The Week In RC, Cubby Dubby Report Version 09.28.08
One of the rc industries leading chassis manufactures is making an interesting move at the largest rc trade show, I-Hobby, this October. Traditionally in the rc world, a chassis manufacture will make a product, sell it at a slight profit to one or more distributors, and let the distributors handle the task of reselling the product to the hobby shops all over the country. Well, one manufacture has quietly decided that they are going to shift more focus on selling directly to dealers. They plan on remaining with their existing distributors, but, they also plan on offering increasing incentives when selling directly to LHS’s. Perhaps enough price reductions that they hope to break the stranglehold of the rc distributors on said dealers.
In an ideal world, skipping the distributors “should” work great for Joe Blow consumers like you and I. The manufacture could sell kits and parts at a cheaper price straight to LHS’s than they can to distributors, yet still make more profit. On the LHS side, they “should” be able to buy at a cheaper price than from a distributor, resulting in either reduced prices to consumers, or more profit to keep the lights on (and I feel for you dealers out there right now, keeping the lights on isn’t easy in this economy).
But, most dealers are very happy buying their stock from distributors. Most sit down at their computers once a week and place their orders. It’s very convenient for them to place one or two big orders at distributors and get parts from over 50 manufactures. The large distributors certainly have their jobs dialed, having great inventories, and a relatively easy set-up for dealers to order over the internet, or via phone from sales reps. So, it’s not going to be easy for manufactures to get dealers to buy direct, even though it will make more money for both involved.
In the rc world, most of the distributors aren’t “just” distributors that sell directly to dealers as the definition would imply. They also have retail outlets that sell straight to consumers (HRP Distribution is the exception to this, and they should be commended). Their large retail outlets offer rock bottom prices to consumers, and because their cost is less than what an LHS pays, they can sell at these lower prices and still make more profit than your LHS can. In fact, the distributors retail outlets have enough buying/selling power that they basically establish the “street price” for all rc products. When a price goes up on their website or print flier, that becomes the price your LHS is going to have to match in the eyes of consumers. Right now, most “street prices” are barely Any profit for an LHS. In fact, some of the prices, if you include coupon incentives the distributor’s retail outlets throw at consumers, is Below your LHS’s dealer cost! Low profit is fine and dandy if large quantity is involved, but in the rc world, it’s a low volume world, even for the hottest selling of product.
I’m a greedy bastard. When I’m down at the local bash spot on a Saturday afternoon and break my car in half (which seems to happen far too often), I want to drive directly to the nearest LHS and buy the replacement parts. I then want to go back to my bash spot, install the new parts, and continue driving/having fun. I don’t want to break my car in half, go home, get on-line, order parts, and wait till Wednesday of the next week for them to come in. When the latest hot new truck is released, I want to drive down to my nearest hobby shop and hold it in my hands, examine the trick nuances of the drive-line, feel the controller in my hands, and be able to buy all the little accessory parts needed to get it fully up and running. I don’t want to order the hot new kit on-line, get it in the mail a week later, just to find out that it’s going to require one little extra part just to drive it. How many people have we lost in our sport because they put their car/truck in the closet and never got it back out because their LHS didn’t have parts to fix it? Far too many I’m afraid.
To boil it down, LHS’s are the entire backbone to our hobby/sport. For our hobby to have a large consumer base, the LHS’s have to be open, thriving, alive and well. Lose your LHS’s, or having them too broke to have large inventories, and the consumer base will dwindle. You can either have a smaller number of hardcore enthusiasts buying on-line, or you can have the happy masses busting out the cash down at the LHS.
So what would I like to see?
Manufactures- If you sell directly to dealers, offer larger incentives for buying direct. Offer region based representatives to take care of said dealers. Keep your hands off end consumers, after all, you are a “manufacture”, and if the LHS’s die off, so will you.
Distributors- If you can send end consumers 20% off coupons, you can surely do the same for your dealers right? When dealers come by your booth at I-Hobby, treat them like royalty, fill their arms with swag, stomachs full of Rosemont’s best hotdogs and soda, and give them a healthy discount on PO’s placed at the show. I could certainly type “keep your hands off end consumers”, obviously something they won’t do, so I’ll just type “focus on your dealers”, after all, they are the one’s that keep Your doors open.
Dealers- Yes, I know how hard it is to stock all those F’en replacement parts, but it’s your priority to stock the basics and anticipate consumers “walk-in” needs. It’s a damn hard living selling low profit parts that always seem to be in need today, then sit on the shelf for eternity tomorrow. If you haven’t made it to the dealer days at I-Hobby lately, treat yourself to a few days in warm, sunny, clean, urban Chicago (LMAO). When you drop by a manufactures booth, don’t just drop by to see “what’s new”, drop by with the intentions of talking them into a deal. Work the fact that they might be able to gain your direct business if they give you enough “incentive/discount”. Go to the show willing to cut the check for some nice sized PO’s IF the price is right. Hit the distributors booths and ask what they are going to do to earn your business for the next year. Goodness knows how much money you’ve sent to them over the years, and you deserve the red carpet treatment from them. And this might sound impossible, but hit the show with the intentions of lowering your product costs by 10% in the coming year. From what I’ve seen lately, you might even be able to do better than that! A little sweet talk combined with charisma, could save you 10% or more on everything you buy, giving you a little breathing room on bills, or additional funds for more inventory.
I know that’s all a bunch of industry “mumbo jumbo” to most consumers out there, but perhaps it might give some consumers a little insight to how the rc industry works.
Thanks for reading, check your BigSquid daily, break your cars weekly, and check back for next weeks worthless ramblings.