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Discussion Starter #1
A friend runs a micro fly shop on the Oregon coast out of a room in his garage, just to feed his and the locals habits since the nearest fly shop is 2 hours away. A Chinook salmon specific shop, as that is his and his customers passion.
Annoyed with costly 'name' brand reels that had trouble lasting a season fighting brutes, he went online and started exploring direct contracting with Chinese manufacturers currently building reels.
He found a manufacturer making a nice reel - 4.15" x 2" mid arbor, full cage design, type 3 anodized, CNC machined and polished 6061 T-6 bar stock aluminum, oversized carbon disc drag, oversize handle, 3 ball bearings.
Delivered for well under a $100 per unit with a 10 unit minimum order, for even less at 100 units, and further reduced at 300 units, the typical order from the large fly shops.
He sells these reels for $125 in the shop, the same reel online in the big shops using the same manufacturer sell them for $250 and up.

I've used these reels on some big salmon. They performed great.

So my point? That gearheads tend to think cost = value.

and it's just not always the case. Especially with reels, which at their heart are very simple, and often overpriced.

personally, I do try and buy US made when I can afford the item. On the other hand, if I am buying something made in China, if it fully meets my requirements, I want it as cheap as possible - as it should be.
 

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All Tangled Up
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Any small-volume specialty retail item works on large markups over manufacturing cost, otherwise the numbers don't work out. Something has to pay the cost of capital sunk in inventory, keep the lights on, pay for a guy to sit behind a counter or stuff stuff in boxes and mail them out. At the supplier side there is marketing and distribution. All of those are "real" costs. At least some of the end-cost advantage your friend enjoys I would wager is only possible because the business is done on a small-scale and enjoys a de-facto subsidy from his regular job or his wife or whatever paid for the garage. And also that he's willing to accept a low to zero profit margin, when you account for everything involved.

Oh yeah, and design cost. Somewhere some mech. eng. was employed to design the reel, are you sure that person was at this offshore place and not at one of the big names, therefore providing yet another hidden subsidy? Leakage of design IP is a concern for a lot of companies these days. Nobody wants to sink a ton of $$$ into R&D only to see close copies of their products appear at cut-rate prices six months later.
 

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...
He sells these reels for $125 in the shop, the same reel online in the big shops using the same manufacturer sell them for $250 and up.
Sounds like his overhead is next to nothing, not like a full serve shop who's per sq ft cost is going to make everything cost more in order to have any stock on hand.

And more importantly, as troutless pointed out, who is getting paid for the hours sent in design and development. Not to say that Chinese engineers aren't capable of designing something as simple as a fly reel, but did they? Or was it copied, thereby bypassing the expense. Sure, cheaper to the buyer, but at what eventual cost to the actual designer.

I have nothing against people working with global supply chains. I do have a big issue with copyright and trademark infringement.
 

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Discussion Starter #4
nobody subsidizes his operation, his wife is retired, as is he. Note my statement the shop was opened up to supply him and the rest of us who are 2 hours from the nearest fly shop. it was not intended to portray a head to head cost differential between a big shop and a mom and pop, simply to underline the true cost of many reels.
The design of the reels was pre-existing, developed by the Chinese manufacturer with feedback from the customers.
And regarding design/copyright infringement, that ship sailed long ago once China got in the game. And the vast majority of fly reels have never been patent protected because they are all basically the same reel, with a few exceptions in design and quality.

I was involved in an effort during the early 90's to produce reels in Russia. A friend of mine from Russia had bought with his partner group, for pennies on the rubles, a complete CNC machining facility that had been formerly dedicated to the Russian arms industry. His group obtained a Russian goods contract to keep everyone working, and were looking for additional projects to maximize production capacity. I proposed fly reels, we worked out some details, and he headed back to Russia with a case full of various price point reels he was going to have the plant produce and bring back for approval review. None of the reels he brought with him were patent protected, we checked. 2 of the reels, from different brand names, were made in the same facility it turned out. Our production pricepoint for the equivalent of a CLA reel with an improved polished finish was going to be $50 per unit.

When he got to the factory he found the employees were gone and every single piece of equipment and inventory had been cleaned out, even the wiring had been ripped out of the building, it was just an empty shell. It turned out the employees had sold the entire production line, divided up the profits and vanished.

