US Dealer or Low Cost Import

[sgrayner]

Euro/Dollar conversion rates have remained low for a couple years now and I’m wondering if the low prices offered by European dealers don’t outweigh the advantages of buying from a US dealer. I recently purchased a Steyr match air pistol from a discount dealer in the Netherlands, Krale-Schietsport, and saved hundreds of dollars. I did have to wait a few days for export customs release, but there are no US Customs duties on air pistols and UPS delivered to my door without any import delays. Air pistols are categorized under Customs subheading 9304.00.40



I did have a incur a MasterCard 1.5% surcharge that Krale demands, but even after this and a 25 euro delivery charge, my costs were less than $1450 for a pistol that doesn’t sell in the US for much less than $2000.

What are the advantages of a US Dealer? Is it really worth it?

Steve

[john bickar]

They underwrite the cost of free discussion forums, for one.

[sgrayner]

Agreed...Scott provides a valuable service. And he and Neal the other few US dealers have nothing but the best of reputations. Nor can they be condemned for trying to make a profit in an environment where a 30 percent euro drop has seriously devalued their investment in inventory.

Business is business, though. I'm guessing many will decide that loyalty to them is just too expensive.

Steve

[GOVTMODEL]

Scott (and others) support their customers tangibly (with part availability, providing repair service), as well as intangibly (hosting this bulletin board, traveling to Austria to receive factory training). All this costs real money. After he purchases inventory, he doesn't get a refund if the value of the Euro plunges. Conversely, if the Euro takes off, his inventory is already paid.


When the cost of being the US agent is no longer worthwhile, there will no longer be one. There are so few people supporting us that I think it's worth supporting them.

[TenMetrePeter]

Germany is a long way to send your rifle for warranty repairs

[SlartyBartFast]

After he purchases inventory, he doesn't get a refund if the value of the Euro plunges. Conversely, if the Euro takes off, his inventory is already paid.

Stores need to look at how gas stations are run.

The purpose of a business is not to simply buy stock, set a price, sell it all, then buy more. The purpose of a business is to maintain inventory and generate cash flow while hopefully generating profit.

For a gas station that means that at the end of the week, you want the tanks to be full and there to be money in the register. If you buy the gas cheap, and sell it at a profit, but ignore the market wholesale price, you're F'd. You'll need new investment just to replenish inventory.

And that is EXACTLY what gas stations do. It's also the reason why in any area where there are a limited number of refineries that every station seems to increase and decrease prices simultaneously. They all react to market wholesale prices ASAP.

So initial inventory is investment, the sale price is based on the current market price, inventory is replenished immediately at current market values, and remaining cash is return on investment.

[shaky hands]

I think it is very noble to purchase from a dealer who plays an important role in a sport as small as ours. I also think that it is perfectly noble to save your family $500 in extra expenses and buy directly overseas, especially if you are not very rich. To each his own.

[william]

After he purchases inventory, he doesn't get a refund if the value of the Euro plunges. Conversely, if the Euro takes off, his inventory is already paid.

Stores need to look at how gas stations are run.

The purpose of a business is not to simply buy stock, set a price, sell it all, then buy more. The purpose of a business is to maintain inventory and generate cash flow while hopefully generating profit.

For a gas station that means that at the end of the week, you want the tanks to be full and there to be money in the register. If you buy the gas cheap, and sell it at a profit, but ignore the market wholesale price, you're F'd. You'll need new investment just to replenish inventory.

And that is EXACTLY what gas stations do. It's also the reason why in any area where there are a limited number of refineries that every station seems to increase and decrease prices simultaneously. They all react to market wholesale prices ASAP.

So initial inventory is investment, the sale price is based on the current market price, inventory is replenished immediately at current market values, and remaining cash is return on investment.

A gas station expects inventory to last days at most. I remember during the 2 oil crises of the 1970's many stations sold out in a matter of hours. Dealers in this industry have to plan their purchases based on a weeks / months time frame.

Critically, you fail to note that gasoline has relatively low price elasticity of demand; and prices tend to be downwardly sticky.

[Chia]

While we're getting up into business theory here, don't forget a basic thing: one of the major reasons that APs in particular are cheaper is the combination of the customs exception and the lack of importation requirements. Instead of dealing with firearms regulations, you're just dealing with basic hazmat in customs. .22 pistols are a very different ballgame from air pistols. While international companies can compete price-wise with AP and possibly AR (haven't checked on that), getting new firearms into the U.S. is a real pain in the ass.

In short, I'm concerned that this customs exception may actually kill the AP market in the U.S unless the current companies work it right. To fix it would be deceptively simple: price match, accept the loss in the short-term, and make it up by following the same path that Krale and them are by targeting a larger, international market. Use that to float the initial goodwill and inventory for the repair business (I don't know exactly how much it costs but I'm willing to bet that repairing a professional air pistol ain't cheap), which can then pull in money. If the repair business doesn't bring in the money...well, that's where the deceptively simple part comes in. Either repair costs increase or the repair service dies.

