Are we being ripped off by tool retailers?

[NorthernSteve]

I don't mind spending good money on quality tools, but a few items of late have made me ask the question - "Because we will pay for high quality items, does this lead to retailers marking up basic items well beyond what they should reasonably be?
The last item was a leigh 710 router bush adaptor - essentially a 60mm washer, priced at £24 with £5 p&p from Axminster. Another was T track at £40 for 2 meters at Rutlands, I can get the same for about £13 on Temu - and I can tell no noticeable difference in the two.
I appreciate that retailers with a physical presence have additional overheads as do those providing a technical support service. Non the less, as a newcomer it strikes me that the main UK retailers are pricing in an oligopolistic manner, in particular on smaller run of the mill items.
I am interest to hear which companies people think are the most guilty of this and also, and probably more usefully, which companies people have found to offer good value. For those of you not aware, Temu is a Chinese owned, Boston HQ ecommerce business. Yes they do sell some junk, but they also sell some good stuff and for basics, I have found them to be of incredible value, ditto Ali Express. Nearer to home I have had a few bargains from FFX Tools.
Cheers
Steve

 

[Sideways]

Supply and demand ?
Captive market ?
Profit maximisation ?
All that stuff.
For commodity tools I think we have a good competitive market in the UK.
Much dearer than the USA simply due to volumes and taxes, not generally worse than Europe, except for things made there.
For niche products UK is a small market that isn't big enough to support a lot of competition and importers then work that. I suspect that some of them set overly fat margins to make a living off of importing just a few brands. Easy answer. If it's poor value, they don't deserve your custom.

For spares, it is standard in industry to exploit your installed base of product by charging a big markup on spares. To some extent it is justified if you have to sit on stock of parts for years just so that you have it available when needed. You need a fair return on the capital tied up in it.
It can work against you though. I recently needed a spare for a Sedgwick PT, swallowed hard and paid £220 for it, then found I needed another and when they asked £250 for that, I said to hell with it and returned the first for refund. One part was a pulley that I can lathe turn myself for about £20, the other is a plastic cog wheel that ought to be another £20 standard part but is complicated because they have stuck with the same obscure imperial tooth count that they adopted when they started making these 50+ years ago and is now very much not standard.
I will make the gear from scratch eventually, but most people would be held hostage and have to pay up or scrap / break their machine for parts. If you need a part to meet a customer deadline, the seller has you in a bind.

Fat margins on spares creates a problem for all original manufacturers. People will be tempted to copycat your parts and undercut your prices. The garage trade runs on aftermarket pattern parts.
You would think that might help to keep manufacturers honest, but I don't see it happening.

 

[ChaiLatte]

...the same obscure imperial tooth count...

What, pray, is an imperial tooth count?

Would it be something like 25 1/16 teeth on the gear?

Does the metric version have a sensible number like 24.75 teeth?

 

[BucksDad]

It's a tough trading environment out there for UK companies.

I suggest you take a read at Axminster's accounts that were filed in February and you can read the report at the start.
https://find-and-update.company-information.service.gov.uk/company/03326979/filing-history

The highlights - turnover in 2023 was £44m, a drop of 8%, gross margin was 40%, however after all other costs, they made a loss of £2m including exceptional costs, which included restructuring and reducing their headcount by 50 people.

So right now, companies like Axminster are having to charge what they charge just to even attempt to break even.

You can also read FFXs latest accounts
https://find-and-update.company-information.service.gov.uk/company/05668753/filing-history

Twice the turnover of Axminster at £96m but only 20% gross margin (because they don't make any of their own tools, compete on price and try to be a volume business) but made a £4m loss.

So no, companies are not trying to rip you off, they're just trying to stay afloat

 

[Chris152]

It's a tough trading environment out there for UK companies.

I suggest you take a read at Axminster's accounts that were filed in February and you can read the report at the start.
https://find-and-update.company-information.service.gov.uk/company/03326979/filing-history

The highlights - turnover in 2023 was £44m, a drop of 8%, gross margin was 40%, however after all other costs, they made a loss of £2m including exceptional costs, which included restructuring and reducing their headcount by 50 people.

So right now, companies like Axminster are having to charge what they charge just to even attempt to break even.

