What are WE paying for???

[madandra]

I was looking at the new Nike Victory Red forged irons on t'internet and the £699 price tag has got me wondering:

How much of the £699 is actually for the product we buy.

How much in % is for marketing/ sponsorship.

How much is actually paid to the poeple who make them?

Is it time for Fair Trade in golf???


Whats your thoughts on this.

 

[GB72]

Whilst I appreciate that there is investment in research etc, the fact that the likes of MD, Benross, Orka etc can sell top quality clubs for nearly half the price seems to suggest that a large chunk of the cost is paying Tiger's salary.

 

[Twire]

As a rule of thumb, everyone who touches the clubs wants to double there money......to many middle men.

The manufacturer always has the smallest margin.

I used to manufacture an umbrella holder years ago, and as the manufacturer I used to get about £2 per unit, the retail price was £16.........I soon stoped making them.

 

[Parmo]

I concur with twiregolf, there are far too many middle men in golf.

I don't believe that a £699 set of clubs is going to help me anymore than a £299 set, it might make a difference to Cat1 players but as a weekend golfer or someone not looking to be Tiger woods I think charging that much is a disgrace.

 

[USER1999]

It is all overheads and too many people in the chain. Retail want to make at least 50% (they use margins rather than mark up because 100% mark up sounds greedy, but if I buy something for £20 and sell it for £40, that is a 100% mark up in my book).
The manufacturer of a £600 set of clubs will be lucky to get £100, and then they have to take their manufacturing costs out too. Tiger probably gets about 50p out of it.

But then retail has high overheads, stock, rates, staffing, etc, so they will probably say they sell near a loss, but then have a 25% off sale, and still make a killing.

I designed a shower head for Boots the chemist once. They wanted to sell it for less than £20, so I had a budget of £2.50 to manufacture it. It was rubbish, what did they expect? However, the punter paying £20 for it, probably thought he was getting a £15 item. It doesn't work that way.

If you look at a £1000 TV, it probably cost a lot less than £100 to make, and we moan if it goes wrong.

The whole world is a rip off. Better get used to it.

 

[medwayjon]

You would crap yourself if you knew how scary our overheads are!

 

[Parmo]

You would crap yourself if you knew how scary our overheads are!

The cost of bread buns gone up? joking!!!

*runs*

 

[Imurg]

You would crap yourself if you knew how scary our overheads are!

The cost of bread buns gone up? joking!!!

*runs*

Give over Parmo.

if I start laughing I start coughing me guts up.............

 

[USER1999]

If itunes in the US charges 79c for a song, and it charges 79p for a song over here, when we get to an exchange rate of 1$ = 1£, will they put our prices up.

My firm buys alot of gear from China, and with the current exchange rate on the dollar, we are going to get caned next year. I imagine that a lot of golf kit will be more expensive too, as most of that comes from China (even if it is then assembled in the US, to get that important 'made in USA' tag).

Luckily my bag is sorted for a while (unless I see a 909 driver that I really really really need).

 

[Imurg]

Don't forget a large chunk of the "overheads" in golf is keeping the hundreds of pro's stocked up with clubs,bags,balls,gloves,clothes etc etc etc.

TM, Callaway, Nike and the rest pay them a kings ransom to use the kit and then give more away to "Celebs" who they think will promote the brand. That's all got to be paid for somewhere.

And don't forget the R&D guys who are being paid - and spending - serious money so that you and I can hit the ball 3 yards further next year!!

 

[USER1999]

The R and D probably does have a decent budget, but for the likes of Nike, Cally, TM and Titleist, I would guess that the amount they spend on the pro's is peanuts compared to their income from golf equipment. It will sound alot, but in the overall scheme, won't be much as a percentage. Most of the cost of equipment will be mark up by the retailler, and global price fixing with rrp.

At the open, I think Titleist get rid of 200,000 balls or something, but that is all at cost, so is about £4.50. That doesn't put much on the selling price of a box of balls.

 

[haplesshacker]

The price of capitalism eh!! And retail margins aren't as generous as you might think in a lot of cases. Sure, something that costs very little to make might cost alot more on the high street, but surely this is what keeps folks employed.

In my opinion. Too much stuff being made, not enough being bought. Too many choices.

Just think how many of us would be unemployed if it all came down to basics and no choices of products / goods. Doesn't bear thinking about.

Just think how cheap stuff would be if we only had a few choices. ie. choose from 4 cars, 4 houses, 4 sets of irons, etc. Mass produced, reduces costs, reduces stocking overheads etc. But it reduces the number of jobs. There is no straight answer. Only what the market will stand as a selling price. Folks will only pay the price if they think it is worth that price. There's also the thought that it's expensive therefore it's got to be good, even if it isn't. Retail price doesn't always reflect the true value of a product. I'm sure that the latest driver from Nike isn't worth £300, and it will be £200 this time next year. Doesn't really reflect it's cost, just it's position in the market place, and what we're willing to pay for it.