What keeps the remaining fly shops open these days, as many continue to close due to online pricepoint competition, is an ability to provide an almost club like environment whose members support because of their desire to mingle and b.s. with other flyfishers. And that's a good thing.

However, the next time you spin the handle on that $400 reel, just know that is very well might have been made in the same plant where that $125 reel has been made, for even less cost because of volume discounts.

My friend with the fly shop is best friends with a quite well known and fairly affluent fly fisher. One fishes with $200 outfits, the other with $1200 outfits.
They both catch about the same amount of fish.
About 6x as many as i do.
 

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Value is in the eye of the beholder. Your right when you say that all ceteris paribus, a $100 reel should catch as many fish as a $1000 dollar reel. That big box reel manufacturers source their wares from Asia, is one of the reasons why I tend to avoid them altogether.

If choosing a modern reel, the visual and tactile experience of fishing a North American made product with ties to local craftsmen makes my fishing trips more enjoyable. :)
 

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JD
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Manufacturing processes

Being in the engineering business for 30+ years, this is something I know a little bit about. First off, most all production machine work today is done on CNC machinery. There is just no way anything built on pre CNC machinery can compete. That is why a Bogdan reel was always expensive. They were virtually hand made, one at a time. The setup time on CNC equipment is so short, it enables small quantity runs of 100, or less parts. Custom engraving, again CNC. You want your company name & logo on our XXX model reel? No problem.

There are many ways to cut production costs, but you still have to exchange the product for money. Again, modern technology has provided some shortcuts, enabling some very high quality products to be had for much less than even a decade ago. Hell, for less than the price of even a moderate fly reel, we're carrying in our pockets mini computers 1000x more powerful than those that went to the moon! And we still have deal with all the middle men.

There are always those willing to pay the price for exclusivity, while there are others who could care less, as long as it gets the job done. That's what makes the world go around. More power to the guy who can build, or shall we say deliver, a better mouse trap.
 

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seaterspey
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Very touchy subject!

It is extremely difficult to sell against the made in America machine without stirring the pot of anger.

I work in a machine shop and know how much it costs to run components for most industries and it varies a ton depending on who you are selling to. I can sell a part to a aerospace company at 200% margins and get away with it because the market calls for just that but there are also certain industries that you are lucky to get 20%.

The fly fishing industry as a whole is only around 800+ million per year and that is not a whole lot compared to other industries. I work with companies that sell more than 15 billion in one year! Fly fishing manufacturers have so little to work with and the market just keeps getting smaller every year. Fly shops closing left and right simply because there is no business or not enough to keep them afloat. The days of the mom and pop fly shops are coming to a close because they are no longer just breaking even they are losing money.

It all comes down to personal preference, made in America or not.
 

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BF nailed it.

Very touchy subject!

It is extremely difficult to sell against the made in America machine without stirring the pot of anger.

I work in a machine shop and know how much it costs to run components for most industries and it varies a ton depending on who you are selling to. I can sell a part to a aerospace company at 200% margins and get away with it because the market calls for just that but there are also certain industries that you are lucky to get 20%.

The fly fishing industry as a whole is only around 800+ million per year and that is not a whole lot compared to other industries. I work with companies that sell more than 15 billion in one year! Fly fishing manufacturers have so little to work with and the market just keeps getting smaller every year. Fly shops closing left and right simply because there is no business or not enough to keep them afloat. The days of the mom and pop fly shops are coming to a close because they are no longer just breaking even they are losing money.

It all comes down to personal preference, made in America or not.
Remember several fly shops here in Southern Oregon that I'd go into and just 'drop a few bucks.' A personal fav was a small shop on the North Umpqua. Total 'Mom and Pop' but could easily cost me a hundred dollar bill to get out of 'there.' Last time I stopped by, store was closed/empty.

Knocked on a neighbors door and heart sank.:( Small independents are to soon be a thing of the past?
 

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Discussion Starter #9 (Edited)
They are closing all around us, thanks to a sagging economy, a pullback from "The River Runs Through It" fly shop boom years, and an inability to compete with 'specials' that permeate the internet these days.

For many, discretionary spending has impact, and affordability is everything. And ignoring all the white noise from latest and greatest marketing hyperbole, it all comes down to the simple act of getting a fly in front of the fish.