I believe Axminster in Cardiff is set to close next November (iirc) when the lease is up.

 

[niall Y]

The manufacturing base for many products in this country has disappeared. We obviously cannot compete with cheap labour from the Far East, If we continue to buy products directly , then UK retail companies will start to follow the same trajectory as manufacturing
We all love a bargain, and I am equally as guilty as the next person of buying direct - because it is just so much cheaper. Very few things I have ordered have even had import duties levied on them. From Europe, yes, the authorities seem to have a handle on this, But the bits and pieces from China mainly seem to sail through unchallenged.

 

[NorthernSteve]

It's a tough trading environment out there for UK companies.

I suggest you take a read at Axminster's accounts that were filed in February and you can read the report at the start.
https://find-and-update.company-information.service.gov.uk/company/03326979/filing-history

The highlights - turnover in 2023 was £44m, a drop of 8%, gross margin was 40%, however after all other costs, they made a loss of £2m including exceptional costs, which included restructuring and reducing their headcount by 50 people.

So right now, companies like Axminster are having to charge what they charge just to even attempt to break even.

You can also read FFXs latest accounts
https://find-and-update.company-information.service.gov.uk/company/05668753/filing-history

Twice the turnover of Axminster at £96m but only 20% gross margin (because they don't make any of their own tools, compete on price and try to be a volume business) but made a £4m loss.

So no, companies are not trying to rip you off, they're just trying to stay afloat

Thanks for this response, I hadn't thought to look at CH for detail. 40% and 20% respectively do seem like low GMs, especially given Axminster's infrastructure. Trying to stay afloat and overcharging are not mutually exclusive, I am not claiming that their intent is to 'rip off', but irrespective of motive it is something companies do, and sometimes do particularly in response to fiscal performance pressures. I suspect that much more significant changes are required to ensure the continuance of their business, especially given the reduced strength of their balance sheet. Looking at Axminster's accounts they do appear to take CSR seriously, which speaks volumes re motive. I believe that a nationwide face to face engagement with customers via events would work well for them. I have been interested in some of their courses but unwilling to travel to Axminster HQ to attend. I know others who have mentioned similar. Maybe adding a more significant training stream would have a positive impact on their GM and revenue?

 

[Rhossydd]

a leigh 710 router bush adaptor - essentially a 60mm washer, priced at £24 with £5 p&p from Axminster.

That's more than just a washer. It's not flat and it's precision made. Leigh kit is made to a high standard, not just cheap knock out far east kit.
Leigh charge $37 cn = £21 for that item in their home territory. Axminster charge £20 + VAT, so it's actually cheaper here!
You only pay Axminster postage on small orders and not at all if you visit their shops.
Frankly £5 postage is pretty reasonable once you factor in the cost of packing materials, courier/mail charges, not to mention someone's time to find, label and pack it.

 

[Nick.]

It's a tough trading environment out there for UK companies.


So no, companies are not trying to rip you off, they're just trying to stay afloat

Well said @BucksDad and that is the reality, companies need to make profit - the overall market is still very poor at the moment according to all I speak to - it has been for a long time.

 

[NorthernSteve]

That's more than just a washer. It's not flat and it's precision made. Leigh kit is made to a high standard, not just cheap knock out far east kit.
Leigh charge $37 cn = £21 for that item in their home territory. Axminster charge £20 + VAT, so it's actually cheaper here!
You only pay Axminster postage on small orders and not at all if you visit their shops.
Frankly £5 postage is pretty reasonable once you factor in the cost of packing materials, courier/mail charges, not to mention someone's time to find, label and pack it.

Maybe it will just take me some time to get habituated to the prices charged for some of the kit. Their UJK equivalent is 1/3 of the price, yet also marketed as precision? I have some of the UJK and I do rate it.

 

[HOJ]

I am an advocate of supporting my local independent supplier/s, they cannot compete with Axminster, let alone Scewfic and Ten pound tat.

They go above and beyond in customer service and sell at a price I am willing to pay.

We have to be careful what we wish for, get a "bargain" on line or support an established bricks and mortar shop, and in the case of my supplier 3 generations.

 

[NorthernSteve]

Well said @BucksDad and that is the reality, companies need to make profit - the overall market is still very poor at the moment according to all I speak to - it has been for a long time.

