A storm brewing?

[FLO]

I am a retailer, not an economist or politician, what I am about to say might be flawed and will certainly be incomplete. It is only my understanding of a situation that is developing that will ultimately affect all those who supply, retail and purchase astronomy equipment. Please feel free to correct me and to add information that you feel is relevant.

Most telescopes and binoculars sold today are sourced directly or indirectly from China. China are experiencing some growing pains. Currently they are having considerable difficulty with power shortages. The Chinese fixed their electricity prices which has resulted in power supply companies shutting down power stations because the more electricity they produce, the more money they lose. Consequently many Chinese factories have switched to working 3-day weeks. There are also significant material shortages which are affecting the manufacture of many products, including optics. And Chinese workers are understandably wanting a greater share of the available wealth, they want higher wages. We heard recently one of China's three largest binocular manufactures has folded and the Chinese Military are apparently insisting the other two give them priority. There might be others. It is difficult to know quite what to make of all this but we are expecting a reduction in the range and number of models available, increased prices and delayed deliveries. Indeed we are already seeing signs of this happening.

Consider also the state of astro retail here in the UK. It is in a bit of a mess! First let me say FLO is fine. FLO was launched at the beginning of the recession so has grown and developed around the economic climate and has made a profit, albeit a modest one, each and every year which has been reinvested in people, premises and stock. We are rather pleased with where we are right now but it has been achieved against the odds.

Astronomy is a small market compared to most other hobbies such as fishing, photography, golf and pet supplies. Surprisingly, here in the UK we have more astro retailers than Germany, France or Italy. Germany for example has a population of 81.5 million compared to our 62.7 million. Germany's customer base is 30% larger yet has less astro retailers. And then there are the margins! I need to be careful when discussing margins but I can say suppliers and retailers have been squeezing margins to the point where they are now quite absurd. I bought a bike recently, when the store owner realised I was a retailer he commented on how difficult it was to survive selling bikes. His margins are 2.5-3x greater than those experienced in astro retail... Margins really are much tighter than people imagine. This appears to be something that is affecting the UK more than other European countries, perhaps because we have a more competitive environment. I had a large German retailer on the phone recently who was complaining that our unusually low UK prices are affecting business over there.

So, the UK has too many astro retailers, too little stock and a margin that is recklessly low. I suspect there will be some casualties. Speaking personally I shall not lose any sleep if we lose some competition, telescopes really ought not to be sold alongside craft supplies and garden furniture. But unfortunately we might lose some of the good guys too.

Drop-shipping! Drop-shipping is where a retailer finds the customer then relies on the supplier to drop-ship the goods direct to the customer. Similarly the supplier is often relied upon to service the customer should a collection be required. Granted it does sometimes make sense to drop-ship large/heavy items and we do it ourselves when appropriate but the steady rise in retailers who choose to do this for the majority of their sales is alarming. In affect they have outsourced their operation, they have made a supplier responsible for delivery and for much of their after-sales service. We believe holding, delivering and collecting stock are core competencies that should not be outsourced. Here at FLO, nearly every week we collect/replace/refund something that the supplier would not consider a warranty repair. Here is a recent example and there are many others. You can imagine how annoying it is when members post here on SGL in a matter-of-fact style that all retailers drop-ship so it doesn't matter where you buy. It does matter.

I am not suggesting FLO is the only astro retailer who trades in a trustworthy manner. Here in the UK we have a handful of specialist retailers who deserve your support. They are easy to identify: they carry stock, they often receive positive reviews in the Supplier Reviews board and are generally the ones who don't sell their souls every Christmas offering dodgy refractors on wobbly mounts. For the sake of astronomy in the UK I propose you consider them when making your next purchase because ultimately your spending habits and preferences shape the industry.

Indeed I think that is what this rambling post is about. There are difficult times ahead that will be more easily overcome if we are aware of the circumstances and support each other openly and constructively.

We are in this together....

Steve

[Psychobilly]

We live in "interesting times"..

Keep up the good work Guys (and Gals)...

We often get quoted 12-15 week min lead times on components these days "Cash up Front".. who would be daft enough to work in manufacturing

Peter...

[MartinB]

Interesting read Steve. We've all come to take high quality optics for under a grand for granted. Seems like we've had a little golden era. Maybe time to start stocking mirror grinding kits.

[FLO]

PS: Please do your best to keep responses non-political. Despite what our competitors say FLO does not own SGL, we only sponsor it, so the ADMIN/Mod team will probably watch this thread as closely as any other

[John]

Thanks for posting your thoughts Steve and for being so frank and open with the forum on what the future might hold for manufacture, supply and purchase of astro gear. Forewarned is forearmed, as they say

Having been in the hobby for many years, I can remember a time before the Chinese and Russian equipment had hit our market. What is available today is a treasure trove compared to what was available, say, in the 1980's. I really hope that we don't return to a situation like that

I'm very glad that FLO is well placed to survive wherever is coming though

[daz]

Interesting thoughts Steve (and yes, it will be monitored )

Working in the food industry, we also see the squeeze that the changing climate in China (for example) is having, and you won't believe what the retailers are able to get away with....

[Andrew*]

Might manufacture simply move to the next country, e.g. Taiwan?

[Deneb]

Fair Due's as Peters says, these are interesting times, it will be interesting to see how much prices & quantity will fluctuate in the market for astro goods..

I do wonder if astro equipment development will move into other development countries e.g. India. I don't think were that far off, as they are one of the biggest countries which are competing with China.

Nadeem.

[russ]

Thanks for the heads up Steve. I think we've all known this is coming. So you have just confirmed our fears. Good to hear that FLO have set themselves up well to handle this situation.

Might manufacture simply move to the next country, e.g. Taiwan?

