Pavlo

Do the increasing number of group buys to companies abroad pose a threat to the Subaru/Jap tuning business' in this country? Will the short term gain of getting cheap parts into the UK, often without tax, be outweighed by the loss of specialist companies and the knowledge or services they can provide?

Discuss.

Paul

john banks

International competition happens with cars, medicines, call centres, coal, fish and everything else so why not with Scooby parts?

If a specialist is dispensing true specialist knowledge then that itself can be marketed.

Not wanting to be too political, but let the market decide IMHO

dnb

Probably not. Not everyone has the knowledge and skill to fit the said parts bought from group buys. Those that do though probably wouldn't have gone to the specialist in the first place - they'd have specced up the parts and bought the parts from the best source themselves.

Those companies that offer a service with real value results will survive. Those that just sell things may not. Intelectual property has a price too. (I fight to stop the company where I work giving IP away too easily...)

Ask yourself why is it cheaper to ship an intercooler halfway round the world than to make it here... Labour costs are one reason, but there are others too - economies of scale etc.

Don't forget that some people will pay (often quite significant money) for the right name on a product.

As John said, the market will decide - rightly or wrongly.

On a side note, I try to support my local (island) economy when it comes to getting things made (both car and non car) even if it costs me a little more.

Pavlo

(just trying to stimulate discussion)

When Joe public can get parts at trade price, pay no VAT or duty, and delivery in the same week from abroad, why bother with a UK supplier?

But when Joe Public wants something he can't buy from the US, or maybe some services, where does he go when 50% of the places are out of business after the group buy wars?

How can business compete when people are getting prices lower than UK trade, often don't pay tax, have not overheads or running costs to recoupe?

Paul

dnb

Paul, you may as well add ScoobyECUs to the list of things that "hurt" the tuning companies here. Think of all the R&D money you've single handedly deprived from tuners around the country.

Pavlo

I do this too, mainly with my Mountain bike. I like to visit my local bike shop, and I like to talk with the guys there. They look after me too, I give them repeat business I get a good discount which isn't apparent if you compare them just with the web prices.

I hear places like this, TSL springs to mind. But often their (not TSL specifically) prices are too high for some of the nicer stuff, or they don't do it all.

That is my point! I agree, except that I only took a small portion of the market that established tuners didn't want any more. Stephen Done did the same thing, and Dave Power 'liked it so much be bought the company' so to speak.

Paul

[Edited by Pavlo - 1/20/2004 12:48:26 PM]

Wurzel

iTrader: (1)

If your all worried about the UK economy why are you all driving Japanese cars?????

And as someone already said "why is it cheaper to buy something from halfway round the world and get it posted"???

It is because the Government in the UK are greedy and the suppliers are greedy, everyone wants a piece of the action and so up goes the price and whilst you muppets in england are happy paying Prodrive 2 grand for a PPP when the parts only gost a few hundred quid they will continue to charge you 2 grand for it.

Pavlo

Wurzel,

Suppliers are not greedy, they have to cover their costs and overheads and extract a profit from sales. The except may be certain Jap tuning goods, where margins are high and image, which is everything, is preserved at all costs.

But to give you an example, the J&S group buy is getting a 20% discount, which is more than some vendors give to the trade. SO if there was a UK trader selling them, how could he compete, let alone make money?

I am not saying it's wrong, but I wonder IF there will be a longer term impact we have not yet considered.

Paul

dnb

Paul - it was slightly in jest, but there you go. There's money in IP, like I said.

I look on it that you saw a niche little niece market that no one really wanted (ie. the tuning companies thought it wouldn't pay) and overheads low enough to risk exploting it. (ie. you wanted it for yourself too, and selling it made ends meet sufficiently to warrent the effort.)

I'm relatively time rich,cash poor so I apply a similar logic to most things.

As for buying a Japanese car over a British car - I can't afford an Aston Martin (not really british any more though ), and don't want an MG rover. For what I bought the Impreza for, there was really no other sensible option for the type of car I wanted. (4wd, turbo, mod potential etc...)

