Shane's epic essay on US vs Australia pricing

Talk about any old crap not related to your gear - "almost" anything goes
Post Reply
User avatar
guitarsatbmusic
Site Admin
Posts: 6984
Joined: Fri Jan 09, 2004 3:00 pm
My Rig: Cool shit
Contact:

Shane's epic essay on US vs Australia pricing

Post by guitarsatbmusic » Tue Sep 13, 2005 1:55 am

OK, I've been meaning to do this for a while. This will be added to and expanded as new thoughts come up, but it's basically a place for me to link to when I get e-mails of the ilk I will discuss now.
We often get asked the question, "why is it so much cheaper in the United States" etc. etc. And sometimes we don't get asked, we get told and we get accused of "ripping people off". I very calmly and politely explain why, some people genuinely ask the question, others down right have a crack at us without a clue as to what they're talking about. An example, a guy e-mails me last week and tells me he wants a Schecter Ultracure shipped to him in Queensland with a hard case for $1,000. These we sell, after discount, for over $1,500 WITHOUT a hard case. Now here's the cutest bit to his e-mail, went something along the lines of, "you can sell it to me for that because you'd still be making a couple hundred bucks if it was $900" :? So I look on Music123.com and MusiciansFriend.com, everyone's favourite places to go to see how much they're getting "screwed" in Australia. US$699 they sell it for. Ah, so the guy thinks I pay $700 for the guitar because in the USA they sell it for US$699. Nice logic, but VERY flawed. This e-mail is one, and one of the exceptions, that I simply permanently deleted without responding. It was foolish and ill informed and I probably should have e-mailed the guy back but can you really tell this person....?
Well, maybe I can, and herein I'll give it a go. I'm not whinging about the US prices, I don't care, I buy stuff from there (and Japan) myself so like I care :P I've likely bought significantly more than anyone who rings me up and decides to tell me he bought a Line 6 pedal from the US for such and such like he's an expert import/export consultant all of a sudden and I know shit. I understand the whole "people only see the dollars" thing, and that's completely cool and I completely understand. I do live in the same world as everyone else. I would, however, ask that the factors herein be considered before jumping to the conclusion that you're being "ripped off" (not everyone thinks that of course, but there will hopefully be info in here for everyone to digest and consider).

I need to add before going on as it isn't really what this is about but is worth mentioning, buying from the US isn't always flawless, I know, I've learnt much about shipping balls up, quarantine expenses, customs hold ups and extra charges, and stuffed gear landing than I care to remember. Three or four successful imports without a hitch doesn't constitute experience I'm afraid. There are many pitfalls but that's for the buyer to concern themselves with.

GST and Customs
The most obvious things to consider is duties and taxes. Obviously a dealer in the US doesn't pay import duties and GST when buying a Gibson from Gibson. An imported guitar from Asia attracts a low customs duty but that's it. The customs brokerage and shipping costs to get imported guitars to their destination are less because of a) wages (see below) and b) volume of shipping (plus a whole raft of other things). There are exceptions to these low tariffs and cheap shipping, we'll study German product, for example, in detail shortly.
You may avoid customs when you bring in a box of D'Addarios from America, but commercial importers aren't afforded that luxury, try bringing in a couple pallets of them and see what they cost you!

Direct from manufacturer
Most all products in the US are bought direct from the manufacturer. In Australia most all products are bought from an independant importer. You can say that "who needs a middle man" or whatever, but these are an EXTREMELY important part of the industry here. Manufacturers need these guys to represent their products, and help to manage their promotion, warranty obligations and branding in these territories, it's not in the interest of the manufacturer to do this, distributors like those in Australia are necessary.
Case study:
A guy I've known for some time calls me up and, half sounding like he knew what my answer would be, asks me how much we sell DiMarzios for. I tell him and he's like, "well, I'm sorry to tell you, I can buy them from the US for such and such". So, that's more than I pay, what the fuck do you want me to say? He was gloating over this in some weird way. Obviously the first thing he's ever bought from the US and he feels pretty proud of himself. But the main reason for his call? He wants to try out one of these 1984 Kramers before buying one off MusicYo.com. Bad luck mate, that's the only place to buy one. Well, he's concerned that it may not be what he wants and would like to try one first. Well, I'll be, there's a scenario where this guy needs a local diistributor and a local dealer. So are these businesses supposed to exist so he can try shit out before buying it overseas? You know, this dude could NOT get his head around that???? Weird.

