Curious about knife businesses.

[2edgesword]

KnifeOutlet

"In fact, about 85% of the population does not shop on the internet."

I'm very surprised at this stat. Maybe I"m unusual but 95% of the knives I've purchased have been purchased on-line. In addition, whether you ultimately buy on-line, anyone that shops and doesn't research the item on-line isn't a very smart shopper IMHO.

The internet has made "brick and mortar" retailing difficult. You have internet retailers that don't carry an inventory but rather work off the inventory of the manufacturer or large stocking distributors. They don't share the start-up, operating or inventory cost of a B & M retailer so they can work on a lower margin. As mentioned by others a retailer that keeps an inventory runs the risk (if they don't have stock rotation privileges) of seeing a good portion of their profit wiped out if they get stuck with non-moving items.

 

[zhangmaster12]

KnifeOutlet

"In fact, about 85% of the population does not shop on the internet."

I'm very surprised at this stat. Maybe I"m unusual but 95% of the knives I've purchased have been purchased on-line. In addition, whether you ultimately buy on-line, anyone that shops and doesn't research the item on-line isn't a very smart shopper IMHO.

The internet has made "brick and mortar" retailing difficult. You have internet retailers that don't carry an inventory but rather work off the inventory of the manufacturer or large stocking distributors. They don't share the start-up, operating or inventory cost of a B & M retailer so they can work on a lower margin. As mentioned by others a retailer that keeps an inventory runs the risk (if they don't have stock rotation privileges) of seeing a good portion of their profit wiped out if they get stuck with non-moving items.

You are only one person. In fact, the amount of knifebuyers on bladeforums are only a very, very, very, small part of the population of people who buy things.

Also, many people buy from places like sportsauthority online. That doesn't really count b/c prices are the same as in store. Even if it does count, most poeple would rather just go to the store and skip paying shipping prices.

Truth is, most older people have no idea how to buy things on the internet. In addition, many people dont want to spend the time researching product prices and would rather just go to the store and quickly buy the item instead of spending three hours researching, then waiting another 5-10 days for delivery.

Although the number of 85% isn't exactly accurate, it is defintetly true that 85% of the population do 95 percent of their shopping in stores. That statistic was probably just some general number calculated by Times or something.

 

[2edgesword]

zingmaster12

I learned something today, I'm an unusual older person .

The Times statistic may be accurate since certain products are still predominately purchased in stores whereas other items are probably seeing a growing percentage of sales on-line (light weight, low shipping cost, etc.).

 

[J.Mattson]

most poeple would rather just go to the store and skip paying shipping prices.

In addition to that when you buy in a brick and mortar store you get instant gratification. Saving money online keeps most of my purchases there but there are few things worse then that 3 or 4 day wait for your new toy.

 

[Thomas W]

I personally think that's a sad buisiness practise. Once you buy product off of someone (because that's what a retailer does as well) it shouldn't be the sellers worry how much he'll sell it for.

I've seen WAY too many companies do this and I'll not buy from them unless I have no choice.

For me just one more reason not to get a sebbie.

I think Benchmade did something similar. I personally think they shouldn't worry so much, they already got paid by whomever purchased the knives directly from them so why should they care if someone sells it at a loss? Guess they don't want the general public to find out about a cheaper price, so maybe this topic is a little controversial in the knife industry? Interesting.

Anyone who's not an idiot understands that retailer buy for less...otherwise they wouldn't be able to make a profit. The problem I have with it is when they start telling retailers how to run their buisiness. Telling them they can't have a "sale" on something the retailer already bought from them.

I remember a thread on this sometime back and thought it was a good read at the time. Possibly there is still solid info to be had from it.

http://www.bladeforums.com/forums/showthread.php?t=512047&highlight=court

 

[knerd]

Thanks for the link Thomas.

 

[knerd]

Seems like manufacturers set up a minimum price so they don't have radical competitive prices between dealers. Thereby making sure they have a stable market so they don't go under.

Say a dealer buys some knives from a manufacturer, that dealer then decides to sell those knives cheaper than any other dealer out there. This then causes the other dealers to lose business and therefore hurts the manufacturer because they're only selling knives to the one dealer. The manufacturer was getting more business by distributing knives through various dealers that kept purchasing more knives. If the dealers can't sell stock because of the competition then the manufacturer doesn't sell as many products because the lack of orders.