I do try to buy British farm produce though. (I come from a farming background)

I'm not getting drawn into a government argument, but yes, they do contribute to the cost of everything. It's an imperfect world.

[Edited by dnb - 1/20/2004 1:17:34 PM]

Pavlo

Aston Martin is british?

dnb

No, but see my comment after it!
Like Jaguar, it's owned by Ford now.

Besides, I can't afford even an old Aston V8 (or an E type Jag) at the moment.

Adam M

aston and ford in the UK are owned by ford in the UK, though these are under an american parent company.

When you buy one of these cars the money stays in the british economy, and the sales help secure the jobs of the workers in development and manufacture in this country.

While it is true that the profit is shared over the world, if british sales fell, then british jobs would be lost the british economy would suffer.

In short, buy aston, it rocks!

Diablo

Yes, is the short answer.

Paul is correct.

The volume of group buys from scoobynet is probably not that great in the grand scheme of things, but apply that accross all the specialist car sites and it becomes more relevant.

What happens is that ligitimate UK suppliers have no choice but to cut margins to compete with what (not yet, but ultimately) becomes a lower accepted market price for a product or products.


D

(Posting with nearly 15 years of business recovery and insolvency experience)

Pavlo

I can see this premise is about as popular as a turd on a bowling green!

If you close your eyes and don't listen, nothing ever bad can happen. Can it?

Paul

Wurzel

iTrader: (1)

But if a company can afford to sell stuff at 20% discount and still make a profit then do you not think that they are charging to much in the first place???

I understand a company needs to make profit but why taking into account that I can buy an STi here in germany from a dealer that gets his cars from the same factory that a brit dealer gets his from for a few grand less than in the UK, are you saying that my german dealer has any less overheads than a brit dealer???

both cars are built by a small oriental gentleman and shipped more or less the same distance round the world? and don't start with the supply and demand argument because there is far les demand for them over here than in the UK.

also our petrol, alcohol, **** etc are cheaper than your but they all come from the same place.

Why is it cheaper to buy an MGF (built in Coventry) from Japan and ship it back to the UK than it is to buy it in the UK to start with?

I could go on but there is no point, the bottom line is you lot are getting royaly screwed because you pay the prices and as long as you keep paying the prices asked nothing will change, if however you stopped for a while things would have to change.

ie. everyone complains about the cost of car insurance, which goes up every year inspite of you not having a crash, if everyone in the country suddenly pulled together and stopped paying insurance (obviously also not driving the car) then the insurance industry would be on it's knees within a week.

but why am I bothered my insurance is cheap my petrol is cheep and 100RON.

dnb

The trouble is that the end supplier (person who probably makes the least profit) suffers first by everyone looking elsewhere or abstaining. (Thus the smaller markets suffer first, as things move to a "one size fits all" solution )

I too fail to see why it's cheaper to ship an MG round the world than to just go to Coventry. But then I've not looked at the prices for doing this, so I don't know the numbers. They would be interesting to see. Presumably someone is making some real money somewhere?

Pavlo

Because that's not what's happening here.

What I am saying is that as a group, you can get a healthy discount from manufacturers, or companies in the US that can operate on such low margins, that they don't mind making only 5% on a product to get 20 sales and some free publicity.

Also, that many people ordering from the US using tricks like "warranty return" "gift" or "sample" are getting round tax. Ordering 20 off of a product in a single box makes this impossible for a trader (not to mention illegal!). The best a UK trader can hope to do, is to match the price of a group buy, and order the parts from the same place, and make the profit out of the difference in delivery costs. SO his margins shrink to the point of not supporting the business model.

I am not talking about overpriced cars, or high UK taxes, but the fact that Group Buys can take out the middleman, or compete so effectively with him that it's no longer in his interest to sell.

