I lost an arm and a leg to a table saw

[HexusOdy]

That's a well thought out argument Eric and it all does have an effect on costs but I don't think many of them apply to modern day consumer goods. These factors still plague specialist manufacturing industries, for example, wind turbines, that are built here but not so much something your average consumer will buy.

We do have one advantage over the US. We have a larger wage disparity across Europe than the the US does. So we have an advantage in production costs, it is why there are many factories and manufacturers in Eastern Europe, for example Blaupunkt TV's are made in Slovakia. Although it doesn't really apply here as were talking about box shifting goods made in China.

Taxes and Bureaucracy have a part to play but again that's mainly a UK thing. In Germany for example the business taxes are lower and there is no such thing as business rates which are extortionate in the UK. There are many European countries where it is easier and cheaper to run a business and property costs are much lower.

All of your arguments are true but they don't really apply to modern day consumer sales. None of the manufacturing is done here like it used to be with say Wadkin. Modern consumer products are nearly all manufactured in Asia, ship in a container then sit in a warehouse until someone buys one.

Axminster for example don't have these costs to apply to their table saw range. They are not a table saw manufacturer, they are a tool retailer who added table saws to their range. They buy the goods from the factory, ship them in and never open the box. Production costs don't come into it, business rates, taxes etc barely come into it because they already had those facilities and the TS's are just using a fraction of them. There are many manufacturers don't even do their own handling and shipping. The goods go into 3rd party logistics and where costs are more manageable.

 

[heimlaga]

The average American doesn't have a greater disposable income. Hovever there is a large upper class (or gentry if you want) with plenty of disposable income. Many not so rich Americans also seem to have a habit of overspending and consuming for loaned money so their consuming habits are much like those of the gentry though they really cannot afford it. This overspending habit is rapidly spreading in Europe too but maybe not to the same extent.

I don't believe the pioneer spirit makes much of a difference either. When discussing woodworking on American forums I have found that what we consider a normal level of independence and selfsufficiency around here in the less densely populated parts of Finland and Sweden is way beyond what the average American seems to be able to fathom and imagine. They seem to be just like the people in European cities and suburbs.

 

[DennisCA]

All that hoopla about american rugged individuality is just consumerist branding, like most other things nowadays are. Quick, buy this mass produced product like millions of others to assert your ~*individuality*~

 

[HexusOdy]

Here's another example of rip off Europe. This time from mainstream toolmakers.

I was recently watching a Ryobi EMS-1830SC 12" mitre saw on Ebay that sold for £220. It's a fine machine that retailed for over £500 from around 2005 to 2013. During that same period the exact same saw was available from Ridgid in the US for £250. It's still available now for a little less. Pretty much same as an old Ryobi sold for used. Its been on the market for more than 10 years in the US.

The exact same saw is still available in Europe as an AEG PS 305 DG. AEG tools is owned by TTI the same group that owns Ryobi and Milwaukee. When TTI sold it under Ryobi it was £500, the same with AEG on it is high £600's. In Europe around €800.

That's close to 3 times the U.S. price. How many consumer products do you know that get more expensive over 10 years?

 

[Rhossydd]

Axminster for example..... They buy the goods from the factory, ship them in and never open the box.

I think that's a gross simplification and fails to take into account the problems and overheads of ensuring the products that are rebranded with their name conform to all the necessary legislation for consumer standards and safety. They also need to hold stocks of machines that can be used as a supply of spares for when there are warranty problems.

It's an interesting thought experiment to consider the problems of importing and reselling large items like this.
Would you risk buying in bulk 'blind' or will you have to visit the factory to ensure that standards will be maintained ?
What laws and legislation do you need to conform to ?
How big do you need your premises ?
How many people do you need to employ to handle the stock and paperwork ? > how much do they cost to employ ?
How many units do you buy in ?
How good do you want your after sales service to be ? > How many do you need to hold back as spares for warranty ?
How much profit do you need to make to cover the costs above ?

 

[Random Orbital Bob]

Here's another example of rip off Europe. This time from mainstream toolmakers.

I was recently watching a Ryobi EMS-1830SC 12" mitre saw on Ebay that sold for £220. It's a fine machine that retailed for over £500 from around 2005 to 2013. During that same period the exact same saw was available from Ridgid in the US for £250. It's still available now for a little less. Pretty much same as an old Ryobi sold for used. Its been on the market for more than 10 years in the US.

