A storm brewing?

[John]

I work for an IT VAR (Value Added Reseller) and this sort of thing comes and goes in cycles....

I'm wondering if this "storm", should it come, will be well beyond the normal cycles

With astro equipment being a relatively small market niche, it could be more vulnerable than other areas when tough decisions are made on prioritising production.

[RikM]

The reason I buy astro kit from FLO (as well as the extremely attractive pricing) is the confidence I have that the advice given upfront is reliable and the aftersales support is there if I need it. Having that confidence is worth something to me and I have bought a few items from FLO that were available for a few coppers less elsewhere. Were it not for a certain brand of eyepiece, I don't think I would talk to another supplier and I have no intention of changing my purchasing habits.

I expect the next few months will be testing. Hang in there.

[RogerTheDodger]

This does have some uniques to it certainly and it looks like it could be "Interesting times". For us, when the last crunch came it was very dependant on where the computer kit was made, but the main problem was that the people that made it (HP/IBM/EMC etc.) also sell directly and they pull more business back from us.

[JB80]

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

Isn't it funny though, I think as customers most of us have at one point or antother weighed up the option of ordering from stateside simply because their price is far lower than anywhere else and doing the little sums to see if after customs it would still be worth it.

And while I don't claim to know a thing about margins and the business side the reasons I switched from buying from German companies(who are closer to me) comes down to two things, price and excellent service. And I'm not saying I recieved poor service as I didn't, it's just that they can't compete for whatever the reasons.

I think that no matter the business, if they can stand behind their actions and offer quality service to their customers then it should stand them well for whatever may come in the future.

[JamesF]

Makes me wonder about the wider scope of these effects.

The apparent logical conclusion of China's situation is that prices will go up for all goods manufactured there, presumably quite significantly over the next six months to a year. It's hard to see how that can happen and for inflation to reduce as the BoE predicts. Given our enormous dependence on cheap Chinese manufacturing, it could well mean that inflation gets even higher, interest rates (and therefore mortgage rates) rise, disposable income shrinks dramatically and we do get pushed into a "double dip" recession.

Those who went through the desperate unpleasantness of the early 90s recession with mortgage rates at 13%+ will probably recoil in horror at the thought of it happening again, but my gut feeling is that we can't discount the possibility entirely.

James

[SiriusB]

Interesting & candid post Steve.

Kinda suspected we were in for a bit of a price rise, but blissfully ignorant of the potential Kit shortage, which is a bit concerning.

Can sympathise with the low margins, was on friendly terms with our local camera shop proprietor until he shut up shop.

Told me it was due to ever decreasing margins & people asking him advice then buying elsewhere!

One final comment, i heard a prediction recently that inflation will be running at 25% in the US by end 2012.

How accurate that is,only time will tell.Let's hope it's not.

[F15Rules]

Interesting stuff..

There seems to be no escape from China syndrome.. my company used to buy a lot of disposable latex and nitrile examination gloves several years ago, mainly from China, and we were told amongst other things that the prices would go up and availability down due to the Bejiing Olympics!

Apparently to reduce pollution for athletes and visitors some factories had to shut down and this was expected to hit supplies. In the event, nothing happened and I think it was a scam to sell more forward bulk orders. But there is no doubt that countries like the UK which farm out most of their manufacturing to the Chinese are playing a dangerous game.

Apart from anything else, the chinese think nothing of copying products with no concern for patents etc, and it is interesting that some manufacturing is definitely coming back to the UK. Also, world logistics costs will only go one way in future, and that is up.

I do think we have got too used to certain astro items being too cheap, and that this may change as global costs go up. I predict that fuel, water and energy will be the key areas of conflict in the future, and those that have these resources in abundance, like the Russians with their oil and gas, will hold the main cards. A sobering thought.

Good luck to FLO and companies like them who do genuinely add value to the products they sell.

