Margins & Pricing

LTR

Member
306
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USA
I have no problem paying for a quality product. You always get what you overpay for. However, how does a Garmin chart plotter (entry level) start at approximately $1K, and some Ocean jackets/smocks sell for well over $1K?
 

slug zitski

Super Anarchist
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Perhaps labour and a very small market for 1000 dollar jackets

i have never owned one

electronics have huge markets and mass production

I’m sure that the plotter is mostly off the shelf components
 
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Marty Gingras

Mid-range Anarchist
1669750492522.png


Seriously though, lots of stuff is through the roof due in large part to inflation.
 
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LTR

Member
306
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Damn, I kept typing musto.org. No wonder the linky no worky.

At one point in my career, I worked for one of the premier technical outerwear companies. I was privy to the R&D costs, margins, etc. Once the manufacturing was outsourced out of the US, the quality dropped, and the margins increased.

Didn't know zippers were as difficult to source as chips these days.
 

billy backstay

Backstay, never bought a suit, never went to Vegas
Damn, I kept typing musto.org. No wonder the linky no worky.

At one point in my career, I worked for one of the premier technical outerwear companies. I was privy to the R&D costs, margins, etc. Once the manufacturing was outsourced out of the US, the quality dropped, and the margins increased.

Didn't know zippers were as difficult to source as chips these days.

HERE’S WHY YKK ZIPPERS ARE ON EVERYTHING​


 
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giegs

Anarchist
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Damn, I kept typing musto.org. No wonder the linky no worky.

At one point in my career, I worked for one of the premier technical outerwear companies. I was privy to the R&D costs, margins, etc. Once the manufacturing was outsourced out of the US, the quality dropped, and the margins increased.

Didn't know zippers were as difficult to source as chips these days.
Even when production gets outsourced, top end gear isn't a major revenue center, right? My experience in that world is that most of the folks using the top end don't pay anywhere close to retail for it, so you're chasing after sales to a relatively small number of tourists who will. Maybe the relative number of 'tourists' in sailing is higher. I don't think TNF makes any money from their A5 line, its value is brand recognition and PR. They make their money selling puffies to wealthy suburbanites.

Pushing those margins on your high end gear gets you into the kind of trouble BD has been having following the handling of crampon and beacon quality issues. It creates an opening for competition.
 

Monkey

Super Anarchist
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This ^

Chart plotters sell maybe in the 10's of thousands.

Tablets and notebooks sell in the 100's of millions.
However, they’ve been consolidating like crazy. For instance, Simrad fish finders and B&G chart plotters are identical in all but software. That cranks up the volume quite a bit.
 
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LTR

Member
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Even when production gets outsourced, top end gear isn't a major revenue center, right? My experience in that world is that most of the folks using the top end don't pay anywhere close to retail for it, so you're chasing after sales to a relatively small number of tourists who will. Maybe the relative number of 'tourists' in sailing is higher. I don't think TNF makes any money from their A5 line, its value is brand recognition and PR. They make their money selling puffies to wealthy suburbanites.

Pushing those margins on your high end gear gets you into the kind of trouble BD has been having following the handling of crampon and beacon quality issues. It creates an opening for competition.
You are absolutely correct. If I’m not mistaken, approximately 75% of the TNF retail sales were on fleece products. They wanted 80% of the floor filled with fleece. Very little if any sleeping bags, packs, and tents are on the floor let alone in the store.
$1k= 1 standard boat buck
Exactly!
 

mckenzie.keith

Aspiring Anarchist
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Santa Cruz
This ^

Chart plotters sell maybe in the 10's of thousands.

Tablets and notebooks sell in the 100's of millions.
I have been working in electronics design for years. I agree with this 100 percent. When I worked at a company that was manufacturing 200k units + per year I could get vendors to come visit and give presentations and help when we had problems and get a good price.

At other companies when we wanted to make 100 of something they won't even return my call or quote me good prices.

Also, even though I am an EE, I have worked with MEs a lot. There are other cost issues with tooled plastic parts. The tools cost 100k USD or more for large injection molded plastic parts. The plastic doesn't cost too much, but the tool price has to be amortized over the production run. When you are running at a high rate and wearing out tools in a month, it is not so bad. But if you aren't going to wear out the tool until after 5 years of production, well, you are not going to wait for 5 years to get your money back. You have to amortize over the first year worth of production.

Also, things like daylight readable touchscreens are not as cheap as you think they are. For sure the single most expensive part in the product.

And I would say marine MFDs have to be built a bit better than laptop screens because they are subject to more abuse.

Finally, you usually have to sell everything for 3x or even 4x your cost to make any money at all. So if they are charging you $4000, it is probably costing them $1000 by the time they have them stacked on pallets in a USA warehouse. Otherwise they will lose money and go out of business.
 

H-77

New member
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I can't speak to apparel, but low volume electronics get expensive fast for a few reasons.

1) A lot of low-volume electronics have a specialty application. In this case, it needs to last a good many years (you don't replace this stuff every couple seasons!), and it needs to be readable outside, with polarized sunglasses, after being dowsed in saltwater. While the microprocessors used in the device might be cheap, things like displays, enclosures, weather-tight seals, waterproof buttons, etc. are not.

