> You need to understand how this works from a world perspective why the US is
> cheaper.
>
> In the US they have a MASSIVE market and work for lower margins as they can
> rely on a bigger turnover to justify the lower profit.
Yes, but it's actually the amount of competition that has a bigger effect. A
bigger market with more shops does not guarantee a bigger turnover.
>The tax is applied
> afterwards and not inclusive so the purchaser pays city, state and federal
> tax where they live.
In fact only a couple of states have extra taxes on consumer items.
>Cost regimes in the US are very different to Aus/UK as
> we have higher tax on most things and duty.
What is the current duty on photographic equipment, other than the GST of
course?
>Bear in mind that the highly
> competitive nature of the US and the price is king so lower prices are the
> norm. The public there wouldn't buy it otherwise.
I agree, so the answer is to do the same, ie. not buy here if prices are too
high.
> Also remember that the US make things and supplying to a home market makes
> it cheaper to distribute.
Not much cheap photo gear made in the USA these days.
>Favoured tariff terms with Taiwan and China make
> it also cheaper for US businesses to manufacture in these countries and
> import for a fraction of the rates we pay.
What fraction would that be exactly?
> When you buy you are buying exclusive of tax and the shipping is also tax
> free.
GST is chargeable at twice the normal rate *including on shipping cost*.
> You may get away with not having to pay duty and GST on import but it could
> be added if customs catch it or the shipper used collects it on delivery.
You may not be charged of course, but even if you are it still works out
cheaper in the majority of cases.
> Suffice to say that the market price is geared to a country, location or
> territory and that the working margins of the manufacturer and or
> distributor is usually far greater than the retailer. Just think about all
> that stock just waiting to be sold in the shop for you to choose from.
I wish. Hardly anything at my local shops. When I ask for a price, all I get
is the full retail, and they are not interested in discounting items they
don't usually stock.
>That
> is a direct cost to the retailer who has to wait to get back the money
> spent. I have wondered if it wouldn't be better to earn interest in a
> savings account than stock a shop.
No, unfortunately there are no tax deductions for interest on savings, even
when it is LESS than the inflation rate and you are actually LOSING money.
> But some retailers are into it for the love of photography. Yes I know there
> are those who only want the money but the small shops are enthusiasts
> enjoying doing for a living something they truly love.
Yes I once knew a shop like that. It closed 20 years ago.
MrT.
Duncan - 06 Jan 2007 14:24 GMT
It gets difficult to explain things in text when speaking would resolve so many of these issues and of course I don't have an answer to all of the questions and so can't answer them.
But for example when manufacturing overseas in China for example they ask for a minimum US$2,000 order.
Let's just use this as a base and that each item costs US$1.00 so the manufacturers have made some money on the sale at this point I'll use US$ from here on...
It varies but with shipping and insurance works out around 50% to 100% of the original nett value so it's now $2.00 per unit.
It arrives in the country and gets duty and tax and depending on the tariff it comes in one that adds another 35% so now it's $2.70.
The item is shipped to the distributor from the company that had it manufactured. The originator wants at least a 20% return so we are now selling at $3.24.
On landing let's say another 35% duty and tax so landed it's $4.38..
The distributor now sells wholesale to the retailer and wants at least 20% = $5.26
So the supply chain has loaded the price to the retailer who has to buy in volume and not just singles. He adds a margin of 35% taking it to $7.10 plus GST @ 10% it's now $7.81.
So the dealer is making $1.84 profit per item to cover the overheads. But has to sell all of the quantity bought to make the 35%! Something sit on shelves for ages before they sell through.
Converting to AUD the sale price is AU$10.02!
The supply chain has loaded the price not the dealer.
Also remember that foreign companies set a margin of 20% for their direct distribution. Enough to pay the overheads of the business in the country and create jobs and income tax for the government which keeps them happy. But the profit has been made in the home country as they have made a bigger margin through the direct sale to the subsidiary plus they get export tax incentives and so reduce their tax burden. Leaving us to pay for the high cost of the kit for them to play a numbers game.
It's easy for the customer to blame the retailer and in some cases may be justified but largely it's out of their control.
Duncan
>> You need to understand how this works from a world perspective why the US
> is
[quoted text clipped - 75 lines]
>
> MrT.
Graham Fountain - 06 Jan 2007 19:43 GMT
> It's easy for the customer to blame the retailer and in some cases may
> be justified but largely it's out of their control.
Then when it comes to selling it in the stores, there is another lot of
freight from a single distribution point (usually sydney or melbourne).