Dave

[astro_al]

The cost of my telescope is now 20% higher than when I bought it 18 months ago. If the retailers and manufacturers aren't benefiting from a price increase then it is scary to think that such a big percentage increase is down to manufacturing and distribution costs and taxation.

[iwatkins]

Steve, an interesting and somewhat sobering post. FLO are one of the good guys that I try to support when I can (i.e. when you stock it) so I hope you can survive and make a good living from it too.

On the plus side, do you think this is justification enough to the wife to buy more stuff now rather than later?

Cheers

Ian

[Merlin66]

Guys,

I spent almost 50 years in manufacturing engineering... I've moved assembly lines from France and the UK to Spain, the Czeck republic, then the same damn lines to Mexico and guess what they ended up in China....we transfer all the technology and know how and we "forget" how to train the youngsters back home into doing a job!

It is inevitable as the countries grow, they want a share....

It was said to me a few years ago now that the real cost of labour was "$8/ hr" if you're above that rate (at the time Oz and the UK/ France were more like $18/hr) you will loose the business......

Now we look after MacDonalds and other restaurants.

Such is life.....

[RikM]

I personally am in R&D, but my company's main business is manufacturing. Injection moulding plastic widgets for the Biopharmaceutical industry. Within our group, we are currently increasing the proportion of products made in the UK because our costs and particularly overheads are lower. We have manufacturing sites in several countries that you would think would be way cheaper to produce than the UK, but currently that is not the case.

Perhaps an increase in UK optics manufacturers is not out of the question?

[nightfisher]

Good luck for the future steve and all at FLO, here is my 2 cents worth:

with china having manufacturing upsets, why oh why do we not get more russian optics in the uk and more to the point more availability of these optics?

russia must be closer to the uk than china, (i guess) so shipping and logistics should cost less, and generally the equipment seems to be of a higher standard than chinese, just my thoughts

[Tim]

As you know Steve my role includes selling landscaping and paving supplies, and has been hit really hard for the past three years. But the downward spiral in margins is the real killer, everybody is cutting each others throat to try and get the order, to the point where it almost isn't worth doing. If only the mentality to act as a whole could be developed where a more sustainable margin could be stuck to, we'd all be better off, even the customer in the long run as they will help to ensure the particular company they prefer to deal with can actually afford to continue trading.

There is some big names going under at the moment, and many of them are taking smaller companies with them due to unpaid credit. Being able to run light and not dependant on a single supplier/customer seems to be key at the moment. I know I am running a skeleton crew, which makes it harder on the remaining staff, but at least they still have work.

Tim

[Psychobilly]

I stopped buying Chinese Optics and bought Japanese instead

[JamesF]

As you know Steve my role includes selling landscaping and paving supplies, and has been hit really hard for the past three years. But the downward spiral in margins is the real killer, everybody is cutting each others throat to try and get the order, to the point where it almost isn't worth doing. If only the mentality to act as a whole could be developed where a more sustainable margin could be stuck to, we'd all be better off, even the customer in the long run as they will help to ensure the particular company they prefer to deal with can actually afford to continue trading.

I've been thinking for a fair while that over the last ten years we, along with many other western economies, have been engaged in a headlong rush for the bottom in terms of selling goods and services as cheaply as possible and hang the consequences. There's a positive side to this, which is that peoples' standard of living has probably increased significantly, but there's a big down-side too, meaning that companies are living right on the edge of breaking even, unable to ride out the smallest ups and downs in the economy, and that production moves to places where people can be paid a pittance and treated in a manner we'd probably prefer we didn't know was happening and certainly wouldn't put up with ourselves.

That such a situation is unsustainable ought to be obvious, but it's not what you want to think about when the alternatives mean that your money won't go as far and you can't have that new car, or that new 40" television and so on.