So both my friend with the $1200 outfit and friend with the $200 outfit will end up together on the river, making the memories they crave.

And what you use there is much less important then being there...
 

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seaterspey
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Being there is what it is all about!

The one thing that I have seen in this industry that drives me nuts is the cost of let's say waders are the same no matter where you shop. What happened to a bulk discount? Let's say you decide to buy 300 pair of waders and get a 15% discount why not pass that to your customers? The fly fishing industry needs to stop price fixing. If Cabelas can buy 15,000 pair of waders and offer it to the customer for 20% less so be it, they should not be punished for being bigger than the other guy and having the power to buy more at a better price!

I thought that is what this nation was great for, competition. Make this stuff more affordable to the consumer and you will sell more product.

When was the last time you have seen Simms G4Z waders on sale?
 

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seaterspey
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Come to think of it I thought price fixing was illegal? Just because there is a MSRP given does not mean you have to sell it for that price.

I started in the retail business with my family and we did it the old fashion way we assigned a margin that we wanted on a certain product and set the price to reflect that. Then we had loss leaders to bring in the crowds and get them to spend more.

You go to any fly shop in the US and you pay the same amount for Simms waders in Rhode Island to Washington??????

Stirring the pot I am!!!
 

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Kind of a cool topic and nobody is fighting...Yet!

I work in the industry and hear things like: Since the economy down turn we went from something like 1275 shops in the U.S. to something around 650. The industry in it's entirety gross's around 600 million. That includes shop sales, guided/outfitted trips...the whole nine yards. To put that in perspective...Patagonia itself grosses right around 700 million...Just goes to show that long underwear, jackets, pants etc. talk to a much larger crowd/capita than rods and reels do.

As far as a $100.00 reel that sells for $125.00. It is simple business math saying that probably will not work for the long haul. For example, one of the friends has a warranty issue...guy who runs the garage shop has to give friend X a new reel...since he only makes $25.00/reel...that is like giving away 4 reels...not to mention he probably has not been hit with duties from the product entering the country which will eventually catch up to him as an added cost as well.

~Fly shop owner buys 10 reels at $100.00 =$1,000
~Potential gross of all reels sold $1,250...profit being $250.00
~Handing over 1 warranty reel potentially cost him $100 + $25 profit
~Now his potential earning selling the whole lot of reels is down to $125.00
~You can see how quickly a 2nd warranty reel would net him $0.00 profit and if he has any more warranty reels this is going to cost him money to see that his friends have something to fish with
Good chance this is going to cost him either money or friends. Other unknown factors are: is there spare spool availability in case somebody wants a 2nd line ready to go? Do the spools consistently fit the frames so they work properly? Is there availability to get parts like reel feet, drag knobs, reel handles or other annoyances that can go south with a reel?

Hopefully the reels are great and there is never a warranty...but I think the real costs of reels is a bit higher than you think?

BB~
 

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Come to think of it I thought price fixing was illegal? Just because there is a MSRP given does not mean you have to sell it for that price.
Similarly, if you do sell below MSRP, the manufacturer can decide it will not longer ship you product. The price is not being fixed in a collusive agreement, the manufacturer is deciding who it will do business with and who not. This freedom-to-deal results in an exception in anti-trust doctrine, look up "Colgate doctrine."

This type of vertical arrangement is different from price-fixing that results from collusion among competitors that have a horizontal relation in the market. If Simms and Patagonia start discussing aligning their MSRPs, that is price-fixing. Likewise two fly shops.
 

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Discussion Starter #14
BB, you are dead on, not a sustainable business model to emulate, just a brief on what has been done.

Many brand producers price fix their products through emphatic MSRP emphasis, and only tolerate their products to be discounted if an older model, and will cut off any retailer who discounts the current market price established by the producer.



We are, however, on the eve of the next major game changer, which should bring much production back to the US.

Pay attention to advances in 3D product printing, which is going to obsolete many of the current technologies, and shift global spending patterns

As the machines improve in size and complexity, and usable bonding materials develop further, automated production will be relocated in adjacency to the utilized resources.

China, Pakistan, India, etc, have labor, they do not have the natural resources. North America does.

What happens when the cheap labor production contracts begin to fade from those countries as massive 3D printing facilities begin coming on line elsewhere, their GDP begins to shrink rapidly, and unemployment begins to climb to historic highs?