The exact same saw is still available in Europe as an AEG PS 305 DG. AEG tools is owned by TTI the same group that owns Ryobi and Milwaukee. When TTI sold it under Ryobi it was £500, the same with AEG on it is high £600's. In Europe around €800.

That's close to 3 times the U.S. price. How many consumer products do you know that get more expensive over 10 years?

I understand the frustration over the price differential from the US to Europe. I used to travel to the States frequently on business and it pained me to see the same tools sold at discounted rates there. Many shopping trips had me drooling I well recall. But the truth is that the OPEX costs of a business are different for different countries, particularly the cost of office space, land and salaries. The variance, even in the West is quite stark. I'll give you an example from the software industry to illustrate the point. A market leading software company that had global operations had all the country managers meet periodically to discuss strategy. Agreeing pricing models for the same product distributed globally but localised for language became a massive bunfight in these meetings. The UK wanted to charge £100K for a 50 user licence but the US were up in arms, saying there's no way their sales force could compete on those terms...they would be a laughing stock! The head of Japan pipes up and says, in a totally sincere way "if we advertised those prices, they're so cheap, we would instantly lose our market leadership credibility"

In the end we had the beanies run a sophisticated analysis to allow the management to compare apples with apples and essentially understand what impact each OPEX item had on the profitability of the country and salaries and land prices (office rent) were always close to the top as the big deciding factors. Japan (Tokyo) surprise surprise has pretty much the highest property prices in the world, hence the cost of doing business there is high. The US has some of the lowest land prices, their salaries also tend to be lower on average than Europe. Their businesses also can leverage their assets for easily as they have the largest homogeneous marketplace in the world, all speaking the same language, in their lap. So they can make the thing once and sell it many times. More profitable. Not so in Europe which, despite attempts at political and currency union is as we all know a staggeringly fragmented market, by culture, by language etc.

In the end, this company invented a price list for all its software product in a mythical currency called "Atlantis dollars". Everything was priced from development (the factory) in Atlantis so the beanies had a currency to use when comparing performance across boundaries and then each country had an uplift or down lift to apply to their local list price. The US was typically about 2/3 less than the UK. Japan was sometimes literally double!

In the final analysis, what I call the cost of doing business in any given country has to be at least considered before anyone can really understand the nuance behind the retail pricing. And that's company's with wholly owned operations. In the tool world, you have to layer distribution on top which opens up another can of worms to which the previous poster has already made some good points.

 

[Eric The Viking]

A market leading software company that had global operations had all the country managers meet periodically to discuss strategy. Agreeing pricing models for the same product distributed globally but localised for language became a massive bunfight in these meetings. The UK wanted to charge £100K for a 50 user licence but the US were up in arms, saying there's no way their sales force could compete on those terms...they would be a laughing stock! The head of Japan pipes up and says, in a totally sincere way "if we advertised those prices, they're so cheap, we would instantly lose our market leadership credibility."

Been there; have several, related T-shirts.

I have found US business customers to be more demanding than UK ones, expecting better deals and higher quality of service. It's the same in their consumer markets, too. But the Japanese are the worst customers by far, and saying 'no' is considered a huge cultural faux pas. If you do say no however, assuming the request is genuinely unreasonable, they will stop demanding -- it took us some while to twig that one.

Considering Axminster, some of us in the forum were lucky enough to visit them on an organised trip a couple of years ago. They rolled out the red carpet and we were taken round in small groups by senior management, for a whole day. We could (and I did!) ask pretty much anything, and we got straight answers. I'm not ashamed to say I was very impressed.

They precision manufacture on site, and they work very closely with their volume partners in China. They also have sufficient clout with most of the others suppliers, to influence them significantly.

I know a bit about OEM deals, and I would guess that Axminster are probably the preferred partner for many of their Chinese suppliers. They evidently take an almost anal approach to quality and customer service, and that is fed back through the supply chain. I can think of several instances where their own-brand products have been through one or more revisions, with quality improvements, including not-visible things like better motors. I also know, because I've seen the setup and discussed these topics with one of the directors, that they collate both failure data and customer feedback, and put high value on both.