James

[nicnac]

im with nightfisher on his point, bring in russian optics!, a new store, specialising in TAL telescopes has just opened in the states, we need one!

would be nice that

come on NPZ, get shipping!!!

just send the equipment to auntie FLO

[andrew63]

I for one only remember too well before the bust the huge Chinese vessels full of cheap tat to fuel our lust for cheap throw away goods especially towards Christmas - perhaps it's a good time for a rebalance and to take stock how the global world is turning next.

andrew

[the_laughing_crow]

Aside from everything else you mention.... once Chinese goods are produced at a cost which "the market" doesnt like, production will be outsourced else where.

There'll always be someone to exploit. Thats how capitalism works.

[Albireo380]

An interesting post Steve. I probably buy 75% of my astro gear from FLO and value our conversations about the pros and cons of different bits of kit. I agree that there are a small number of good retailers across the Uk.

I fully expect prices to rise and "bargains" to disappear. C'est la vie. I would prefer to pay a little more to a good supplier and be fairly sure I am getting a good service.

Hard times are upon us all and my "disposable cash" is reducing. this Summer is probably my last buying spree for some time.

Tom

[themos]

well, we've helped to create tens of millions of new consumers in China...we just have to think of something they might like to buy (oh, and make it!).

[Earl]

Margins !!1 Ill tell you about Margins!!!

It is cheaper and considerately so to purchase new Consoles from "Insert Random Supermarket" than it is to purchase them from the official UK distros!!!

Thank the E=MC2 for Second hand !

[Earl]

IMO the biggest problem was the Insane wages paid to Spanner Monkeys in the car industry, the generation of the "Car Boom" were so unbelievably greedy with there wages 30k for a track worker putting 4 bolts on.... and the associated house prices yadda yadda

i laughed when Rover closed down as the staff themselves made it so unprofitable with there own greed..

Longbridge has a college been built on it, hopefully they will be able to learn the lessons.

[Madhatter]

"MADE IN CHINA" has a obvious stigma attached to the product..when you buy a product with these three words written on them you exspect it to be cheaper than elsewhere.

When Chinas prices rise the amount of goods they are selling would surely fall-I bought a skywatcher dob because it performs well and is cheaper than the competition, had there not been much a differance in price i would have not bought one and gone for something else, unless it has an edge-and skywatchers edge has been price.

In these tough times money talks.

As for where i buy my astrogear i would happily use FLO again and its the first company i check too see if you sell what i want too buy, i dont mind paying a few extra pounds for peice of mind.

[JamesF]

There'll always be someone to exploit. Thats how capitalism works.

Or, at least, it works on the supposition that there'll always be someone to exploit. A bit like Ponzi schemes, really...

James

[Odd Thomas]

Very interesting thread this.

I suppose I'm one of the 'bad boys' here. Among other things I do, I have a retail business selling motorcycle parts and accessories. It is a well known name and probably one of the biggest, if not the biggest outfits in the country. All our stuff is sourced from the far east, China, Tiawan wherever is cheapest and to be perfectly frank, its definately 'not the best', but it sells in vast quantities because its cheap and we have huge buying power to 'pressure' manufacturers to what we want to pay. Our margins are way above any that have been mentioned in this thread and show no signs of decreasing. To get to the point, there are many people who will seek out and buy the cheapest example of whatever, irrespective of quality, service locality etc. likewise there are folks who will pay a premium for excellent service and quality goods. (I fall into the latter camp) I must admit that I have considered importing ED's and APO's from China, we have containers coming in weekly, it wouldn't be a problem, but the prices I've been quoted from Chinese manufacturers are relatively so 'High' I wouldn't even think about it!so I can see and sympathise with the likes of FLO about margins, costs etc. (BTW the russian manufacturers never replied to my requests for prices).

So theres my tuppence worth.

I believe the outfits who love what they do, (FLO) & are not just in it for the money will weather this storm and others who 'also sell telescopes' will cease to sell telescopes & concentrate on their core business.

Just been re-reading this post....to clarify, when I say 'we' etc. I don't own the company! I'm just one of many small cogs who sell their products.

Tom