Pricing Disparity

[TrevorW]

I don't know about you but as the weather in WA for the last month or so has been mostly cloudy so I've been catching up on my other hobbies.

Fishing for one, I've been looking for a good quality spinning reel and as the majotioy are made in China I was looking for a high end one, you know full aluminum body, superb bearing system etc.

Well I'd hear that Okuma was a good brand so I priced a rig locally at a Ranger Camping/Getaway store and the one I looked at they were asking around $280. The link is for the model I was looking at

http://tackleware.cart.net.au/cat/2091264.html

Now the same reel but marketed in the US under a different name was to my surprise $110US, shipping $30 so for $140 I've purchased virtually the same reel.

http://www.tackledirect.com/okuma-cedros-spinning-reels.html

I know this one has been touched on before but you would think retailers by now with the high AUD would wake up and stop trying to make 100 to 200% profit on items.

Also why to manufacturers make an item and sell virtually identical items in two different countries but use different model names for that item, :question:

I might be wrong but I think I got a bargain

[mswhin63]

Not really, we need another recession to get Australia to wake up. We need some business to collapse to bring a balance. Balance is the value of the dollars to be proportional to our population.

There is already speculation of another recession. So keep buying overseas and we will find that balance.

[bobson]

We pay more for everything. Is it really because of less population, I don't think so. It also depends a lot how many times product changes hands before it reaches the consumer. I mean the middle man. I worked as a mechanic many years and its common that managers put sometimes up to 150% mark up on the parts we use. Minimum is 35-40%, I have never seen less than that. The problem is the people we buy it from did exactly that selling it to us and someone else did it to them before they bought it.

For example; Bendix brake pads we pay to Repco $45-50 dollars, Repco rep told me they pay only $10-15 dollars to the supplier who pays them $5 dollars. If you buy it yourself from Repco you will pay 25-30% on top of what business pays for it which is $45-50 dollars.

A lot of money made by middle man, consumer pays for it. Actually the middle man and that is a few of them in the process made much more than manufacturer of the product. Government is happy to take 10% GST every time for the same product on top of that.

So we wonder why things are so expensive. This is just one example what I know about but the thing is I hear the same thing happening everywhere.

Look at the price of bananas. People say we should support local farmers and I agree with that. I would be surprised if they get fair piece of that $15 per kg currently. Yet again the countries who cant grow them pay import tax, transport, distribution and its still $0.55c or $1 dollar per kg.

Nintendo DS 3D made in Japan. We are closer than USA to them. Here it costs $350 in USA $175 !

And they wonder why people don't buy here.

[AstralTraveller]

I was looking at octave mandolins. Trinity College is a US badge but they are made in Asia (Sth Korea??). From The Mandolin Store, Arizona: $US549, from Gladesville Guitar Factory: $995. I'm getting a different brand (coming from Ireland) but it's a no-brainer from where I would have bought one of these.

[blink138]

pentax xw 7mm US$290 (B&H PHOTO VIDEO) and $749 in australia!
pat

[jeff65]

A big part of the problem that is seldom talked about is high real estate rents in Australia. By the time the importer, distributor and retailer each make their contribution to the property boom, things get expensive. They've all got to make enough money to pay their business rents and personal mortgages.

[TrevorW]

Could be resolved by running an online store from home, no brainer IMO

[jeff65]

There are some issues with the online store from home idea. One is that it doesn't scale. A business with the turnover of Myers or Harvey Norman doesn't have this option, for example.

A better way to resolve it would be much lower rents, but given the situation I understand that not too many are going to agree with this.

[stanlite]

likewise another issue is volume. if a retail outlet (particularly smaller ones) need to buy a set min quantity of say 1200 units of stock but only sells say 100 a month (to make it scale easy) that means they have to hold/store stock for a year in some cases plus in that time the value of the dollar changes (for example a year ago the dollar was still below parity) so since August last year the value of the dollar has risen about 15% (meaning the same item is 15% cheaper now in the US then it was 12 months ago) add in storage cost of 10-15% of base price, and shipping of 10-15% plus taxes of 10% (most US stores add tax on after purchase we just don't see it because we are international and US state taxes don't apply to international sales because they don't have a national GST like tax) plus store frontage rental of 10-15% (separate from storage areas if its a bigger small business enterprise). You get a price increase of 70% above wholeseller (assuming they buy direct from the factory) not including actual profits to pay for the wages of the owner and any staff he may have, in Australia a 30-50% mark up generally covers these utility costs (being the money the owner needs to make to make it worth while to run the business rather then invest the money else where). Its not suprising that things cost more here then in the US where the population base is large, the market is larger (more comsumer for your goods = less storage cost higher turnover) and partiularly presently property values and rental cost are very low. I hope this makes this clearer for you in understanding why things cost more here.

[TrevorW]

This is nothing new even when the AUD was around 60-70c US I started purchasing items OS nearly 15 years ago as it was often cheaper to buy direct than local on many items.

Also before 9/11 freight was even cheaper and things got here faster

No I think the crux is that mark ups here are just to high.

[AstralTraveller]

Rent and trade volumes may account for some of the disparity, especially for low volume retail items, but sometimes it is just gouging, and not necessarily in Aus. I know of a case (quite a while ago now) of a certain scientific instrument, a very new type and only made by this one company who held the patent, where it was sold in the US for about 60% of the local agents purchase price. By the time the local agent added their markup the local price was >>2x the US price. (It was a desktop instrument and the prices were >$100,000 so shipping wasn't the reason.)

At work we buy consumables off a large local company at the NSW Gov't contract price, prices the company rep assures me with a straight face are very competative. Recently I found out that another Uni, who negotiated their own prices without the 'advantage' of volume and who are further from the depot, are paying far less for some items than we do. Having words with our rep is on my 'to do' list.

My experience is that

Sale price = true cost to retailer + whatever they can get away with adding

[stanlite]

no doubt a seller is going to try to maximize his income indeed he will do so til the market competitive pressure (ie. the customers willingness to find cheaper options) is met. This is the basic principle of modern economics. But you have to remember that the business owner is taking a risk to supply the market with the product that may not sell. this risk is represented by the level of markup that go beyond costs and is constrained by the competitive pressures of the market. If the risk is high the mark up will be higher also even in a highly competative market, if it is low the price will be lower. In the case of Australia the market depth isn't there so monopoly structures develop in which only a few company's compete for customers and in this instance prices rise particularly if there are obstructions to outside sources of competition (and lets face it oversea shipping and losing warranty periods are major hindrance to outside/international compitition still). Admititly recently the price point of outside goods has fallen to levels were the risk to consumers are now outweighed by savings we are seeing more oversea/internet shopping.

In summation three things drive higher prices here.
1. its risker for the business selling because of our smaller market size, therefore they need greater returns to justify the risk.
2. until recently outside competition was to complicated for most Australians to access
3. we only have ourselves to blame for not being more demanding in getting better prices (talking about all Australians generally) since in most other countries ticket prices are rarely paid and act more as a starting point for negotiation. IE. we don't even bother to look for better prices in the first place.