john@bby-bc.UUCP (07/04/87)
The articles about getting UUNET in Canada reminded of a sore point.
I keep having this experience when I go out to buy computer or
electronic stuff:
me : so how much is it?
salesperson: it's only $X.
me : but it's only $Y in the US (where $Y = 0.5$X usually)!!
salesperson: ummm, yes that's about right, two times the US price. After
all we have to pay exchange, and fst and duty.
me : there isn't any duty on that stuff and exchange + fst gives a markup
of only %50 not %100
salesperson : oh, umm, er, well
A common variation is that the article is on "sale" :
me : but that's the same as the US list price plus exchange + fst!
salesperson : yes but our list price is relatively higher; you have
to take the US list price and then add exchange + fst to
get our list price.
me : but you don't pay the list price you pay wholesale and add exchange +
fst to that price and then add your markup.
salesperson : no, we add our markup to the US list price after exchange
and fst are added in.
me : good day
This happens time and again (although some of the retailers around here
are getting better); it is particularly galling when the stuff comes from
say Japan and the price I pay is effectively:
wholesale price (Japan to US) + exchange (yen/US $) + US duties and taxes +
profit margin of US retailers + exchange (US $/Can $) +
fst + Canadian retailer markup
instead of:
wholesale price (Japan to Canada) + exchange (yen/Can $) + fst
+ Canadian retailer markupbrad@looking.UUCP (07/05/87)
In article <133@bby-bc.UUCP> version B 2.10.2 9/18/84; site looking.UUCP looking!watmath!ubc-vision!fornax!bby-bc!john john@bby-bc.UUCP (john) writes: > > me : but you don't pay the list price you pay wholesale and add exchange + > fst to that price and then add your markup. > > salesperson : no, we add our markup to the US list price after exchange > and fst are added in. > > me : good day You have made the mistake of assuming that profit margin or "markup" is added. It is multiplied. If a dealer wants a profit margin of 25%, then the price is multiplied by 4/3 (so that cost = .75 * selling price). So of course the markup is calculated based on the dealers true cost of the goods. A margin is a margin. At the higher prices our government kindly forces us to pay, the dealer sells fewer products. He needs to make proportionately more to make the same money for the same sales effort as an American dealer. What's worse is that the US price was chosen to maximize the (sales*unit profit) figure. The US manufacturer sets this price, so it is set to maximize this amount down there. If you have priced your product correctly, then doubling the price produces sales of LESS than 50%, and halving the price produces sales of LESS than 200%. (this simple example is falsely based on a zero price of goods) Also, more expensive goods require more expensive advertising, packaging and service. What this means is that the Canadian dealer gets screwed, and the price point to maximize profits will not be equal to: (( whoesale cost * duty factor * FST factor ) + customs hassle) * U.S. margin (which is what a customer thinks it should be equal to) The price is higher, so we all pay, thanks to our government. If our dealers didn't have all these rules, duties and taxes to worry about, they would follow the same economics that any US dealer follows. Before you flame, *think* about why things are the way they are. -- Brad Templeton, Looking Glass Software Ltd. - Waterloo, Ontario 519/884-7473
bjorn@alberta.UUCP (07/05/87)
In article <133@bby-bc.UUCP>, john@bby-bc.UUCP (john) writes: > salesperson: it's only $X. > > me : but it's only $Y in the US (where $Y = 0.5$X usually)!! Perhaps articles are more expensive in B.C. than Alberta. While I have certainly encountered computers and related items with this sort of pricing, I must say that in the last year or so this has been less and less the case. I consider anything higher than 1.6 times the US price to be a ripoff [1.6 is approximately (exchange rate * duty * fst), duty on computers is 3.9 % if I remember correctly]. > me : but that's the same as the US list price plus exchange + fst! > > salesperson : yes but our list price is relatively higher; you have > to take the US list price and then add exchange + fst to > get our