taunton-hobbit Posted January 15, 2015 Share Posted January 15, 2015 I've 'dared' suppliers to put stuff about pricing in writing - it ain't happening - it wasn't in 2002 and it certainly won't now......when (not if) I leave this shop, I'm never going near consumer retail again, trust me............... Quote Link to comment Share on other sites More sharing options...
crez5150 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='molan' timestamp='1421356376' post='2660401'] They can simply refuse to supply in the future though and give other reasons than discounting as to why they won't sell to the retailer any more. I've seen lots of examples of this and there are definitely ways around things. The 'smart' thing to do is not to put the refusal to supply because of discounting in writing. Thomann is a perfect example. Every now and then products disappear completely from their stock list. There's a general assumption that this is because the manufacturer won't sell to them at heavily discounted prices but in some cases the manufacturer won't sell to them because they have the potential to wreck the pricing market for the manufacturer. I'm in discussions right now with a major manufacturer who has made it very clear there is a price point that a retailer can never go below or supply will dry up. All conversations are on the phone rather than in writing. [/quote] This is a way around it.... but I guess it depends on the manufacturer and..... some can easily do this, others cannot. It's also noted that the 'big online german store' will de-list a manufacturers product from it's site if there is no margin to be made over a period of time..... Quote Link to comment Share on other sites More sharing options...
crez5150 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='molan' timestamp='1421356376' post='2660401'] I'm in discussions right now with a major manufacturer who has made it very clear there is a price point that a retailer can never go below or supply will dry up. All conversations are on the phone rather than in writing. [/quote] Yes this happens but it is still illegal. Some distribution/manufacturers are more lenient when it comes to what you can and can't discuss with the retailers as to pricing.... others will tell you that it is strictly forbidden to discuss price points. Quote Link to comment Share on other sites More sharing options...
andy67 Posted January 16, 2015 Author Share Posted January 16, 2015 (edited) [quote name='crez5150' timestamp='1421400965' post='2660703'] This is a way around it.... but I guess it depends on the manufacturer and..... some can easily do this, others cannot. It's also noted that the 'big online german store' will de-list a manufacturers product from it's site if there is no margin to be made over a period of time..... [/quote] Yes they do, the Mike Dirnt P is no longer available from das auto! Edited January 16, 2015 by andy67 Quote Link to comment Share on other sites More sharing options...
M-Bass-M Posted January 16, 2015 Share Posted January 16, 2015 I've arrived at this thread particularly late, but I wanted to pick up on this whole "online vs bricks and mortar" debate. The opinion seems to be that because internet retailers don't have to worry about paying rent/rates and staff costs for all their stores, then they have comparatively lower overheads and so can be more competitive on price. I work for a major online retailer, and I can tell you that we make lower profits than some of our key bricks and mortar competitors. Although we do not have any stores to pay for, we have other considerable costs elsewhere that are probably exclusive to online retailing. First, you have a website to pay for and maintain. To deliver customer service, you need to ensure that it's available at all times. Keeping it running requires considerable IT expense, but if it does go down, then you need to have a back up in place, so you have some considerable disaster recovery costs. Likewise, you need to ensure your product is uploaded onto your site. This is not just photographs, but also enough text to provide customers with enough information. Some suppliers will supply this to you, a lot of the time you need to do it yourself - as an example, I know Mark from Bass Direct spends a lot of time creating YouTube demos and taking photos of all his stock to load on to the website. Furthermore, Fraud can become a massive issue for online retailers. As an example, several high street shops stopped selling any form of electrical product online because the amount of fraud they were experiencing was simply too high. At my company, we have invested considerable sums of money safeguarding our