One thing they certainly don't do with machine tools is merely box-shift.

The above doesn't mean that every customer experience will be perfect, nor that they are always competitive. I still buy kit elsewhere, and I don't think the sun shines out of every Axminster orifice, but they remain my first choice for many things.

There are a lot of things influencing the volume-versus-value product mix for any supplier, and as consumers we don't see the (probably heated) pricing discussions that go on. Some things are very price sensitive (e.g. wood glues), others are not (high-end panel saws?), yet, driven by their printed catalogue, Axminster have to price annually, against fluctuating currencies (a problem the US largely doesn't have, as the Dollar is the global reserve currency), and often on the basis of quite low volumes (making stats. unreliable), and at the same time introduce new items for which they can only guess the demand.

Don't even think about the complexities of supply chain management, stocking levels and costs, etc.

There are table saw retailers in the UK who buy by the half-container, and may even hold back orders until they have enough to make a shipment worthwhile. They probably don't do enough volume with the manufacturer to get any product changes made at all at source, so they, and their customers, take what they're given. Their prices are keen, but you can probably whistle for everything else support-wise.

It's interesting that VAG (Volkswagen) have recently been running TV adverts on this theme - buying the cheapest parachute (with a free clock radio), or shark encounter, etc. They're positioning themselves are reliable and good quality, but not necessarily the cheapest. Interestingly, Lidl and Aldi have also been doing this recently. Most marketers will tell you this is a far, far better strategy than competing merely on price.

E.

 

[HexusOdy]

It's an interesting thought experiment to consider the problems of importing and reselling large items like this.
Would you risk buying in bulk 'blind' or will you have to visit the factory to ensure that standards will be maintained ?
What laws and legislation do you need to conform to ?
How big do you need your premises ?
How many people do you need to employ to handle the stock and paperwork ? > how much do they cost to employ ?
How many units do you buy in ?
How good do you want your after sales service to be ? > How many do you need to hold back as spares for warranty ?
How much profit do you need to make to cover the costs above ?

Again all valid points but I have a lot of experience in this area and it's not as complicated as you might think. For somebody like Wadkin when they designed and made their own goods in the UK it was a much more complicated situation with R&D costs, engineering, production lines and all the employees to support it. It's not like that now, it's why the manufacturing industry in Europe is what it is today.

Nobody buys in bulk blind. Axminster and anyone else will have a couple of production samples shipped in before making any purchases. They will test these and have any minor alterations made before placing a bulk order. They will also by this stage have wrote and approved the manual but many just go with the factories own (which is why many are poor). They would have course already met the representatives of which ever company they are buying from and likely visited their factory at least once.

The only legislation they have to comply with is CE and this is also done by the factory through a compliance testing company in China. They do this once for each machine and that same CE cert applies to all machines they sell no matter what name is on the box.

Warehousing, handling etc dont factor in much. Axminster already have that in place. As they do customer services and each company knows exactly how many man hours any product takes. If you expect 1% RMA's you know exactly how much to factor in CS costs, handling, shipping etc. generally add 2% to the cost of the machine and your safe and 2% isn't much.

Spares are purchased form the factory along with the machines. After your first order you have a general idea what spares you need from your RMA's. Have 1% of machines with faulty motors you buy 1% spare motors and so on.

It's really not as complicated and costly as you would think.

 

[HexusOdy]

Been there; have several, related T-shirts.

I have found US business customers to be more demanding than UK ones, expecting better deals and higher quality of service. It's the same in their consumer markets, too. But the Japanese are the worst customers by far, and saying 'no' is considered a huge cultural faux pas. If you do say no however, assuming the request is genuinely unreasonable, they will stop demanding -- it took us some while to twig that one.

You make a lot of interesting points Eric and I'm using Axminster as a general example. I have no knowledge of their workings it was just the first name that sprung to mind. Although I doubt very much they are doing any real precision engineering on site. I'm sure they thoroughly test and adjust units and get the factories to implement those changes and I am sure they have a major say in tweaking and honing the machine they buy based on feedback. But that's nothing less than to be expected and nothing more than the Grizzly's and Ridgid's of the world will be doing. I don't want it to be misconstrued that I expect Axminster to be the same value as their US counterparts. We do have some duty to factor in, and higher VAT than the US has in sales taxes I just don't think we should be paying such a vast difference.