list price. I'll start bargaining down from 1.6 * US going/list-price and usually succeed in obtaining a price that compares favorably to competitive US prices. To be honest I should note that most of the time I'll let the salesperson talk themselves into a lower price, which I'll take it or make a final counter-offer. No matter what your looking for always be prepared to walk out without buying. > me : good day Forget about their markup and try to obtain the product at what you consider a fair price. They'll sell it to you unless they'd take a loss. Remember though that salespersons need to make a living, don't cheat them out of the entire commission. For high priced items deal with the manager or the owner. The run of the mill salesperson may not have authority to cut into the store's markup. Bjorn R. Bjornsson {ubc-vision,mnetor}!alberta!bjorn
john@bby-bc.UUCP (07/05/87)
> > me : but you don't pay the list price you pay wholesale and add exchange + > > fst to that price and then add your markup. > > > > salesperson : no, we add our markup to the US list price after exchange > > and fst are added in. > > > > me : good day > > You have made the mistake of assuming that profit margin or "markup" is > added. It is multiplied. If a dealer wants a profit margin of 25%, then > the price is multiplied by 4/3 (so that cost = .75 * selling price). You have made a mistake in assuming a particular meaning of the word "add", read it again treating it as a synonym for "apply". > At the higher prices our government kindly forces us to pay, the dealer How does it force us to pay higher prices? Aside from 12% fst which I object to but don't blame the retailer for - I would pay 12% more than the US list (in Can. $) without griping to the retailer. > sells fewer products. He needs to make proportionately more to make > the same money for the same sales effort as an American dealer. I just can't believe that a 12% tax means sales srop so low the dealer has to charge 30%-50% more than US list and exchange and fst. The US list already includes a healthy dealer markup - then our dealers markup the markup!! The price in the US seems to be list = wholesale "plus" markup From what dealers here tell me the price we pay is really Can. list = wholesale "plus" US markup "plus" exchange "plus" fst "plus" transborder costs "plus" Can. markup rather than Can. list = wholesale "plus" exchange "plus" fst "plus" transborder costs "plus" Can. markup > What's worse is that the US price was chosen to maximize the > (sales*unit profit) figure. The US manufacturer sets this price, so it > is set to maximize this amount down there. If you have priced your > product correctly, then doubling the price produces sales of LESS than > 50%, and halving the price produces sales of LESS than 200%. (this > simple example is falsely based on a zero price of goods) They choose their wholesale price based on their total volume. They choose their list price based on dealer volume. This is a *very* healthy increase based on very low volume at individual outlets (see how much a large volume discounter can cut off the price). I doubt a single computer store in Seattle has a markedly different volume than a single computer store in Vancouver. > Also, more expensive goods require more expensive advertising, packaging > and service. You mean Ford has to spend more on advertising it's multi-thousand$ cars than pepsi does advertising it's $0.60 drink? > What this means is that the Canadian dealer gets screwed, and the price > point to maximize profits will not be equal to: > > (( whoesale cost * duty factor * FST factor ) + customs hassle) * U.S. margin > > (which is what a customer thinks it should be equal to) > The price is higher, so we all pay, thanks to our government. If our dealers > didn't have all these rules, duties and taxes to worry about, they would > follow the same economics that any US dealer follows. Just as an example - in the worst case a retailer here could pay Us retail price for a LaserJetII from a discounter. To get it landed here in Vancouver all expenses paid (fst,exchange,brokerage, shipping) would cost $2600. Now what is a fair increase to make a profit? Say 40%? This would mean a profit of $1040 on a $2600 item, not bad. So the retail price would be $3640. So why am I quoted a price of $4700 as the Canadian list? As a final argument, let me reiterate: not all companies do this there are a wide variety of goods (some of them computer stuff) that are sold at what you would expect (not hyper-inflated) so why can't computer companies do it too? > Before you flame, *think* about why things are the way they are. I did. That's why I am pissed off. > Brad Templeton, Looking Glass Software Ltd. - Waterloo, Ontario 519/884-7473