While loss of repairs will stink in a big way, this can at least be ameliorated by having reps at competitions that matter. The reason the international scene will really suck for athletes is the consumables. Importing an air pistol is efficient right now. Importing a tin of pellets or targets is most decidedly not. Try looking on Krale for things like the standard texts, targets, etc., and then look at shipping.

[SlartyBartFast]

A gas station expects inventory to last days at most. I remember during the 2 oil crises of the 1970's many stations sold out in a matter of hours. Dealers in this industry have to plan their purchases based on a weeks / months time frame.

Critically, you fail to note that gasoline has relatively low price elasticity of demand; and prices tend to be downwardly sticky.

Sitting on stock waiting for the wholesale price (or exchange rate to change) to drop so you can match your competitors, all the while hoping that the local market doesn't dry-up or your stock becomes outdated is a bad business plan. There's also loss of customers to other sources to consider. Matching prices and providing service brings back repeat business for items that might have a higher markup potential.

Whether that stock has a long average shelf time or a short one. A business needs the fastest turn over possible to create cash flow and ROI. This specific situation should be an opportunity for a store to maintain stock levels, reduce inventory costs, and have some cash on hand.

Average gas price might not change demand much, but differences between stations will move customers. So you're misapplying elasticity of demand.

The specific situation of currency exchanges makes the whole thing a little more opaque and difficult to evaluate. But if a business can't match the prices their customers can get elsewhere, they're doomed. In this day and age of internet stores and easy communication, more so.

Another recent observation about poor business practices: A local store used to have a decent selection of pellets. I went back with a friend who needed pellets and found all they have now is some left over R10 match pellets, less than a half dozen air pistols (Umarex handgun replica types), and a Drozd Blackbird which is poorly displayed.

With no decent selection of pellets, we won't be going back. Without a selection of pellets and air gun supplies, why would anyone interested in air guns and rifles be in the store to discover the pistols and rifles they are trying to sell? With a poor selection of pistols and rifles, why would anyone go there looking for them? With poorly displayed goods, how is any customer in the store for any other reason going to stumble across and be drawn into buy what they do have?

Another poor business practice at a local store: They're an Umarex distributor. Their website lists only the 5 pistols they have in stock and RWS Diabolo Basic pellets. WTH don't they list the entire Umarex catalogue on their website? Just have to be clear with customers about what is in stock and what needs to be ordered and the expected delivery times.

The art of success is balancing the cost of carrying inventory with keeping customers and taking advantage of sales opportunities.

That all said, I'm sure that if I started a store I'd probably end up out of business in short fashion. I don't have the financial security or desire for risk to ever take the jump and find out.

[william]

"In short, I'm concerned that this customs exception may actually kill the AP market in the U.S unless the current companies work it right. To fix it would be deceptively simple: price match, accept the loss in the short-term, and make it up by following the same path that Krale and them are by targeting a larger, international market."

Do I understand you? Are you suggesting that our host and the pitifully small number of other dealers in this arena will make a profit by re-exporting Steyr & Morini air pistols, etc? I'd really like to see that business model.

"Average gas price might not change demand much, but differences between stations will move customers. So you're misapplying elasticity of demand.

Actually it's the distortion built into the monopolistic competition model. Remember that the relationship between price and quantity demanded is always followed by "ceteris paribus." Other things being equal doesn't quite apply when there is brand differentiation. For those of us with no brand loyalty - gasoline is gasoline, there is no substitute, and price sends us to one station or another.

Let's not play much more with microeconomics. It might make Rover a bit churlish.

[Chia]

"In short, I'm concerned that this customs exception may actually kill the AP market in the U.S unless the current companies work it right. To fix it would be deceptively simple: price match, accept the loss in the short-term, and make it up by following the same path that Krale and them are by targeting a larger, international market."

Do I understand you? Are you suggesting that our host and the pitifully small number of other dealers in this arena will make a profit by re-exporting Steyr & Morini air pistols, etc? I'd really like to see that business model.

Then go look at Krale's website. It's what they're doing and it's what started this thread. And don't give me any bull about the U.S. being unable to compete internationally either. They figured it out. So can we.

[ChipEck]

My two cents. I have talked to Scott multiple times. He has freely shared ideas on how I can grow air pistol. I am not sure I would have gone ahead and created an air pistol match here in Wisconsin without his advice. Bloomer, Wisconsin April 8th. Entry fee is $8. WisconsinAirPistol.com

I bought a Steyr LP50 from him at Camp Perry based upon his advice and loved it. I ordered an Evo10e from him back in November. It finally came in yesterday and they called me right away and said they are shipping. Talked to me about the large grip being larger compared to large grip on my LP50. They said if it did not fit me to send it back. For that kind of service I will gladly wait and pay more. When I consider the advice and expertise it turns out to be a great deal for me.

Years ago I purchased a Nikon grey market lense. It went bad so I had to send it back to Japan. It ended up costing me over $100 more compared to buying one from a US vendor that offered US repairs.