website against Fraudsters...and it don't come cheap. Secondly, you have distribution costs to worry about. In a shop, your customers turn up to your door and usually take their product away with them. With an online business, you have to ship products to your customers. Now to a certain extent you can pass on this cost to your customers, but with prices so visible on the web, you only have to look at the number of online retailers who provide free delivery to realise that market dynamics mean that you may not be able to do this. I'm far from an industry expert, but I'm just trying to add some perspective to the notion that e-tailers have a lower cost base than bricks and mortar retailers. In my view, the success of online retailers vs local musical shops is probably due to scale and the impact that it has on cashflow. If you take a local music shop, their cash inflows will be large, but few and far between - basically, you'll get a good chunk of cash every time you sell a guitar. If you have a few good weeks, then you're quids in; a few bad weeks, plus having your regular rent, rates and wages bill to pay, and all of a sudden you're in problems. The same problem will affect the large online retailers, but their size and market reach will mean that sales will be a bit more regular, and therefore cash will be slightly more steady. Steadier cashflows allow you to make longer term pricing (discounting) decisions with comfort. Furthermore, as others have said, as a larger firm you will receive better terms with your suppliers. This isn't just restricted to a better price through higher volume orders, but also better financing terms: you're likely to be able to negotiate 30-60 days credit, as opposed to having to pay for stock up front. This can have a considerable impact on your cashflows. From a pricing perspective, if local music stores aren't able to compete on price, then they have to compete on something else - and again, others have clearly identified this as customer service / in depth knowledge. In this area, I look at the success of Bass Direct and the Great British Bass Lounge, and specifically the very tailored customer service that is offered by clearly passionate individuals. In my mind, the enhanced service that I receive more than justifies the fact that I may end up paying slightly more for a new guitar. Quote Link to comment Share on other sites More sharing options...
Moos3h Posted January 16, 2015 Share Posted January 16, 2015 Nicely written post! Quote Link to comment Share on other sites More sharing options...
crez5150 Posted January 16, 2015 Share Posted January 16, 2015 M-Bass-M Yes you are correct to an extent. Though many Music retailers will be facing the same costs as you mention as the majority do have online presence, shipping costs etc.... just maybe not to the same extent. The main crux here is online visible pricing rather which is the same issue for both online and B&M retailers...... Quote Link to comment Share on other sites More sharing options...
oggiesnr Posted January 16, 2015 Share Posted January 16, 2015 [quote name='M-Bass-M' timestamp='1421412165' post='2660870'] From a pricing perspective, if local music stores aren't able to compete on price, then they have to compete on something else - and again, others have clearly identified this as customer service / in depth knowledge. In this area, I look at the success of Bass Direct and the Great British Bass Lounge, and specifically the very tailored customer service that is offered by clearly passionate individuals. In my mind, the enhanced service that I receive more than justifies the fact that I may end up paying slightly more for a new guitar. [/quote] I'm afraid you may be one of a dying breed who think like this I'm friendly with the owner of a music shop who spends a lot of time running courses, workshops etc and has brilliant customer service. He also sells lots of ukeleles. In fact they are a big reason that his shop can keep going. He has also stopped selling ANY electric instruments, guitars, basses, keyboards, the lot. Reason? There's no profit in them. Not by the time he's bought them, used wall space to display them, staff (or his time), to tune and dust them, stocked a range of amps so folks can try them out, it's not worth his time and effort. Especially when coupled with the "try here, buy on line" ethos. So he sells lots of ukes, has a great display of acoustic guitars and lots of other acoustic instruments which people seem to try and buy from him rather than online. Maybe folks who buy acoustc instruments have a different point of view? Steve Quote Link to comment Share on other sites More sharing options...