So many thoughts on this topic, but not easily able to get them down on paper!

 

[TonyN]

The pro at Mizuno told me that the clubs they sell, should really sell for double what they do, because of what there made of, and how they are made. but to stay competetive, they have to keep costs down alot. I know they are still selling at a profit, but it makes me feel a wee bit better about this subject knowing that.

 

[HomerJSimpson]

I have thought about this subject for ages now and was considering writing a piece for the magazine I'm still thinking of starting. I realise that R&D costs do account for a reasonable % of the cost and that the big boys are currently working on their 2010 and beyond models so have an initial outlay. There is also the huge cost of advertising especially in the US to persuade Joe 28 handicap that buying the X driver will give him another 20 yards and guarantee that he will find the fairway every time.

There are retainers to be paid to the top pros for using the equipment. Think of the TW and Nike deal and Padraig and Wilson and you can see that thre is a price to be paid. This filters down then amongst the top 100 in the world and then to a much lesser degree onto other tours and finally to club pros.

There is the volatile market forces to take into acoount and the pressures on worldwide currencies. These fluctuations will all get passed on down the line from manufacturer, via the glut of middle men to the point of sale and the final RRP and ultimately our wallets.

The newbies like MD, Benross etc are selling their products in a smart way without the blurb of media attention. Can you imagine how thin a monthly opy of Todays Golfer would be if they weren't bigging up TM, Callaway, Nike and Ping every month? These new guys are relying on the quality of the product to sell itself. A risky strategy but one that seems to be working at the moment.

At the end of the day the consumer has the choice. You can pay the RRP for a big name knowing that whilst you are buying a quality product from a reputable company and will have the after sale service should something go wrong, you are probably paying a finite % over the odds simply because you are buying the NAME. There is the choice to buy budget brands (which is why Slazenger K1 drivers do sell).

Personally I am a golfing brand snob and that is my choice. I like certain makes of club, ball, bags, shoes and clothing and choose those because I feel good and feel I get some benefit from my equipment. That said I'm like everyone else and apart from golf begrudge paying over the odds for anything from my monthly food shop to a new TV or a car. Whatever sector you look at there is always someone looking for a cut and it will ever be so.

 

[haplesshacker]

Homer.
A well planned and executed piece of written work. Especially when compared to my own ramblings. In my defence, I was at work at the time. Maybe I'll submit a piece for the mag!!!

Nope, but not.

 

[HomerJSimpson]

hapless

Thanks for the compliment but that wasn't the piece!!!! It was just the ramblings of a dosed up cold sufferer who feels like the others that we are not getting the best deal. If I get the magazine going (I have a couple of other writing offers to consider from different sources) it was going to be my lead article. I may still get it done and see how GM feel about putting it on the forum or in the mag.

 

[madandra]

The company I work for work on 46% gross margin. Out of OUR margin we have to cover all our overheads. My customers usually try and get 50% gross margin (buy for £1 sell for £2) but on some products they get less than 25%. My guess is that AG make 30% GM on clubs and less on Powacaddy and Motocaddy.

Retail is hard at the moment as are other industries and I wonder if we will see golf club manufacturers reduce the number of new releases.

 

[Herbie]

The quickest way to see a change in the prices is for every golfer to go for just one year and buy nothing!

I can see that happening

 

[time_vans]

What never ceases to amaze me is the technical advances manufacturers claim year on year to persuade us to replace pefectly good clubs with new. Yes clubs produced now compared to ten years ago will be superior and noticebly so but compared to 5 years ago barely noticeable and certainly clubs produced in the last 24/36 months will be marginally different.....enough to buy new ? It mirrors my experience in match angling and hype and promotion on new products.....manufacturers are desperate for our cash especially for items that have a long life (ie golf clubs / fishing rods)they need to convince us our kit isinferior.....yes in 10 years it will be ,in 5 years possibly but the year after we bought it....no.

 

[andycap]

What never ceases to amaze me is the technical advances manufacturers claim year on year to persuade us to replace pefectly good clubs with new. Yes clubs produced now compared to ten years ago will be superior and noticebly so but compared to 5 years ago barely noticeable and certainly clubs produced in the last 24/36 months will be marginally different.....enough to buy new ? It mirrors my experience in match angling and hype and promotion on new products.....manufacturers are desperate for our cash especially for items that have a long life (ie golf clubs / fishing rods)they need to convince us our kit isinferior.....yes in 10 years it will be ,in 5 years possibly but the year after we bought it....no.

A fairly good example of this appeared recently when someone posted the pga tour driving distances stats. The increase in distance is just a few yards year on year , you could go back 10 years before it reached double figures.And a lot of that you could probably put down to fitness and technique rather than club development