2) R&D is expensive. It varies dramatically from company to company and product to product, but all that needs to be recouped.

3) You don't have recurring sales from the same customers on products with a long lifespan the way you do with a smartphone designed around a 2-year lifecycle.

4) Everyone knows that low-volume manufacturing is expensive, but sit down and think about it for a minute. If we look at one piece of tooling -say a $120,000 injection mold- with a laptop, the cost of that mold is distributed across however many laptop shells it makes before it wears out. With small production runs of a few thousand, you may never reach high enough numbers to even wear that mold out.

5) These are expensive, long-life products, and the manufacturer is expected to support them for a whole lot longer than for a cell phone. Maintaining the capacity to refurbish a device that was discontinued 5 years prior is a huge pain, and a significant cost.

6) When you go to ST microelectronics or Samsung or Infineon and say "we're planning to use your chip in the next iPhone. We're going to sell _____ hundred million devices. Give us your best price", you get a lot better deals, and a lot more R&D support, than if you go to them and say "Hey, so, uh, we make boat electronics, and we're releasing a new chart plotter. I think we might sell a few thousand of them. Oh, and can you guarantee that we'll be able to buy these in five years?"

7) You've got to pay your employees, and when your typical products sell in small volumes, your profit margins have to be higher. 1000% profit on a $40,000 device is not "insane" if you only sell two of them a year. Garmin doesn't have that kind of profit margins, but I rest my case.

Edit: Just realized someone else more or less said everything my post did. Oh well, I suppose that more or less confirms my own experiences in engineering.
 

mckenzie.keith

Aspiring Anarchist
859
287
Santa Cruz
I can't speak to apparel, but low volume electronics get expensive fast for a few reasons.

1) A lot of low-volume electronics have a specialty application. In this case, it needs to last a good many years (you don't replace this stuff every couple seasons!), and it needs to be readable outside, with polarized sunglasses, after being dowsed in saltwater. While the microprocessors used in the device might be cheap, things like displays, enclosures, weather-tight seals, waterproof buttons, etc. are not.

2) R&D is expensive. It varies dramatically from company to company and product to product, but all that needs to be recouped.

3) You don't have recurring sales from the same customers on products with a long lifespan the way you do with a smartphone designed around a 2-year lifecycle.

4) Everyone knows that low-volume manufacturing is expensive, but sit down and think about it for a minute. If we look at one piece of tooling -say a $120,000 injection mold- with a laptop, the cost of that mold is distributed across however many laptop shells it makes before it wears out. With small production runs of a few thousand, you may never reach high enough numbers to even wear that mold out.

5) These are expensive, long-life products, and the manufacturer is expected to support them for a whole lot longer than for a cell phone. Maintaining the capacity to refurbish a device that was discontinued 5 years prior is a huge pain, and a significant cost.

6) When you go to ST microelectronics or Samsung or Infineon and say "we're planning to use your chip in the next iPhone. We're going to sell _____ hundred million devices. Give us your best price", you get a lot better deals, and a lot more R&D support, than if you go to them and say "Hey, so, uh, we make boat electronics, and we're releasing a new chart plotter. I think we might sell a few thousand of them. Oh, and can you guarantee that we'll be able to buy these in five years?"

7) You've got to pay your employees, and when your typical products sell in small volumes, your profit margins have to be higher. 1000% profit on a $40,000 device is not "insane" if you only sell two of them a year. Garmin doesn't have that kind of profit margins, but I rest my case.

Edit: Just realized someone else more or less said everything my post did. Oh well, I suppose that more or less confirms my own experiences in engineering.
100 percent.
 

tane

Anarchist
951
274
the margin of the manufacturer I know nothing about, but for brand products (deck gear, hatches, ...)in the supply chain it was mostly
distributor 50% -55% discount on the RRP, dealer 25%. VAT on top of that, of course.
30% margin was considered "survival level" according to the bosses.
Clothing had bigger margins, but as functional clothing was "fashion" too a certain "throw-away-rate" was factored in.
I figured quite a lot of prices were calculated by the manufacturer on the basis "because we can" with very big margins.
The price difference between a small "marine fridge" & a full blown household one cannot be adequately be explained by "volume" alone. Inefficency in production & supply chain - manufacturer-distributor-wholesaler-dealer & greed account for much of lot too, imho.
 

Ease the sheet.

ignoring stupid people is easy
20,361
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Do cases and housings for electronic goods really need to change?
Rear case and mounting brackets can be consistent across several models, across many years.

New shapes, new looks, new colours are about encouraging consumerism.

It's not a business model I can be enthusiastic about...
 

mckenzie.keith

Aspiring Anarchist
859
287
Santa Cruz
Do cases and housings for electronic goods really need to change?
Rear case and mounting brackets can be consistent across several models, across many years.

New shapes, new looks, new colours are about encouraging consumerism.

It's not a business model I can be enthusiastic about...
If you ad ethernet, you need a new back to accomodate the ethernet jack. If you then add N2K or seatalk, you need to mod the case. Etc. Its a nice thought. But harder than you think unless the product design is completely frozen.
 

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