sl@van-bc.UUCP (07/05/87)
In article <133@bby-bc.UUCP> john@bby-bc.UUCP (john) writes: >This happens time and again (although some of the retailers around here >are getting better); it is particularly galling when the stuff comes from >say Japan and the price I pay is effectively: >wholesale price (Japan to US) + exchange (yen/US $) + US duties and taxes + >profit margin of US retailers + exchange (US $/Can $) + >fst + Canadian retailer markup Actually its just that you are paying for a second level of distributorship in Canada. -- {ihnp4!alberta!ubc-vision,uunet}!van-bc!Stuart.Lynne Vancouver,BC,604-937-7532
john@bby-bc.UUCP (07/06/87)
> >are getting better); it is particularly galling when the stuff comes from > >say Japan and the price I pay is effectively: > > >wholesale price (Japan to US) + exchange (yen/US $) + US duties and taxes + > >profit margin of US retailers + exchange (US $/Can $) + > >fst + Canadian retailer markup > > > Actually its just that you are paying for a second level of distributorship > in Canada. I don't understand your comment - the stuff is coming from Japan so I don't see where there is a second level of distributorship. Why is the relative price so radically different than the price of the same thing in the US which is also imported from Japan? john . news fodder
brad@looking.UUCP (07/07/87)
In article <137@bby-bc.UUCP> john@bby-bc.UUCP writes: >> > salesperson : no, we add our markup to the US list price after exchange >> > and fst are added in. >> > me : good day >> >> You have made the mistake of assuming that profit margin or "markup" is >> added. It is multiplied. If a dealer wants a profit margin of 25%, then >> the price is multiplied by 4/3 (so that cost = .75 * selling price). > >You have made a mistake in assuming a particular meaning of the word >"add", read it again treating it as a synonym for "apply". > If this is how you meant the word, then why does it make a difference to you whether they "add" their markup before duty and tax or after duty and tax. If you meant multiply, it wouldn't make a difference to you where they "add" their markup. >> At the higher prices our government kindly forces us to pay, the dealer > >How does it force us to pay higher prices? Aside from 12% fst which >I object to but don't blame the retailer for - I would pay 12% more >than the US list (in Can. $) without griping to the retailer. > I thought I detailed this fairly well. To put it in brief terms: We pay much higher prices. If the government regulations were not there we would pay the same prices they pay in the USA, except for currency exchange. Conclusion: The government is responsible for the higher prices. This doesn't mean that business doesn't charge what the market will bear -- of course it does! But that price is higher strictly because of our government. Some factors are direct like duty and tax. Others like currency difference are the result of a complex pattern of economic factors supposedly under the control of the Government. The low price of the Canadian dollar means a nice bonus for the exporter, but you, the importing consumer must pay a penalty. >I just can't believe that a 12% tax means sales srop so low the dealer >has to charge 30%-50% more than US list and exchange and fst. As noted above, there are other factors, like currency exchange. Right now a dealer's cost on a product with 5% duty is 1.58 times the US price plus brokerage and border hassles. Thus you feel that a product with a $100 US list price should have a price of about $160 CDN. If the US Dealer has a profit margin (markup-store expenses) of 15% he gets $15 in the USA while the Canadian dealer gets $24. But the price point is set so that while you might sell 1,000 at $100 you will only sell 500 of them at around $160. Thus the US dealer makes $15,000 (USD) while the