I think your quote above sums it up. I think in UK (and Im sure Europe too) we have become to expect to pay more. I don't think we expect value and we suffer in silence. This isn't helped of course by companies that know that and take advantage of it.

 

[JakeS]

Warehousing, handling etc dont factor in much. Axminster already have that in place.

You've glossed this over a couple of times, but just because they've already got them in place doesn't mean they're free! They'll still have to factor the cost of warehousing and the time any given product is likely to stay on their shelves taking up space into the price of everything they sell. And I doubt any of the tool suppliers in the UK - Axminster included - are large enough to have Amazon-style robot pick-and-pack facilities, on top of the costs for maintaining the warehouse are also the costs for staffing it, running the forklifts to carry heavy tablesaws to the delivery hub, insuring everything, etc.

I expect that the more relevant point with Axminster and many other UK tool suppliers is that they have physical brick-and-mortar shops as well. These are more expensive to run than an online business, require more staff per sale and have all the same warehousing concerns and more, but the retailer can't provide a discount for online sales and only recoup shop-floor costs through shop-floor prices, or everyone would come into their nice air-conditioned, super-clean well-staffed expensive shops to look at the products and then go home and buy them online and never pay for the shop's overheads.



Not to say that we're necessarily not getting ripped off, but I'm pretty sure that there's more to it than "Axminster already have a warehouse so that isn't going to affect their costs much".

 

[Eric The Viking]

I'm using Axminster as a general example. I have no knowledge of their workings it was just the first name that sprung to mind. Although I doubt very much they are doing any real precision engineering on site.

I appreciate you're not attacking Axminster directly.

For the record, however, for several years they have manufactured their lathe chucks (the high-precision ones), in Axminster, in a factory that's co-sited with their warehouse and management offices. They have high-precision multi-axis machines, as you might expect. They have also been extending the range of production to include precision items in other ranges than woodturning, I believe, but I'm not sure of the detail. Items they make themselves are prominently flagged as such in their printed catalogue.

I must confess that I usually use the online catalogue, and, as I'm not a turner, I don't have cause to flick through those pages. Axminster is still very much a family firm, and the owners have a strong commitment to expanding the British-made parts of their range, keeping in mind constraints of cost and quality. We were told they had started production for two reasons: partly patriotism - wanting to see that sort of work done here rather than in the Far East, and partly because they genuinely couldn't get the quality and consistency they wanted from China, at the right price.

We were allowed to visit the manufacturing operation. To a layman's eye the commitment to quality was evident and the finished products appear to be very good value for money (bear in mind I'm not a turner!).

I know they write their own manuals from scratch, as I spoke with the team that does them, which was fun, as it's a job I used to do, too. Tellingly, the documentation team are closely linked to the field support and returns analysis people, so customer feedback gets directly incorporated into the documentation.

I've wondered since if they've started exporting to the USA yet - they could do well, but it's all down to pricing and the channel model, as we're discussing.

E.

PS: They also have a permanent office in China, which liaises with their suppliers. I don't know any more details, except that it is their own operation, not an agent.

 

[pcb1962]

I've wondered since if they've started exporting to the USA yet - they could do well, but it's all down to pricing and the channel model, as we're discussing.

I'd be amazed that they would even think about trying to break into the US market with huge players like Rockler, Lee Valley and HarborFreight having the market sewn up from top to bottom

 

[Eric The Viking]

The Axminster chucks look really impressive (but as I said, I'm no judge).

I meant product export rather than opening up any sort of retail operation, for which I agree the competition is really stiff.

 

[Random Orbital Bob]

Their chucks are well thought of by the British wood turning community. I've not met a single soul in my club that doesn't rate them.

 

[Rhossydd]

Warehousing, handling etc dont factor in much. Axminster already have that in place.

You've missed the point of the thought experiment. It's not about Axminster at all, but is a exercise in understanding all the factors(ie costs) that a retailer has to incur when starting to import and sell machinery. Too many people here seem to fail to understand this issue and just compare factory price with retail price, often without even considering the most basic of things like VAT.

