Gumball's prediction

[Dax]

From an earlier thread gumball said:

Then factor in payment terms and the cost of capital (which in my estimation will be the demise of some brands in the near future - you can ask me about that seperately if you want and I'll explain) and the standard deviation widens.

Okay man, I'm curious.. how do you see the demise of these companies coming?

[gumball]

It's fairly simple really... How do other brands compete with a commoditized product against prices that are 60% less? First, keep their prices artifically high and compete on quality, but we all know a kite is a kite, so that only works for the uneducated consumer, which admittedly, there are a lot of. Then, offer extended terms to retailers and high margins of 40-50%. Many brands are offering retailers net 90 or even net 180 just to get their kites in the shops. The retailers have a hard time turning down "branded kites" or any kites for that matter when they don't have to pay for them for 3-6 months, thinking they can turn them over (and get the huge theoretical margin) and pay later. But when they don't sell, they're left with a big bill which could potentially put the retailer in a big financial bind. Then the end of the season comes around, and all season the brand is demanding they sell and advertise at MSRP, but then they're forced to sell at cost or below (which is still considerably more then a comparable Best kite) because the next generation of kites are starting to hit the market. And even if the retailer survives this, he or she is certainly not going to fall into that trap again meaning he or she will not order any more kites that don't sell (meaning that brand is losing sales). I think you'll see a lot of smaller retailers close shop at the end of this season, which is a shame. To be clear, Best has nothing against retailers, they are an integral part of our distribution and marketing system, and we'd honestly like to have more on our team. We've just cut out the distributor, that's why our prices are so low.

This sceniero is obviously not true for all retailers, but it is a big risk, especially for the fringe / 2nd tier brands and their retailers. Because even though Best has taken away market share from Naish, Cabrinha, Slingshot & North, we've really put the hurt on the rest of the 30+ smaller brands and the industry is slowly consolidating.

Meanwhile, the average Best retailer turns his stock of Best Kites in 2-4 weeks, again because we're dealing with a commoditized product with a 60% price gap. It's like buying pork bellies for $1,000 and not having to pay for them for 90 days vs. buying pork bellies for $400 and paying now. (But even Best offers its larger regtailers realistic terms, like net 15 or net 30 - because that's how long it takes them to sell their Best stock).

Plus, many have said that this may be true in the States, but not so in Europe because Best is an American brand and europeans, if they buy Best, will have to pay international shipping, VATs and duties. But, even with all those added costs, Best is still at least 40% less expensive compared to other brand's artifically high MSRPs. But this is about to change too... We're announcing the opening of our new distribution center in Barcelona Spain tomorrow. Now anyone who buys Best online in the EU (at the same price as Americans pay) will have their orders shipped from Spain. This means:

NO MORE DUTIES, VATS OR INTERNATIONAL SHIPPING CHARGES!

More details in the announcement and on bestkiteboarding.comtomorrow.

[J R R Tolkien]

What he's saying is that a lot of companies have had to borrow money in order to supply kites. This in turn hurts their margins.

However, it doesn't take a genius to see that the market is saturated. We'll see a weeding out of some of the kite companies that are redundant. The same thing happened with the explosive growth of snowboarding. It's nothing new.

In reality there will be a few strong companies selling kites after the market is "cleaned out" so to speak. The real queston is who will be left. I don't think Best will grab the largest chunk of market share on price alone. People will always want the choice of different brands regardless of price.

[skagroovy]

gumball wrote)))First, keep their prices artifically high and compete on quality, but we all know a kite is a kite, so that only works for the uneducated consumer,



for the educated consumers out there, the reason they don't all buy best is because a best kite is just a kite...

inovation will allways lead to stability not just undercutting prices
smart biz would be to lower prices under the comp by 10-15% offer a quality kite with inovative ideas and quality.
many many large companys have gone under because the core part of there biz plan was price and not value(value combo of price,quality,customer service)

if best was a "naish or a north" company there would be no way they would cut prices by 60%

for the uneducated consumers buy best cause a kite is just a kite is guess

[selassie]

A kite is a kite unless its a foil.

[PAFF]

. We're announcing the opening of our new distribution center in Barcelona Spain tomorrow. Now anyone who buys Best online in the EU (at the same price as Americans pay) will have their orders shipped from Spain. This means:

NO MORE DUTIES, VATS OR INTERNATIONAL SHIPPING CHARGES!

More details in the announcement and on bestkiteboarding.comtomorrow.

Put me strait...

If it says 400$ on your web site.... That is what i pay..???

No Tax-No Vat-No nothing?

Give me a eksample plz.

[MadMick]

$ 400 will get you the smallest kite. Kite ONLY and nothing else. Add coupla hundred for bar and lines etc.

The "60 % less" and all that crap is a shit load of lying bullshit !!

Check the actual price from a retailer,for a brand name kite. Not the "reccomended retail" which everyone knows is crap !

[Dax]

$529 13m Yarga + $180 bar/lines + $30 shipping = $762.99... still $337 less than a 13m Slingshot complete even with a 20% dealer discount off of msrp, and Slingshot's are cheaper than North/Naish/Cabrinha.

Also figure in you really don't need bar and lines for each kite. I want a 4 kite quiver, but I don't want 4 bar/lines.

I hope my local shops start selling Best... I'd love to support them, but I'm not going to if it means spending $300-$500 more per kite. I'd rather just go in there and buy the $20 t-shirts...

[alibaba]

Good work Gumball. Now we europeans can get much cheaper kites and stuff.

[Kitedude]

Gumball,

thats a curious one about shipping from Spain. surly you have to pay Vat upon entry to spain or if you plan to sell over 50k you have to register for vat. and hence have to charge the customer??