M-Bass-M Posted January 16, 2015 Share Posted January 16, 2015 [quote name='crez5150' timestamp='1421413589' post='2660889'] Though many Music retailers will be facing the same costs as you mention as the majority do have online presence, shipping costs etc.... just maybe not to the same extent. [/quote] Absolutely that's true, but I guess those retailers that have both online and high street presence tend to also be large, and hence benefit from the supplier benefits and cashflow certainties that I mentioned. As I said, I work for an internet retailer which is less profitable than high street retailers that also have an online presence. This illustrates my point perfectly: online only does not immediately equate to lower cost base and therefore price competitiveness. Quote Link to comment Share on other sites More sharing options...
crez5150 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='M-Bass-M' timestamp='1421414006' post='2660901'] Absolutely that's true, but I guess those retailers that have both online and high street presence tend to also be large, and hence benefit from the supplier benefits and cashflow certainties that I mentioned. As I said, I work for an internet retailer which is less profitable than high street retailers that also have an online presence. This illustrates my point perfectly: online only does not immediately equate to lower cost base and therefore price competitiveness. [/quote] If you were to take a like for like by size I would hedge the Online only company would have a much lower cost base Quote Link to comment Share on other sites More sharing options...
M-Bass-M Posted January 16, 2015 Share Posted January 16, 2015 [quote name='oggiesnr' timestamp='1421413876' post='2660897'] I'm afraid you may be one of a dying breed who think like this [/quote] Thinking like that and being able to act like that unfortunately are two very different things. Like many other bass players, any potential purchase has to be approved by the Investment Committee (aka the Wife). Spending a day - or even half a day - to travel to your local music store is a lot more "visible" than going online at work, buying a bass, arranging to have it delivered to work, and then find a way to sneak it into the house. Quote Link to comment Share on other sites More sharing options...
neepheid Posted January 16, 2015 Share Posted January 16, 2015 [quote name='M-Bass-M' timestamp='1421414572' post='2660911'] Thinking like that and being able to act like that unfortunately are two very different things. Like many other bass players, any potential purchase has to be approved by the Investment Committee (aka the Wife). Spending a day - or even half a day - to travel to your local music store is a lot more "visible" than going online at work, buying a bass, arranging to have it delivered to work, and then find a way to sneak it into the house. [/quote] I'm so glad I don't have to do all that cloak and dagger stuff with my wife. We talk about stuff and support each other in our interests and passions. Just as well, because I'm a useless liar. Quote Link to comment Share on other sites More sharing options...
M-Bass-M Posted January 16, 2015 Share Posted January 16, 2015 [quote name='crez5150' timestamp='1421414165' post='2660903'] If you were to take a like for like by size I would hedge the Online only company would have a much lower cost base [/quote] That would make for quite an interesting experiment, although trying to find comparable sized retailers would be extremely difficult. However, you could start off at the very bottom. You take two individuals, one starts up a local music store, and the other starts up an internet-only retailer. Assume that both business stock identical stock, and employ no other individuals other than themselves. Assume also that both businesses spend the same amount on marketing and advertising - albeit the local music store would advertise in the local area, while the online store would invest in search engine optimisation / paid searches etc. Once these assumptions have been made, then what are the remaining key differences? Arguably, location. Where the online retailer needs storage space for the stock, the local music shop (LMS) is able to make use of shop floor / back office space. To simplify things further, assume that the space required is identical. However, whereas the local LMS needs to have a central town/city centre location, the online store needs only an out-of-town industrial estate to run their business from. Here you have your first major cost difference: out of town industrial units will have considerably lower rate and rents than a town centre location. However, the online store needs to run and maintain a website, and will need to work out a delivery charge strategy. Also, they will pay higher bank fees as they will need to be able to offer secure online payment methods (e.g. Verified by Visa). So the question is: are the associated costs of running an online store lower than the additional rent and rates that a LMS pays for their town centre location? If so, then an online store will have a lower cost base. I don't know the answer, and likewise I wouldn't want to even think about how each business would scale. Might be interesting to download some accounts from Companies House and compare the relative profitability of different music stores. Quote Link to comment Share on other sites More sharing options...