In the specific case you quote; Axminster T&M(before that APT and before that Styles) have been around for a very long time, but they only started offering their own brand products relatively recently. That decision must have involved investing in expanding the business significantly. If you ever went to the old Styles store in Axminster you'll know just how hard pressed they were for space. At that point they didn't have enough warehousing and the infrastructure to import and rebrand.

 

[HexusOdy]

Warehousing, handling etc dont factor in much. Axminster already have that in place.

You've glossed this over a couple of times, but just because they've already got them in place doesn't mean they're free! They'll still have to factor the cost of warehousing and the time any given product is likely to stay on their shelves taking up space into the price of everything they sell. And I doubt any of the tool suppliers in the UK - Axminster included - are large enough to have Amazon-style robot pick-and-pack facilities, on top of the costs for maintaining the warehouse are also the costs for staffing it, running the forklifts to carry heavy tablesaws to the delivery hub, insuring everything, etc.

I expect that the more relevant point with Axminster and many other UK tool suppliers is that they have physical brick-and-mortar shops as well. These are more expensive to run than an online business, require more staff per sale and have all the same warehousing concerns and more, but the retailer can't provide a discount for online sales and only recoup shop-floor costs through shop-floor prices, or everyone would come into their nice air-conditioned, super-clean well-staffed expensive shops to look at the products and then go home and buy them online and never pay for the shop's overheads.



Not to say that we're necessarily not getting ripped off, but I'm pretty sure that there's more to it than "Axminster already have a warehouse so that isn't going to affect their costs much".

I'm not glossing over it Jake, it just doesn't cost that much that it explains the huge differences in price. On average a pallet in a 3rd party logistics warehouse costs about £2 per week, and that with them making a profit. The company I work for has 50,000 pallet spaces, our costs are around 5 cents per pallet per week.

So yes it costs money, just not that much. Add £20 to the price, your well covered. As for the shops, yes they cost money but they are not there for selling table saws. They had the shops before. So there is a cost but again not a huge amount per TS.

And to all others. I absolutely understand the costs involved with having your own brand, importing, customer support etc. They are not insignificant. But pspread over each machine bought and sold they are also not a huge amount of money.

For example, they don't justify the difference between a £675 SIP 01332 in Oz and a £1080 model in the UK. Or a £250 Ridgid SCMS in the US and a £675 AEG SCMS in the UK.

Axminster, Im sure you are great. Sorry for using your name in vain.

 

[Eric The Viking]

If you look the item up by category on the Customs & Excise web site, you can fin out how much duty is payable, in addition to VAT. It's usually rather a lot, for example it used to be about 6% on computer parts, but rather more on anything that could be described as a finished item. I shudder to think what it is on mobile 'phones, but I very much doubt it's only VAT that's payable.

The base price for calculating VAT, incidentally, includes the carriage costs, even if paid by the sender, and the import duty. So the tax is itself taxed.

There are a large number (and amounts of) hidden costs. A good approach is to come at it from the other direction: for publicly listed companies, start with the P+L and the balance sheet, to see stock turn, gross margins, etc.

I wish I had the time, as doing the analysis for similar operations in, say, the UK, France, Germany, Italy and the USA would reveal a lot. One problem however is that disclosure rules vary enormously across the planet. The UK and the USA have some of the more stringent requirements (i.e. more information available). You can also approach productivity figures, as most annual reports show how many employees there are, and you can see pension info, etc, so as to work out average salaries, etc.

Also, if doing this seriously, you can buy sector analysis from companies like Dataquest and the more retail-focused market industry analysts. That'll give you industry 'norms' for meaningful comparisons.

Sorry I don't have a URL handy for the Excise, but I haven't needed to do it in a while. The fact remains that the EU is a very expensive place to operate, no matter what the politicians tell you.

 

[gregmcateer]

This may fit the bill;

https://www.ukworkshop.co.uk/forums/startrite-275ds-12-inch-tablesaw-single-phase-t89076.html

 

[HexusOdy]

I did mention duty earlier Eric. It's 3% on a TS, as it is most woodwork machines. It was one of the first things I checked.

As I mentioned I do import and export of electronics for a German company so I'm very familiar with the costs involved

I do a lot of work with Chinese factories and did some digging. Would it change your mind if I told you a SIP 01332 10" cast iron cabinet saw that retails for £830 + vat costs less than £375 from the factory? It's not SIP branded obviously but the exact same machine, same spec etc before SIP stick their logo on it. And I'm sure SIP are paying much less as that's the 20 unit MOQ price. I would expect they pay less than £350 per unit but lets work off £375.