Paul

julian N/W wrx my93

i used to work at a valeters, one reguler used to import cars from japan,and one car was a MGF. cheaper to buy from jap than good old england where it as built. so it travels to japan and back and still cheaper. how???????????????????????

willy

I heard that an Innovative Jap place did a group buy on knocklink units yet made no money... I think it was a PR exercise.
This is a small independant specialist BTW.

*****

ademid

As is often mentioned any product is only worth what the market is willing to pay for it!

Now everyone who has bought anything for their scooby knows that an SS exhaust (for example) will cost vastly more for a scooby than it would for a nova. The reason? we are seen to have more money therefore can afford to pay the extra. I can't imagine that the exhaust on a scooby costs that much more to make than one for any other car but because we pay it the cost is then justified.

I guess what I am trying to get too is that tuning companies (the manufactures) Should recognise that the group buys are this market places way of saying that we are no longer prepared to pay over the top prices.

But the unfortunate truth is that they will continue to make money wherever we buy our goods from so probably won't care.

The only people who can try and stop this is british manufacturers of the same parts to rather than just charge what is the "accepted" cost of the item, charge a sensible cost (ie materials, labour,reasonable profit).

But I'm sure there is more to this than I know so I shall offer this as my view and now shush

Ade

BoxerFlat4

Interesting thread ...

Nearly 2 years ago I gave up my day job to try my hand at selling jap performance parts : what I learnt was quite interesting. A few salient points...

• Paul is correct : most manufacturers of performance parts are themselves removing the middle man (ie. the trader), in order to boost there own margins. The easiest way for them to do this is to appoint an "authorised" dealer, someone who has an exclusive agreement to then re-sell the products to other business' and the public. However, even the authorised dealers are realising that they can make more money from the public than supplying the traders, and it is common practice for many authorised dealers to sell to the public cheaper than the trader would be allowed/able to. Hence, trader makes no sales. Net effect is the authorised dealer can basically charge what he likes, hence inflated prices and (often) poor customer service.
• The effect of distance selling is considerable : as Paul states, by illegally dodging VAT and import duty, many private importers (and some public ones) are again undercutting the ability of the trader who has to trade legally and pay these costs. Unless the trader can offset this distortion by negotiating discounts for bulk orders, there's very little he can do about it. By bulk orders I mean in the order of £20-£100K investment in stock which the trader has to gamble will sell. This is why some companies negotiate special deals for group buys : it helps them reduce their pre-purchased stock levels. Even at these levels however, profit margins are genrally of the order of 10%-20%, out of which a large number of costs have to come. Profit margins of this level are from a business point of view very small : compare it against property, lending and other more profitable forms of business.
• It's also common practice for authorised dealers to give certain traders they supply preferential treatment ie. greater profit margins, first access to new products and earlier supply chains. Some also enforce the RRP ideal, where as a trader you have to sell at a certain price point, even if you could do it cheaper. While technically illegal (cartel rules IIRC), there are ways they can avoid being prosecuted (you place an order, it never arrives, etc etc).

After 2 years of fighting the system, I returned back to normal work, although the company I setup still ticks over in the background as a hobby. Without significant investement and getting yourself on the "buddy" chain, it is difficult to make a significant amount of money purely from selling other companies performance parts. Investing and manufacturing your own parts is another matter : supply chain is everything.

Paul Houbart



[Edited by BoxerFlat4 - 1/20/2004 4:14:41 PM]

C

Anyone care to comment on the blatent price fixing of some Manufacturers of Japanese parts?

HKS being the classic example?

Likewise - that neither is good for the scene IMO

Pavlo

that is why I say Jap parts are the exception, they are a rip off

But then have you even heard of an HKS product that was sub standard?

Paul

C

Funny you should say that, but I was told by Japanese bloke who I have been dealing with, with regard to my Skyline that HKS are seen as the 'budget' brand out in Japan????