To get even a small item from syd to bris, it's not unusual for the
retailer to get hit with a $20 freight charge on a $5 item if it is a
special order. I've had people say "well just get it posted, that would
be $3" - unfortunately distributors don't work that way, they just use
the one freight company, and unless you are ordering enough quantity to
divide the freight between a number of items, the freight per item works
out to be quite expensive. Customers don't like waiting 2-3 weeks for an
item while the store accrues a large enough order to reduce freight to
be something acceptible, but at the same time they won't pay a $20
surcharge to have it here tomorrow.
Mr.T - 08 Jan 2007 01:40 GMT
> To get even a small item from syd to bris, it's not unusual for the
> retailer to get hit with a $20 freight charge on a $5 item if it is a
[quoted text clipped - 3 lines]
> divide the freight between a number of items, the freight per item works
> out to be quite expensive.
This can be quite true, so shipping it yourself from overseas is doing them
a favour :-)
>Customers don't like waiting 2-3 weeks for an
> item while the store accrues a large enough order to reduce freight to
> be something acceptible, but at the same time they won't pay a $20
> surcharge to have it here tomorrow.
IME when people are told the situation, they are happy to make their own
choice. ie yes I will wait 3 weeks and save $20, or no I want it now and am
happy to pay the extra cost. What really annoys is when they just take your
money, and then give you the run around for weeks, knowing full well they
were going to wait for a larger order, but not telling the customer that.
The fact is that multinationals have no problem getting things made overseas
to increase their profit at the expense of local jobs. This keeps the
workers wage down making it necessary for him to follow suit. If my job is
not protected, I can't afford to pay to protect anyone else's. Too bad, but
welcome to the modern economy and globalisation.
MrT.
Mr.T - 08 Jan 2007 01:26 GMT
I am still puzzled why you think the supply and distribution chain of non
USA made goods, is so different to that in Australia? And why shops here
have different cost structures to those in the USA?
MrT.
Nemo - 08 Jan 2007 09:25 GMT
> I am still puzzled why you think the supply and distribution chain of non
> USA made goods, is so different to that in Australia? And why shops here
> have different cost structures to those in the USA?
>
> MrT.
It works like this ....
Australia with a population or about twenty million in seven states and
territories spread over about 10 million square kilometers necessitating
seven offices, seven repair centres, seven managers and so on.
New York, eight million people within an area of 830 square kilometers.
Similarly for Singapore and Hong Kong and almost any European capital.
The difference in cost structures is DENSITY.
Mr.T - 09 Jan 2007 07:15 GMT
> It works like this ....
> Australia with a population or about twenty million in seven states and
[quoted text clipped - 5 lines]
>
> The difference in cost structures is DENSITY.
And shop rents in New York are about ten times that of Australian cities,
and there is far more competition. But it's all irrelevant, it still doesn't
explain why only big companies in Australia should source from overseas and
not me.
MrT.
Duncan - 09 Jan 2007 08:04 GMT
No one is suggesting that you don't purchase from overseas. If you choose to
do so then fine.
All we are trying to do is explain the nature of the way companies work and
the associated costs and tax methods used to do the business to get them to
a small market demand.
As for rents in NY I don't know but even with high rents that you suggest
their tax regime for paying income tax is much lower.
Try telling any shop keeper in any trade that their rents as not high and
see what response you get!
I remember the rent in one shop in Balmain went up by 100% and that's close
to the Post Office. Further down past the traffic lights where the banks are
they were even higher!
Duncan
>> It works like this ....
>> Australia with a population or about twenty million in seven states and
[quoted text clipped - 14 lines]
>
> MrT.
Mr.T - 09 Jan 2007 08:51 GMT
> All we are trying to do is explain the nature of the way companies work and
> the associated costs and tax methods used to do the business to get them to
> a small market demand.
Well I always knew there was a difference, I still have no clue *exactly*
what those differences are, and neither do you it seems, but consider it
immaterial to my purchasing decisions. If I was starting a shop on the other
hand......
> As for rents in NY I don't know but even with high rents that you suggest
> their tax regime for paying income tax is much lower.
And the total cost structures are different in every case. So what, are you
a shop owner?
> Try telling any shop keeper in any trade that their rents as not high and
> see what response you get!
I couldn't be bothered. I went into Teds the other day, and saw a cheap
Canon lens on special for 50% of RRP, then got offered full RRP on a better
one. Was told that's the best they could do, so I walked out. Should I have
thought "they need my money more than I do" perhaps? But that's not true,
I'm sure Ted has more money than I ever will.
> I remember the rent in one shop in Balmain went up by 100% and that's close
> to the Post Office. Further down past the traffic lights where the banks are
> they were even higher!
And still ten times higher in New York. So what?
MrT.