MiltyG565 Posted January 16, 2015 Share Posted January 16, 2015 The buying power of big online retailers can't be forgotten about. They can sell cheaper because they can command a cheaper price from their supplier. Buying 100 of something will always be cheaper per-item than buying 10 of them, which is the difference between online and high-street retail. Quote Link to comment Share on other sites More sharing options...
oggiesnr Posted January 16, 2015 Share Posted January 16, 2015 [quote name='M-Bass-M' timestamp='1421422758' post='2661049'] Once these assumptions have been made, then what are the remaining key differences? Arguably, location. Where the online retailer needs storage space for the stock, the local music shop (LMS) is able to make use of shop floor / back office space. To simplify things further, assume that the space required is identical. However, whereas the local LMS needs to have a central town/city centre location, the online store needs only an out-of-town industrial estate to run their business from. Here you have your first major cost difference: out of town industrial units will have considerably lower rate and rents than a town centre location. However, the online store needs to run and maintain a website, and will need to work out a delivery charge strategy. Also, they will pay higher bank fees as they will need to be able to offer secure online payment methods (e.g. Verified by Visa). So the question is: are the associated costs of running an online store lower than the additional rent and rates that a LMS pays for their town centre location? If so, then an online store will have a lower cost base. [/quote] Couple of thoughts. I suspect that most music shops today need a web presence to be taken seriously so there is some cost for both of them. The rent differential between a retail shop and an industrial unit is huge. Prime retail space (ie with good passing footfall rather than people having to know where you are) is horrific, 460 sq foot in Princes Quay in Hull is £30k plus £10K rates. My new industrial unit which is the same size is £4k plus £1,500. You can get cheaper retail, it's cheaper for a reason and even that is getting out of hand. Steve Quote Link to comment Share on other sites More sharing options...
Dad3353 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='MiltyG565' timestamp='1421425012' post='2661082'] The buying power of big online retailers can't be forgotten about. They can sell cheaper because they can command a cheaper price from their supplier. Buying 100 of something will always be cheaper per-item than buying 10 of them, which is the difference between online and high-street retail. [/quote] Slight pedantry, maybe, but this is not necessarily true. A bulk buy will only be potentially cheaper if the manufacturer has, in turn, an economy of scale. Some industries do not have this (making labour-intensive short-run items that do not have a fixed set-up time, for instance...). Whilst mainly true, then, one cannot [i]always [/i]extrapolate and get a quantity discount. Just sayin'. Quote Link to comment Share on other sites More sharing options...
crez5150 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='Dad3353' timestamp='1421427488' post='2661128'] Slight pedantry, maybe, but this is not necessarily true. A bulk buy will only be potentially cheaper if the manufacturer has, in turn, an economy of scale. Some industries do not have this (making labour-intensive short-run items that do not have a fixed set-up time, for instance...). Whilst mainly true, then, one cannot [i]always [/i]extrapolate and get a quantity discount. Just sayin'. [/quote] This is True.... Dealerships will have different levels of discount dependant on what markers you hit. Quite a lot of the manufacturers will have a discount structure that may involve extra discount for quantity but this is is normally on realistic quantities as opposed to say being 10 pcs or 100 pcs. More like 1-4pcs 5-10 pcs 10+ pcs. It's not in the manufacturers favour to offer massive discounts for quantity.... it only ends up de-valueing the marketplace for them and their customer base. Quote Link to comment Share on other sites More sharing options...
MiltyG565 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='crez5150' timestamp='1421428332' post='2661145'] This is True.... Dealerships will have different levels of discount dependant on what markers you hit. Quite a lot of the manufacturers will have a discount structure that may involve extra discount for quantity but this is is normally on realistic quantities as opposed to say being 10 pcs or 100 pcs. More like 1-4pcs 5-10 pcs 10+ pcs. It's not in the manufacturers favour to offer massive discounts for quantity.... it only ends up de-valueing the marketplace for them and their customer base. [/quote] And yet, they do offer quite significant discounts to bulk purchasers. But the idea behind quantity discounts is to allow the retailer to make more money on the product, not to sell it cheaper. It incentivises higher order numbers. Quote Link to comment Share on other sites More sharing options...
crez5150 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='MiltyG565' timestamp='1421428892' post='2661155'] And yet, they do offer quite significant discounts to bulk purchasers. But the idea behind quantity discounts is to allow the retailer to make more money on the product, not to sell it cheaper. It incentivises higher order numbers. [/quote] The problem currently thats not what happens. The extra margin goes out the window as to compete with the online pricing... it's an ever downward spiral. Quote Link to comment Share on other sites More sharing options...
