Originally Posted by locknload
So I call this guy at this un-named on-line ski vendor. He's got a good price for the 08 version of the 8k which I've been looking for. I place my order and they call me back later and say they can't get the ski from Dynastar b/c its sold out. So I ask him, "How can a new ski for this year be sold out even before the season has started"?.
His answer was perplexing to me. He tells me, "The manufacturers are keeping their inventories lean b/c there are so many inexpensive skis flooding the market by people who don't know what they're doing". Do any of you have ANY idea what this means? Who is he referring to...places like Evogear or Ebay? What are the implications...to me...having lots of retailers means the price of skis both new and used is coming down IF you are willing to wait and don't have to have the newest version. Is this just a weak complaint or is there any legitimacy to this? I'd love to hear your thoughts.
It means the manufacturers are producing to a number THEY think the market will absorb and not just forecasts/orders from dealers "plus some extra for good measure". It isn't any different than any other business that works through distirbutors/dealers. If the manufacturer doesn't help protect the profitability of its dealer network, the dealers drop their product lines because they can't make any money selling it, or the dealers go out of business if they don't have other product lines that keep the doors open.
Car companies have done this for years. When you see discounts, rebates, etc. it is only because there is more inventory than the market will bear at what everyone has calculated is profitable pricing. So, the manufacturer kicks back extra money to the dealers to help them move inventory. Manufactuers make less, dealers make less, etc. The objective is to keep the plants running and the employees on staff hoping for better days, even if it means just breaking even. It started out as a way to bridge the slow times. Then, the slow times just continued. Finally plants closed and workers were let go to match production to what the market will support at profitable pricing.
There are many reasons why cheap skis have been easy to find , but the root cause is over production.
Most shops are not "big businesses" and have very modest financial backing to ride out slow periods. Called cash flow crunch. When there aren't enough sales to meet the rent and payroll (law says employees have to be paid on time) and other expenses, then shop owners either have to get a loan from the bank or firesale what they have in the shop. Or close the shop, send the employees packing, and whoever is financing their loan takes the inventory. Most shop owners put up a few hundred thousand dollars at the beginning of the season - either from a loan or self-financed - and hope they make enough sales early to cover the operating costs of keeping the shop open. Those who guess wrong don't make it and the skis hit eBay and close out. That in turn makes it harder for other shops to sell at a profit because the sharks are circling. Everyone starts waiting the shops out until they have to sell at minimal profit or a loss.
Another scenario is the volume dealers. They buy in huge quantity, advertise like crazy and make as much as they can quickly based on volume. Less profit per sale and more sales. What inventory is left over, they wholesale off to a discount house, or eBay it.
Sometimes manufacturers even "dump" product directly into the wholesale market late season if dealers didn't take enough of the production runs. This really puts pressure on the dealers to drop prices or not be able to move the inventory. That's a quick way to put your small dealers out of business.
So the implication is that manufacturers are better managing production, which ends the circus of building too much product and then frantically scrambling to find people to buy it. Basically musical chairs until the last man holding inventory loses.