Canadian dealer makes $12,000 (CDN). The Canadian dealer might sell 400 of them at $180 and then makes almost $40 per sale (product costs are the same but store costs increase with price) for a profit of $16,000 (CDN). Not too bad, but still below the $20,200 CDN that $15,000 USD is equal to. Perhaps he can sell 350 of them at $200 apiece with $55 per sale. $19,250. Almost as much as the US Dealer! >I doubt a >single computer store in Seattle has a markedly different volume than >a single computer store in Vancouver. Becuase the prices are higher in Vancouver, the volume is much lower. The Canadian Computer market is far less than 1/10th of the American market, where you would think it would be by population. >You mean Ford has to spend more on advertising it's multi-thousand$ cars than >pepsi does advertising it's $0.60 drink? Yes, it does, especially PER sale. I never got a 16 page 4-colour glossy brochure on a Pepsi. Any Ford dealer will give you several if you ask. > [Laserjet could be imported for] $2600. Now >what is a fair increase to make a profit? Say 40%? This would mean a profit >of $1040 on a $2600 item, not bad. So the retail price would be $3640. So >why am I quoted a price of $4700 as the Canadian list? So if any Joe Schnutz can get a LaserJet for $2600 by importing and HP dealers sell them for $4700, why are HP dealers making any sales? Could they be offering their customers something worth the difference? Are the customers stupid? Or is there a barrier put there by a government that mandates border hassles and useless duplication of distribution channels, support facilities and warranty handling? -- Brad Templeton, Looking Glass Software Ltd. - Waterloo, Ontario 519/884-7473
lyndon@ncc.UUCP (07/08/87)
In article <832@looking.UUCP>, brad@looking.UUCP (Brad Templeton) writes: > In article <137@bby-bc.UUCP> john@bby-bc.UUCP writes: > > [Laserjet could be imported for] $2600. Now > >what is a fair increase to make a profit? Say 40%? This would mean a profit > >of $1040 on a $2600 item, not bad. So the retail price would be $3640. So > >why am I quoted a price of $4700 as the Canadian list? > > So if any Joe Schnutz can get a LaserJet for $2600 by importing and HP > dealers sell them for $4700, why are HP dealers making any sales? Could > they be offering their customers something worth the difference? Are > the customers stupid? Or is there a barrier put there by a government > that mandates border hassles and useless duplication of distribution > channels, support facilities and warranty handling? Generally speaking, your direct costs of importing an item from the US is lower than buying the same item from a Canadian dealer. Depending on your particular situation, this may be the way to go. But what happens when you buy something from the US at a $200 saving, to have it break a month later. Odds are the warranty work will have to be done in the US. Shipping something like a laser printer, plus doing the associated paper work, etc., will eat up that $200 saving quite quickly. OR, you could have it fixed in Canada by someone who will charge you $160/hr + parts to do the job. OR, you could spend the extra $200 and sleep nights knowing that your business isn't going to shut down along with your dead printer. There is a HELL of a lot more to selling computer hardware than taking someones money and giving them a box of equipment in return. We routinely run up ~1K/month in phone calls just on support for our customers. Obviously I'm not paying for this out of my pocket. And anyone who wants to stay seriously competitive in this industry is flying to the US at *least* twice/year to attend product seminars and trade shows. And *then* there are the internals and troubleshooting courses put on by our supplier that I feel I must attend if I'm going to give the customer the support he deserves - those suckers run at about $3K (US) each, plus 5 nights of hotel bills, meals, plane tickets, etc. There is no damn way I can do this for US list price + exchange. The bottom line is: you gets whatcha pays for! If you don't need a product with backing from the vendor, buy mail order and save some bucks. If you DO need that support, be prepared to pay for it. Lyndon Nerenberg Nexus Computing Corporation (YES I speak on behalf of this company!)