Plus 3% duty makes it £386.

Now shipping is fairly high. It's an estimate as shipping changes depending on time of year, fuel costs, whether you can stack them in HQ containers etc but a safe estimate would be £35 per unit. Very much likely less but I'd rather go high. Lets round it to £420 landed in UK for arguments sake.

So the landed UK manufacturers cost is half the best retail price, very much likely a lot less as I've estimated high. I understand there are other costs. Spare parts, warranty handling, customer services, warehousing etc etc which are low percentages on the cost. But even if you add £80 per unit for those things which is a very high percentage there is still a big gap to retail price.

Now SIP have a distribution model in place. They sell most of their gear through retailers, so they have their margin and the retailer has theirs, so that is part of the equation. But what about the direct sellers like Axi, Charnwood, Woodford with Xcalibur, iTech etc who are selling direct and don't have that extra margin to consider?

 

[Eric The Viking]

I did mention duty earlier Eric. It's 3% on a TS, as it is most woodwork machines. It was one of the first things I checked.

As I mentioned I do import and export of electronics for a German company so I'm very familiar with the costs involved

I do a lot of work with Chinese factories and did some digging. Would it change your mind if I told you a SIP 01332 10" cast iron cabinet saw that retails for £830 + vat costs less than £375 from the factory? It's not SIP branded obviously but the exact same machine, same spec etc before SIP stick their logo on it. And I'm sure SIP are paying much less as that's the 20 unit MOQ price. I would expect they pay less than £350 per unit but lets work off £375.

Plus 3% duty makes it £386.

Now shipping is fairly high. It's an estimate as shipping changes depending on time of year, fuel costs, whether you can stack them in HQ containers etc but a safe estimate would be £35 per unit. Very much likely less but I'd rather go high. Lets round it to £420 landed in UK for arguments sake.

And thus the VAT incl. price is now £504 - it's creeping up.

So the landed UK manufacturers cost is half the best retail price, very much likely a lot less as I've estimated high.

You probably haven't. 50% ex-factory gross margin for the whole channel is pretty keen actually. Some computer items are up around 75%, especially if exotic or sold over the counter retail.

I understand there are other costs. Spare parts, warranty handling, customer services, warehousing etc etc which are low percentages on the cost. But even if you add £80 per unit for those things which is a very high percentage there is still a big gap to retail price.

Don't forget cost of sales: advertising, commission, safety testing (this is a category where you can't self-cert for CE marking, I believe), loaner unit(s), and all the other stuff that falls loosely under 'marketing' these days.

You had 20 units. One has gone for spares (assuming it's a new model there's nothing in the spares pipeline so you have to use new parts). One more is doing trade shows, press evals, etc. You can't sell it, at least not as new and not immediately you receive it.

That's 10% of your gross gone right there.

Now SIP have a distribution model in place. They sell most of their gear through retailers, so they have their margin and the retailer has theirs, so that is part of the equation. But what about the direct sellers like Axi, Charnwood, Woodford with Xcalibur, iTech etc who are selling direct and don't have that extra margin to consider?

Axi shops will have essentially the same cost structure as any other retail outlet, albeit a bit more efficient. For 'direct' sales there are significant other costs, mainly marketing-related. Good web sites are not cheap, especially if they include e-commerce, as most do. They're an ongoing cost some of which is variable (directly apportionable), and some of which is overhead, Then there's the credit card cost: I very much doubt many customers pay in cash. Card costs are 1-3% of sales depending on the size of the business and the exact nature of the transaction -- again straight off the top.

Given what's being sold, I'd expect public liability insurance is hefty too. You have an accident; your lawyer goes after the wealthiest entity(ies) to whom liability can be pinned.

As I said earlier though, if I was doing this 'for real', I'd start by having a look at the books of the industry sector. What is its typical gross margin, stock turn, etc.? What are the norms for overheads and cost of sales? What is the sector usually returning to shareholders? What are the risks,

Coming at it from both directions gives a better picture than me guessing a list of cost centres (and costs) in the managerial books.

E.