Not going to be pretty...
 

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seaterspey
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3D printing or additive manufacturing I agree is going to be a game changer for sure, we are already dabbling in this.

But it is a long way off from being productive, I believe GE is building a 50 million plant in Alabama just for additive manufacturing. Big stuff for sure but the other side of the ocean is far ahead of us on this already, India has been into this for years and will start producing working metal parts soon. The US will win though we have to much behind us not to.

As for manufacturers choosing who they do business with based on what they sell the product for is absolutely absurd and doomed to fail in the long run. This country was made from competition, without it we would be doomed. You do not open a shop up for just the fun of it you want to make profits and grow just as Simms, Patagonia and all the others out there want to. I believe that this business was worth 800 million 3-4 years ago now it's at 600? I would start thinking over my business plan and making some changes before it's to late. The only reason Cabelas sells Simms is because of the name not the product, they would rather make a better margin selling their brand name stuff than being told this is what you have to sell ours for. Simms better remember that things don't stand still, progress is moving forward not backwards and that name could be tarnished anytime, then what?

All in all the fly fishing industry is still in the dark ages.

I still love it and yes I do own three pair of Simms waders and two pair of the boots but I still think they are idiots in business and are doomed to failure.

I'm just glad I am no longer in retail because if CBS records told I had to sell a certain album at this price I would tell them to pound sand.
 

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China, Pakistan, India, etc, have labor, they do not have the natural resources. North America does.
What happens when the cheap labor production contracts begin to fade from those countries as massive 3D printing facilities begin coming on line elsewhere, their GDP begins to shrink rapidly, and unemployment begins to climb to historic highs?

Not going to be pretty...
My friend. Sad to say, but you might be wrong on both counts.
Almost 2.6 billion in population in just China and India alone.
Their domestic market will sustain them as their populace starts prospering.
 

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Discussion Starter #18
China's residential property prices have increased 300% over the last decade. The country’s debt-to-GDP ratio is now at 230%, climbing at over 10% a year. Unsustainable, which is why their autocracy is scrambling to create a soft landing for the imminent collapse, their only current answer the ongoing devaluation of their currency.

why it's good to go fishing, swing a line while knee deep, hope for a tug, ignore the follies of mankind...
 

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JD
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Msrp

I found out the hard way what MSRP was all about. Once upon a time I lusted for a well known expensive reel and I was determined to find some one who would sell it at a discount. Ain't gonna happen Jack!

In an effort to improve their image by making certain their products were properly represented, (no more high dollar Tarpon reels sold for 5wt trout rods etc) the fly fishing industry sought to keep product out of the big box stores & promoted the concept of Fly Fishing Pro Shops. Sure the big city Fly Shop, able to move much more product may get a price break from the manufacturer or the fly rep. However, in order for the small destination Fly Shop to to be able to compete, everyone had to sell the same product for the same price. Otherwise, the little guy does not last very long.

This does not apply to everything in the shop. Some items, the little stuff, is often up for grabs. Many fly shops will include free backing with a reel purchase. Or throw in a free line as well as backing with the purchase of a rod & a reel. But yes, if you want a Tibor reel, a Sage fly rod, or a pair of Simms waders, you will pay MSRP whether you are in San Fransisco, Fairbanks Alaska, or Islamorada. A fly shop is selling service as well as product.
 

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seaterspey
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I totally disagree in today's age of the internet! Little shops can compete and sure there will be some that fail but failure is the mother of success. You and others learn from failure, he'll as steelheaders we should hold that true.

Let's face it the fly fishing industry is in a nosedive, the old ways don't work anymore. I live in a state that has 1 fly shop, 1 that's it.

These bigger companies can set up programs that would be beneficial to the smaller shops and give the big stores something to think about or at least compete. We are never getting rid of the Cabelas or Costco they are here to stay and they will sell more product simply because they have more traffic. Shops need to start thinking outside of the box, shake things up try new things and differientiat themselves from the big box stores.

Making each store sell at the same price to make it fair sounds socialist. I was brought up to try and win at everything I do and it's not a level playing field when you play or work so you go out do your best and hope for the best. These people go in business knowing that they could lose it all but they can also reap the rewards.

There is no level playing field in life what fun would it be if it was?
 
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