The chosen better quality parts are along the lines of: Trust, Greddy, ARC etc etc

Having seen the magins that some dealers make on HKS kit I nearly fell over

johnfelstead

very interesting post BoxerFlat4! We have seen a few companies in the Subaru scene setup and then falter in the way you describe lately. The dificulty with the UK car culture is that brand image is everything, making your own parts could give a technically superior product at a good price, but persuiding people of its value is very dificult.

chiark

Pavlo,

IMHO, the car tuning market is changing for good, and it's not all to do with group buys but more to do with a global marketplace, and distribution of knowledge.

Look at what has happened to the ICE market with the proliferation of on-line dealers: it is a nightmare business to be in now.

Mark-ups were typically 40% or above back in the good old days, so dealers could provide a service to match expectations, could take time to learn products, and could provide a true service (not that everyone did, but margins were there to give you the opportunity)

Now, with on-line traders operating at quite frankly ludicrous margins, and occasionally taking negative cash flow due to cash-back type incentives at end of quarter from manufacturers, the guy on the street cannot compete on price alone.

Result? The great guys provide a value added service and accept that their business has changed, the box shifters and mediocre go out of business.

Where do you go if you want advice on anything to do with your car now? A specialist tuning shop, or scoobynet? I turn to Scoobynet for impartial advice from like-minded people who have done what I want to do. I offer advice where I can. It's a real community, and where does it leave the specialists who are trying to make a living out of it?

Group buys do worry me somewhat. They're a short term "hit" of getting a good buy at the long term expense of the distributors and certainly the retailers. Our market is small comparatively speaking, and there are only so many people who want uprated parts. Look at the brembo brake group buy: a stunning deal for everyone who got in on it, but a bloody awful deal for those sitting on stock of uprated parts, as a sizeable chunk of their market has now disappeared forever.

On the other hand, group buys are about doing volume business. If we live in a service economy, suppliers must differentiate through the service that they offer. Suppliers probably need to accept that they cannot differentiate if someone just wants a parts supplier to give them a product at the best price, and that's it.

Warranty, of course, is a completely different kettle of fish

Anyhow, I'm verging on waffling... The ICE industry has been through this and survived in diverse ways, with arguably more products available to a wider range of people than ever before.

Cheers,
Nick.

BoxerFlat4

I'm not sure I agree with this, for one reason : for most people, price is everything. If Trader A is selling a Widget for 10% less than Trader B, then most people will buy off Trader A, even if he takes longer to deliver and doesn't fully understand the product. If anything, ScoobyNet itself promotes this, by sharing knowledge and information about what products work and how to install them, fewer people need the information that once only the retailers knew. Trader B may well be very good to his customers, and may well be able to retain some of them via his excellent customer service, but if you were purchasing a product you understood well and knew for certain you wanted, which trader would you use Nick ?

As a buyer, I'd end up using Trader A - consider just how many of the companies dealing in Scooby parts coudn't manage to find there own *****, let alone deal with customers yet they survive by being cheap.

willy

I second what Chiark says, my local Ice dealer cant match the "box shifters" as he calls them.
He says sometimes they are making £5 profit per sale!!!
He cant and wont do business on those margins,so charges more.
His reputation means he is always busy.

M0NEY

Just my 2p

Businesses will always do well in the UK. There are many subaru owners who dont use the boards. Now the Subaru owners on the board know about the group buys and know where to look (possibly).

But the average joe public, goes into a garage and buys a part.

We had someone come into the garage the other day with £1500 in his pocket wanting to buy a FMIC cause:

a-he heard it was good
b-he liked the look of it

He could have been sold a HKS items at £1116.25 or even one of the hybrid FMIC from the group buy at a stupid price of £1000 and the lad would have been happy

Places like TSL etc who advertise on the boards, make quite a bit of money from people who go on the internet. But they make more money to people who read mags or who see their car about

Thats where most of the UK businesses make their money

spufus

iTrader: (2)

Surely the fact that we are posting these topics on the WWW means that anyone from anywhere can supply anything at a (probably) lower price?

just my 2p worth.