Badged Power Tools

david lang · 2006-01-25T00:05:38+00:00

wrote: in a recent thread "I expect the pppro is likely to be an aggressively cost cut version with plasticine gears and coin cells, so I'm more tempted by the Ryobi".Lets look at the reality.I'm a sales rep for a Danish high pressure cleaner manufacturer (at least until next week). They have been around since 1962.You can't make DIY pressure washers in Denmark, labour costs are simply too high, so we bought in a badged range from FIAP in Italy. FIAP are highly automated, very efficient and sell all over the world. We tested the kit, based on 40 odd years in the game and by DIY standards it was pretty good.So, Danish product manager negotiates a deal for container loads of machines and multiplies delivered cost by 2.8 to allow for profit margin, marketing, finance cost etc.We sell product in UK, but because we have to offer a 40% discount to resellers and cover our costs, we also mark up by multiplying by 2.8.We now have a product that is shipped from Italy, to Denmark, to UK. Everybody wants a mark up, so a machine that leaves the Italian factory at a price of £50 has a UK list price of around £390.Enter stage left - B&Q and Machine Mart. They negotiate with FIAP, not for container loads, but for huge volumes - really huge volumes, so they get a better price. The shipping costs are less for larger volumes and they go straight from Italy to UK. Fewer mark ups, less costs.The upshot? Exactly the same kit (different colour, but identical) sold for half the price. Exactly the same kit. Exactly.Not a cheaper spec - changing that would actually cost FIAP money through loss of volume. Simply bulk purchase, lower shipping costs, fewer mark ups, lower margins.That's how it works in the real world. Lower price no longer necessarily means lower quality. It means more efficient distribution channels, lower margins and mass marketing.Dave