So I understand where it's coming from. The only grey area is the 3rd party market, there's no way they can enforce what people sell a knife for after it's been purchased from a dealer. I'm sure this is why some online stores have cheaper prices, they might be buying stock from a dealer and not directly from the manufacturer. Dealer 1 buys stock directly from the manufacturer, Dealer 1 sells stock to Dealer 2 at a higher price than purchased from the manufacturer making a slight profit. Dealer 2 then sells the stock anywhere from just over what they paid to just under other competitors prices, making a profit. Maybe there are a lot of multiple trades before it gets to the customer? I'm sure this goes deeper than most think, which also makes it harder for manufacturers to control what price their products are getting sold at.

 

[tomcrx]

The question I have is if they want to enforce MAP on the consumer why not the dealer. Where every dealer of the product pays the same price, from Mom and Pop's to the Wally World. This includes invoicing, financing, shipping, return policy, rebates, availability etc. That way every dealer will make the same margin.

It seems that MAP hurts business because "favored" dealers get better terms on all of the above and therefore can squeeze a few more points into their margin. If you want to enforce pricing on the end user then enforce it all the way down the food chain. That way the playing field is truly level. Then the mysterious improvements to customer service that MAP touts may come true.

 

[Knife Outlet]

In addition to that when you buy in a brick and mortar store you get instant gratification. Saving money online keeps most of my purchases there but there are few things worse then that 3 or 4 day wait for your new toy.

Good heavens! I hope your patience improves over time.

 

[Knife Outlet]

Seems like manufacturers set up a minimum price so they don't have radical competitive prices between dealers. Thereby making sure they have a stable market so they don't go under.

Say a dealer buys some knives from a manufacturer, that dealer then decides to sell those knives cheaper than any other dealer out there. This then causes the other dealers to lose business and therefore hurts the manufacturer because they're only selling knives to the one dealer. The manufacturer was getting more business by distributing knives through various dealers that kept purchasing more knives. If the dealers can't sell stock because of the competition then the manufacturer doesn't sell as many products because the lack of orders.

.

Not really. They don't do it get a stable market. They do it to assuage the complaints of dealers who are trying to rid themselves of the competition. It is a sqeaky wheel kind of thing. Selling to fewer dealers is actually less expensive, not more expensive for a manufacturer. Fewer dealers allow better inventory control and less customer service.

The law of supply and demand rewards lower prices with more volume. In this case, the dealers are providing the lower prices - not the manufacturer - so the manufacturer benefits with more sales without having to discount itself. Lower prices will always be to the manufacturers benfit in terms of sales. It is customer relations that causes MAP policies, not sales.

What I said above about the internet representing only about 15% of retail sales is true. If the manufacturer wants to make the case that they don't want to destroy the 85% for the 15% that is false reasoning also. The reason is that the 85% will continue to buy in retail stores regardless of the prices on the internet. It is the way it is. Occasionally a customer who shops both places will complain to a retailer about discounted prices on the internet but that is a very small percentage. It gets the retailers up in arms but it is meaningless in the overall flow of things. I was retailer myself. Been there, done that. Personally, I don't think any retailer has ever been put out of business by the internet. That is an excuse.

I believe most manufacturers have benefitted from the internet. A great example is Benchmade. While they have been in business longer than the internet, the internet has really made them what they are today. The company has had most of its growth in the past 10 or 12 years because of demand that was created by the internet - forums like this one, availabiltiy of discounts etc. Good designs and products aren't the only reason. They would cringe if they read this but it is the truth.

 

[Knife Outlet]

KnifeOutlet

"In fact, about 85% of the population does not shop on the internet."

I'm very surprised at this stat. Maybe I"m unusual but 95% of the knives I've purchased have been purchased on-line.

That makes you one of the 15%. Simple as that.

 

[Knife Outlet]

The question I have is if they want to enforce MAP on the consumer why not the dealer. Where every dealer of the product pays the same price, from Mom and Pop's to the Wally World. This includes invoicing, financing, shipping, return policy, rebates, availability etc. That way every dealer will make the same margin.

It seems that MAP hurts business because "favored" dealers get better terms on all of the above and therefore can squeeze a few more points into their margin. If you want to enforce pricing on the end user then enforce it all the way down the food chain. That way the playing field is truly level. Then the mysterious improvements to customer service that MAP touts may come true.

There is some of this. Spyderco, as an example, has a MAP policy for its distributors, not for the dealers. I can actually buy Spyderco knives for less from distributors than from Spyderco simply because of savings in shipping cost, even though the product costs are the same.

They may sell some products at lower costs to large retailers. I have no way to know that. I do know that it has never been a problem for any dealer to be competitive with Spyderco products. So if this is the case, then it has little impact on the dealers overall. If it were, the phones would be ringing off the hook in Golden, CO.