Chip Eckardt

[william]

"In short, I'm concerned that this customs exception may actually kill the AP market in the U.S unless the current companies work it right. To fix it would be deceptively simple: price match, accept the loss in the short-term, and make it up by following the same path that Krale and them are by targeting a larger, international market."

Do I understand you? Are you suggesting that our host and the pitifully small number of other dealers in this arena will make a profit by re-exporting Steyr & Morini air pistols, etc? I'd really like to see that business model.

Then go look at Krale's website. It's what they're doing and it's what started this thread. And don't give me any bull about the U.S. being unable to compete internationally either. They figured it out. So can we.

Let me get this straight. You think a USA dealer can import merchandise from an EU manufacturer and turn it around and sell it to consumers in the EU? Not to the EU, then where? China? Korea? Japan? If Scott or any of his stateside competitors had any products made in the NAFTA countries, then US suppliers could compete. But with all the ISSF-compliant gear coming from Western Europe, the proposition doesn't rise to the level of absurdity.

[shaky hands]

That's a lot of words to say that in sales one should balance between running out of goods and stocking too much of them.

Stores need to look at how gas stations are run.

The purpose of a business is not to simply buy stock, set a price, sell it all, then buy more. The purpose of a business is to maintain inventory and generate cash flow while hopefully generating profit.

For a gas station that means that at the end of the week, you want the tanks to be full and there to be money in the register. If you buy the gas cheap, and sell it at a profit, but ignore the market wholesale price, you're F'd. You'll need new investment just to replenish inventory.

And that is EXACTLY what gas stations do. It's also the reason why in any area where there are a limited number of refineries that every station seems to increase and decrease prices simultaneously. They all react to market wholesale prices ASAP.

So initial inventory is investment, the sale price is based on the current market price, inventory is replenished immediately at current market values, and remaining cash is return on investment.

[SamEEE]

Might as well make full use of the free market so long as the dealer offers good quality after sales support.
It's not your cutting your cottage industry air pistol manufacturers...

You could always use local people to service your equipment.

[Chia]

Let me get this straight. You think a USA dealer can import merchandise from an EU manufacturer and turn it around and sell it to consumers in the EU? Not to the EU, then where? China? Korea? Japan? If Scott or any of his stateside competitors had any products made in the NAFTA countries, then US suppliers could compete. But with all the ISSF-compliant gear coming from Western Europe, the proposition doesn't rise to the level of absurdity.

I'm no expert at customs or international trade, so I'll defer to your expertise on the subject and concede the argument. I don't know enough about how NAFTA etc. interact with the situation.

I agree with SamEEE, though. Couldn't the component services such as repair shops and consumables/books separate? We've seen several grip makers, including our own Berry on the forum, who do excellent work, so at least part of the industry can be viable.

[TenMetrePeter]

Didn't the likes of Beeman import european and British arms and rebadge them but in VOLUME to get the prices down and margin up? What stopped that is Chinese produced guns that are almost shootable for $140. Nobody can beat that on price, and sales volume for target quality guns isn't there amongst the back yard plinkers.
I bought German for my first rifle but through a UK shop for warranty purposes. (Darn thing never went wrong though!)

[gwsb]

Last year I needed a top of the line air rifle for my college son. I called all the well known sellers in America, including Pilk Guns, and basically found bumpkus. Pilk Guns had NO air rifles. Some sellers had one or two of 2nd line rifles, but no one had the selection that they claim on their web sites, especially at the top end.

The only exception to this was Neal Stepp at ISS. Neal had every possible top end rifle and option in stock. In addition, his price was about $300 less than the others quoted, as if they actually had any.

Needless to say, if I needed another reason to do business with Neal (and I didn't) I found one.

[SlartyBartFast]

Last year I needed a top of the line air rifle for my college son. I called all the well known sellers in America, including Pilk Guns, and basically found bumpkus. Pilk Guns had NO air rifles. Some sellers had one or two of 2nd line rifles, but no one had the selection that they claim on their web sites, especially at the top end.

This is another business model issue that I see in all firearms sales and particularly high end firearm and competition air arms in Canada. I think the high end situation is similar in the USA.

Each sales point in the country is simultaneously importer and retailer. This means that a dealer/distributor/retailer on the opposite coast is as far away or further than retailers in another country.

To support customers, promote products, and very importantly grow the sport, IMO there needs to be a network of representatives. Something as basic as a representative within X miles of every city of X population.

The current competitive mentality or model doesn't serve a small niche market well with everyone selling retail and not leaving room for front line reps and middlemen.

In the example above, if there was a proper distributer model, everyone would have access to the same inventory of high end rifles. The first one to make the sale is the one that wins the drop-shipment.

IMO, this can only come about when there's cooperation on the basis of understanding a smaller percentage of a bigger pie is greater than a bigger percentage of a stagnant or shrinking pie.

To me Canada, and perhaps the USA, would benefit from a Krale like big importer distributor coming in and either using the good locals that exist or creating new local representation to support a larger central inventory.

Create a sport shooting merchandising effort and partner with stores to make their risk as low as possible while gaining visibility for the products.