Or India, which is fast becoming the next big manufacturing country.

Having been in the hobby for many years, I can remember a time before the Chinese and Russian equipment had hit our market. What is available today is a treasure trove compared to what was available, say, in the 1980's. I really hope that we don't return to a situation like that

Oh i remember those days well. Two choices for an affordable scope:

homemade dob

or

Tasco 2.5" Refractor or 4.5" Newt

And my woodworking skills are awful.

I think i may add a secondhand ED80 to my equipment list before their value goes through the roof.

[FLO]

and you won't believe what the retailers are able to get away with....

You are probably thinking of the supermarkets Daz. Only a very large retailer can apply any pressure on a supplier. In astro retail there are no large retailers, even those who think they are would be considered small-fry in an industry such as photo-retail. In our industry it is the distributors and customers who have the power to change things.

[James]

I think the Vietnamese and Bangladeshi's are already benefitting. Taiwan is generally more expensive (and they too use mainland China sometimes).

James

[Kai]

But isnt this just the way of retail ?

40 years ago it was the Japanese that supplies the cheap "imitations" ( and no body would touch that jap rubbish would they ? )and they built their economy to become world leaders.

Then there was the "Tiger" economies

These days the Chinese are in the same situation ,ie supplying cheap quality products , having a huge cash surplus BUT their population are now not happy with low pay and poor conditions coupled with increasing commodity prices so prices are being raised.They also have the Political power to influence where the finished product goes.

I expect to see a shift away from China towards Africa or South America in the future as they take up the demand for lower priced products , there is always somebody that will supply it cheaper (given enough time it wouldnt surprise me to see the Uk a manufacturing economy again lol)

[daz]

You are probably thinking of the supermarkets Daz. Only a very large retailer can apply any pressure on a supplier. In astro retail there are no large retailers, even those who think they are would be considered small-fry in an industry such as photo-retail. In our industry it is the distributors and customers who have the power to change things.

Yes, sorry Steve - supermarkets is what I meant

[reddoss]

Good luck Steve and to FLO in these difficult economic times. I am sure you will survive, even if we have to pay a bit more for our gear.

Those of us in the public sector are also worried about the unstable economic situation. As a University Lecturer, many of us are worried what exactly is going to happen when the new £9000 per annum tuition fees kick in.

[George]

You are probably thinking of the supermarkets Daz. Only a very large retailer can apply any pressure on a supplier. In astro retail there are no large retailers, even those who think they are would be considered small-fry in an industry such as photo-retail. In our industry it is the distributors and customers who have the power to change things.

Have you considered bypassing the distributor and becoming a distributer/retailer? Even sending those sort of signals out could be enough for price changes

Monopolies are not good for either the retailer or the buyer as a single importer can artificialy hold back stock to create a artificial supply problem keeping prices high.

[SlipperySquid]

I think most people are in the same boat and many of us have had to tighten our belts as it where but it does make me chuckle when I see a British made product available in the USA for less money! I wonder why that is

[FLO]

Have you considered bypassing the distributor and becoming a distributer/retailer? Even sending those sort of signals out could be enough for price changes

I hear you but I feel the system works best when everyone sticks to their role. Retailing has a different set of challenges to importing and distributing. To do either properly is expensive and time consuming. There are some dealers with a foot in both camps hoping to achieve a higher margin. They generally all carry the same scopes rebadged. It isn't a game I want to play, at least not at the moment.

Btw, we are not after price changes, the price will be whatever is fair and achievable. What would be nice however is a sensible margin and competition selected for their knowledge, experience and ability

[swag72]

A very interesting and informative post Steve, thank you. Makes me think that we are probably on the cusp of considerable astro price rises.

[themos]

For every thing that unites buyers and sellers, there's another that divides them. I don't see the inherent conflict disappearing any time soon.

[riklaunim]

When astroversand in Germany introduced SkyWatcher branded SCTs they got the price difference vs standard Celestron SCT around 40% - for C11 It decreased later, but that is huge... Somewhere money are lost (shipping costs?) or somewhere there is to high margin

And yes, they did upset local Celestron/SW dealer But they doesn't seems to care as they sell only the stuff they get from their sources. Ssome German shops that started re-selling those SW SCTs got phone calls quite quickly... and they stopped.

[RogerTheDodger]

I work for an IT VAR (Value Added Reseller) and this sort of thing comes and goes in cycles. We have the added benefit of reasonably good margins, but mostly it is added Professional Services that we can add on that wins us the deals and makes us the money.

I consider dealers like FLO ones that add value literally invaluable - with anything I buy, I always buy where I think I'm going to get added value, not just the lowest price - unless that price is stupidly low. When I made my return to astronomy I drove from Halesowen up to Rotherham so I could speak to someone face to face about my choices (RVO - gave great servervice BTW) just because it was all new to me again... as time has gone on I am more than happy to give all my purchases to FLO when I can, as I have seen what exceptional Value Add I can expect to recieve... it's just a darned shame I have no spare cash at the moment

roger

[ollypenrice]

Not a rambling post at all, Steve, but a very interesting one. I think on here that most people are well aware that choosing a good supplier is important. There are plenty of folks ready to point this out to newcomers to astronmy, too.

Best of luck,

Olly

[Kai]

What would be nice however is a sensible margin and competition selected for their knowledge, experience and ability

It must be really frustrating to give people the benefit of FLO's advice only to later find out that they went elsewhere for the sake of a couple of ££

I would love to look at the FLO blacklist (fingers crossed)

[FLO]

... or somewhere there is to high margin

It certainly isn't being experienced here on the front line.

[FLO]

I would love to look at the FLO blacklist (fingers crossed)

Wouldn't it be interesting if dealers posted customer reviews