john@bby-bc.UUCP (07/09/87)
> Perhaps articles are more expensive in B.C. than Alberta. I don't have any experience with Alberta but prices are higher here than in Ontario for a variety of computer stuff. > While I have certainly encountered computers and related > items with this sort of pricing, I must say that in the > last year or so this has been less and less the case. Yes it is decreasing here in Vancouver too. The price of clones took a deep slide due to a lot of hole-in-the-wall stores run by a particular ethnic group (not necessarily relevant) selling with low profit margins - the established retailers had to follow suit. > I consider anything higher than 1.6 times the US price to > be a ripoff [1.6 is approximately (exchange rate * duty * fst), > duty on computers is 3.9 % if I remember correctly]. As do I. There is no longer any duty on computer stuff that I am aware of, so currently we have 1.33 * 1.12 = 1.49 approx. > > me : but that's the same as the US list price plus exchange + fst! > > > > salesperson : yes but our list price is relatively higher; you have > > to take the US list price and then add exchange + fst to > > get our list price. . . > which I'll take it or make a final counter-offer. No matter what > your looking for always be prepared to walk out without buying. I am. I usually ask their price and if it is high point out what it would cost me to get it landed in Vancouver from the US and add that I am willing to pay a *reasonable* amount more to be able to buy it from a local vendor and to keep some of my money in Canada. The typical response to this is "so go buy it in the US". It really makes me wonder. A common attitude among US retailers is that it is better to make a sale and move merchandise out the door even if you only make $1 than it is to let it sit on the store shelf. This seems to be rare here in Canada. . . > Bjorn R. Bjornsson > {ubc-vision,mnetor}!alberta!bjorn john
sl@van-bc.UUCP (07/11/87)
In article <1483@ncc.UUCP> lyndon@ncc.UUCP (Lyndon Nerenberg) writes: >In article <832@looking.UUCP>, brad@looking.UUCP (Brad Templeton) writes: >US. Shipping something like a laser printer, plus doing >the associated paper work, etc., will eat up that $200 >saving quite quickly. >OR, you could have it fixed in Canada by someone who will >charge you $160/hr + parts to do the job. If it's name brand equipment it usually isn't to hard to get either an extended warranty or service contract. >out of my pocket. And anyone who wants to stay seriously >competitive in this industry is flying to the US at *least* >twice/year to attend product seminars and trade shows. >And *then* there are the internals and troubleshooting courses >put on by our supplier that I feel I must attend if I'm going >to give the customer the support he deserves - those suckers >run at about $3K (US) each, plus 5 nights of hotel bills, meals, >plane tickets, etc. There is no damn way I can do this for US >list price + exchange. Why not? Are you saying that you can't buy from US distributors at the same prices, import, and add on a markup similiar to a US dealer and make a profit? Please clarify. Are you saying you can't match US dealers or US mail order? And wouldn't any american dealer have the same problem? They will also have to fly about to seminars etc. >The bottom line is: you gets whatcha pays for! >If you don't need a product with backing from the vendor, >buy mail order and save some bucks. If you DO need that >support, be prepared to pay for it. I'll agree with that. Personally I usually know a hell of a lot more about the stuff I buy than any dealer in town. So I usually ask for and get prices based on their cost plus a small markup. Or I go straight to the source. What I find annoying is when I phone an american company only to be told that because I'm in Canada I have to deal with a Toronto distributor. This usually means: - higher phone costs - a three hour difference in time zones - a far lower level of competency -- {ihnp4!alberta!ubc-vision,uunet}!van-bc!Stuart.Lynne Vancouver,BC,604-937-7532
lyndon@ncc.UUCP (07/12/87)
In article <992@van-bc.UUCP>, sl@van-bc.UUCP (Stuart Lynne) writes: -> In article <1483@ncc.UUCP> lyndon@ncc.UUCP (Lyndon Nerenberg) writes: -> -> >OR, you could have it fixed in Canada by someone who will -> >charge you $160/hr + parts to do the job. -> -> If it's name brand equipment it usually isn't to hard to get either an -> extended warranty or service contract. OK - you still eat the $200 somewhere... -> Why not? Are you saying that you can't buy from US distributors at the same -> prices, import, and add on a markup similiar to a US dealer and make a -> profit? Of course! That's how most Canadian business operates -> Please clarify. Are you saying you can't match US dealers or US mail order? Not with an overhead of 12% FST and 3.9% hardware duty. -> And wouldn't any american dealer have the same problem? They will also have -> to fly about to seminars etc. Sure, but most of them don't have to fly nearly as far. Check out the AT&T course guide sometime. -> I'll agree with that. Personally I usually know a hell of a lot more about -> the stuff I buy than any dealer in town. So I usually ask for and get prices -> based on their cost plus a small markup. Or I go straight to the source. Funny, I have this problem with most of my distributors :-) -> What I find annoying is when I phone an american company only to be told -> that because I'm in Canada I have to deal with a Toronto distributor. This -> usually means: -> - higher phone costs -> - a three hour difference in time zones -> - a far lower level of competency EVERYBODY knows what I think of Toronto by now...