Of course, that is the primary reason for existence (for most) , pricing is only one lever of profit, and the issue with price is that there is an intersection on the price/ demand curve beyond which revenues reduce. As many retailers are admitting, there is market pressure on pricing and I wonder the extent to which a volume vs margin based approach, at least in the intermediate term would be a more viable strategy. Extant low gross margin, limits their ability to do this however.

 

[NorthernSteve]

I am an advocate of supporting my local independent supplier/s, they cannot compete with Axminster, let alone Scewfic and Ten pound tat.

They go above and beyond in customer service and sell at a price I am willing to pay.

We have to be careful what we wish for, get a "bargain" on line or support an established bricks and mortar shop, and in the case of my supplier 3 generations.

I will always go with the local, until such time as the price differential gets to the point that the local including a chunk for all the value added they provide does not compete. Otherwise it is a race to the bottom.

 

[Noel]

@Nick. Always thought Axminster had the right set-up with the Perform and White lines as well as the established brands of years gone by and I thought moving to a more upmarket range and self manufacturing (UKJ etc) was not the way to go.

 

[Terry - Somerset]

Maybe it will just take me some time to get habituated to the prices charged for some of the kit. Their UJK equivalent is 1/3 of the price, yet also marketed as precision? I have some of the UJK and I do rate it.

I used to visit both Axminster and Yandles at fairly regular intervals. Not been for a year or so as we have moved but I suspect little will have changed.

In woodworking kit, as in many other area, what separates one supplier from another is largely brand - change the paint, new badges, a chrome handle and a £500 bandsaw suddenly justifies a ticket price of £800. Brand perceptions justify higher prices - even if unjustified.

Common to both were large and well stocked premises - Yandles in particular has an excellent wood yard, Axminster has a wider range of metal, woodwork and site equipment.

Common to both were parking spaces largely empty on most visits. Walk into the (large) shops and there may be between 2 and 10 people somewhat lost in several '000 sq ft. Many smaller independents have closed for good - Stiles and Bates, Snainton, Peter Child (retail), come to mind.

Simply - the market is shrinking, and on-line has grown. Keeping real stores alive needs more than a trickle of customers or very high margins to cover fixed costs. As there are few effective barriers to trading online, and we can all search the best deal, price becomes the only real differentiator.

Personally I find this rather sad - but like all others searching out the best online deals to save a few ££, I am partially responsible for the outcome.

 

[Nick.]

I wonder the extent to which a volume vs margin based approach, at least in the intermediate term would be a more viable strategy. Extant low gross margin, limits their ability to do this however.

Hi @NorthernSteve - agree & I'm sure most have considered that, but the old 'Turnover is Vanity, Profit is Sanity' phrase is true, and the bigger your current liabilities/ future purchases, then the more important it is to have that positive cash flow in place, which as you say, low margins reduce.
I heard something from a reliable source yesterday that was pretty shocking news - I was told it will be resolved next week one way or the other due to a legal deadline and you may hear or not hear about it depending on which way it goes, sorry to sound like a cryptic richardhead, but that's all I can say. It is a very poor market out there for many.

 

[Nick.]

@Nick. Always thought Axminster had the right set-up with the Perform and White lines as well as the established brands of years gone by and I thought moving to a more upmarket range and self manufacturing (UKJ etc) was not the way to go.

Hi @Noel - I can't comment mate as I know others read this forum & I'm like Kofi Anan in diplomacy. I will say though that their inhouse manufacturing is very impressive & I have full respect for their visions and to have built a business that size is an amazing achievement far surpassing anything I've done. Cheers, Nick

 

[Scruples]

I believe Axminster in Cardiff is set to close next November (iirc) when the lease is up.

Axminister are ramping up the email ads these days. It may be an indication that they are finding things tough.

 

[HOJ]

Rumour alert, Axminster are taking on main dealer for Laguna, all the small independents are being phased out of the supply chain.

 

[pe2dave]

What, pray, is an imperial tooth count?

Would it be something like 25 1/16 teeth on the gear?

Does the metric version have a sensible number like 24.75 teeth?

Re-read imperial as 'when Britain had an empire' and it makes sense