MiltyG565 Posted January 16, 2015 Share Posted January 16, 2015 [quote name='crez5150' timestamp='1421429972' post='2661185'] The problem currently thats not what happens. The extra margin goes out the window as to compete with the online pricing... it's an ever downward spiral. [/quote] Exactly. Quote Link to comment Share on other sites More sharing options...
oggiesnr Posted January 16, 2015 Share Posted January 16, 2015 If you look at the Gear4Music site you'll see that a lot of higher end gear is listed as "Available to Order". In other words place your order and they'll get in for you with a time lag of anything from a few days to a couple of months. So they'll put it on their weekly order knowing that it's pre-sold. Highly useful this as they have no risk, I imagine that as they have your card details you would struggle to back out. Would you accept that from your local music shop, even if they ordered often enough to be able to offer shortish lead times? Frequency of orders is another area where the big on line people will always win over smaller shops. Steve Quote Link to comment Share on other sites More sharing options...
skej21 Posted January 16, 2015 Share Posted January 16, 2015 (edited) [quote name='oggiesnr' timestamp='1421433651' post='2661255'] If you look at the Gear4Music site you'll see that a lot of higher end gear is listed as "Available to Order". In other words place your order and they'll get in for you with a time lag of anything from a few days to a couple of months. So they'll put it on their weekly order knowing that it's pre-sold. Highly useful this as they have no risk, I imagine that as they have your card details you would struggle to back out. Would you accept that from your local music shop, even if they ordered often enough to be able to offer shortish lead times? Frequency of orders is another area where the big on line people will always win over smaller shops. Steve [/quote] The 'available to order' thing online is b*ll*cks. It's down to stock integration. Basically, in this example, "Xmusic.com" link their stock to the supplier directly and if it's in stock at the supplier (but not the "Xmusic.com" warehouse) it'll say 'in stock - 3 to 5 days delivery'... This means they'll take your order, send for the item from the supplier and then forward it to you. If it says 'in stock - next day delivery available' that means they are stocking it in their own warehouse. 'Available to order' means they'll try and get one for you but aren't sure on the arrival date, usually because it's not in stock with the supplier or don't have stock integration with that supplier. In these situations, they hope that you'll give them the money and if they can't get it soon, they'll fob you off until it turns up OR they'll suggest you buy something similar that's in stock when it isn't available (as has been mentioned by another member who had this with PMT (?) when they promised to get an item they knew they couldn't get and the tried to cross sell to something else to try and keep the sale). There's so much nonsense that goes one behind the scenes with these things. We regularly had other stores buying stock from us at retail to sell on to at NO profit, just to keep the customer and hope the dealing resulted in return custom. It's crazy! Edited January 16, 2015 by skej21 Quote Link to comment Share on other sites More sharing options...
jezzaboy Posted January 16, 2015 Share Posted January 16, 2015 (edited) Skej, your last point is applicable to lots of businesses. I work in the tool/plant hire game and this happens all the time. If someone wants to hire something from us and we don`t have it, we will cross hire it from someone else to keep the sale and the customer. Even if we dont make a profit or even a small loss if it is an important customer. Back to basses. When Thomann can sell a Sterling MM sub for £232 and guitarguitar sells the same thing for £334, there is something wrong (or right!) somewhere along the line. Edited January 16, 2015 by jezzaboy Quote Link to comment Share on other sites More sharing options...
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