[GrumpyOldGuy]

So deleco and grumpyoldguy are you saying that we should accept this behaviour of Distributors since nothing else will work?

 

I am trying to put pressure on a distributor to up their game...

 

Or must we all sit back and say...well this is Africa?

 

You misunderstand me - I think distributors are from a bygone era, the world is too small and far too price sensitive for them any more - they are simply dying a slow agonising death.

[Guest coenie]

The average GP for a retail store to survive is around 33% depending on the area. this means you have to mark up around 80% of the cost to make that GP.

So cut out the middle man and pass on the saving and get proper service....the LBS's without service will close...

[Guest coenie]

You misunderstand me - I think distributors are from a bygone era, the world is too small and far too price sensitive for them any more - they are simply dying a slow agonising death.

Sorry I misunderstand you....appologies.

[Pegasus]

The same situation is true for all sporting and other goods imported into SA from overseas. The distributors here pay for shipping and clearing and are contractually bound to purchase a certain amount of product from the manufacturers. They have a minimum GP that they feel they have to make and sell at this price to the LBS, who in turn has to make a certain GP to survive. In SA we have one too many people in the chain of supply, ie the distributor. This is why we pay between 20 and 50% more for stuff here than is available overseas or from sites like CRC.

 

I used to own my own dive centre and the exact same was true in that industry.

 

I am in favour of the "global market" theory and retailers should be allowed to buy from the manufacturers. I can see how this could be challenging in SA due to our difficult logistical situation, hence the succes of online shops. We sit in a difficult situation in SA, where it's very tough to survive as a retailer. I couldn't survive in scuba retail so I quit that game.

 

I also don't think that there's any easy answer to this problem....

 

 

The reason why distributors exist and will always continue to do so is because the manufacturers don't/can't deal with thousands of retailers. The manufacturers also benefit from pushing some of the working capital requirements onto the distributors. It's the same in most industry supply chains. Only when the players are quite substantial do they benefit from dealing with each other directly. Add in issues like returns, guarantees,s and country specific complications and you can see why OEM's(who's core competence is usually design and manufacturing) doesn't want to get into the nitty gritty of the distribution and sales end. Distributors exist in high tech industries like networking and software where you can be pretty sure that any online benefits have been untilised.

I suspect that the reason why SA prices are so high is a mindset from the old closed economy days. Retailers knew that consumers had no option but to pay the prices asked. And some of our retailers have simply not cottoned on to the logic that if they lower their margins they will sell more units and profits might even rise.

[TriGuru76]

They do nothing for us other than rip everybody off.

 

Go price a bike on www.racycles.com and then get the RSA price. For exampe a cervelo s2 is 45k here and the same spec is 28k in USA.

 

They also offer rubbish service. So in short, they do nothing for me.

 

I Agree here. I bought a pair of Specialized S-Works MTB shoes from R&A in New York. Took the FedEx option that said 10 working days delivery.

Received them in 4 days, paid import duties and VAT.

Selling price at FPC or others in SA R4200.

My price R2032 with all duties.

 

In the US you can get deals where they include a Cervelo P2C or P3C, Plus helmet, wetsuit, shoes and race kit for the same price the guys sell the frame only for in SA.

 

I import and only sell direct to public as the stores never have stock. They get their information ot "technical know how" from books or the net. So no point in charging premium prices for it.

 

Will happily bank with CWC or CRC.

[DaLoCo]

You misunderstand me - I think distributors are from a bygone era, the world is too small and far too price sensitive for them any more - they are simply dying a slow agonising death.

 

I agree with this, as distributors are just adding to the price...our problem here is logistics, and distributors absorb a lot of that hassle.