In the US stores buy at the same price and oftentimes less than what an importer here would buy them for (much less in the case of a large US chain store). They then have the added costs detailed herein to add. Then they need to make a little bit of profit if they can, then sell them to a store that has expenses to cover that are higher than a US store.
Consider the Caparisons to get an idea of what having a distributor responsible for a network of dealers and so forth adds to the price of something. We sell Caparison direct, there is no mark up to account for a third party, if they were being sold around a network of dealers there would need to be so they could make their money too. Caparison don't make enough guitars to keepp up with demand from it's three international dealers, let alone having 30 shops or something carrying them here! Now, if they were in dealers and were priced as such they would cost as much as some of the more expensive signature and custom shop models from ESP for instance. Having them priced they are people seem to think they aren't as good as the Custom Shop ESP or something, but the reality is they are also Custom Shop instruments. This is a price perception thing, if they were $6,000 a piece or something would they then be thought of differently?
Now, compare prices of German product here as opposed to the price of German product in the USA. Some stuff, such as Framus and Warwick, is sold through an independent distributor in the US. There's one factor which makes a more even argument, consumers of these products in the US are in the same boat as us. Tariffs between Germany and the US are high too, sort of evens out to our customs plus GST type of thing. And freight running between these two countries is not as high volume as it is between US and Asia, for instance, so they pay a little more like we do in freight costs. Now, compare a Framus Cobra head, for instance, at Music123.com. The cheapest I've seen them sell them for is US$2,399, with a pretty strong dollar at present that's AUD$3,109. We sell them for $3,545 every day. Now, take off the GST component of that price (no GST in the US after all), that's AUD$3,222.72. Well, bugger me, our every day price is only about $110 more than the best price one of the USA's biggest stores is able to do them for. Now, with that $110 you think we're making more? Not so, see below for more reasons why it's more expenisve to do everything in Australia and you'll likely see that we would make less than Music123 on that head. But it's a goood example because the conditions they experience for German product like that one are much like those we experience with almost everything here.


The cost of doing business in Australia
Basically it's more expensive to do business in Australia than the US, and it's more expensive for you guys to live too, day to day, for a start your taxes are higher. But again, the government isn't necessarily "ripping you off". I'm not getting into a full on political rant, but consider two basic things in Australia that the government is responsible for - health and welfare. Your taxes go a long way to paying for those services, there is generally less tax revenue collected in the US from the average business or worker. So ask yourself, where would you rather be when relying on the health or welfare systems? Enough said.
The volume of things in the US also keeps prices lower. Look at freight, for instance, it's insanely cheaper to freight things around the US than Australia. There is volume and there is more capacity for dropping stuff off along runs, there are FAR wider distances in Australia to cover wihtout being able to make any money along vast stretches for freight companies. And the wages that drivers are paid....well, that's discussed in depth below.
Small examples, Australian businesses pay more for credit card merchant fees, less volume. Australian businesses pay more for many services that are many and varied. Add to everyone of those things the cost of wages the businesses that supply these services incur, see below for that:

U.S. Minimum Wage
The US federal minimum wage for covered nonexempt employees is $5.15 an hour (at 12th September 2005 this equates to AUD$6.67 - in a 38-hour week that's AUD$253.46). The federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA). Many states also have minimum wage laws. Where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to higher of the two minimum wages.

An employer of a tipped employee is only required to pay $2.13 an hour (AUD$2.76 an hour as at 12th September 2005) in direct wages if that amount plus the tips received equals at least the federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 (AUD$38.87) a month in tips. If an employee's tips combined with the employer's direct wages of at least $2.13 (AUD$2.76) an hour do not equal the federal minimum hourly wage, the employer must make up the difference.

A minimum wage of $4.25 per hour (AUD$5.51) applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $5.15 (AUD$6.67) per hour.

The Full-time Student Program is for full-time students employed in retail or service stores, agriculture, or colleges and universities. The employer that hires students can obtain a certificate from the Department of Labor which allows the student to be paid not less than 85% of the minimum wage. The certificate also limits the hours that the student may work to 8 hours in a day and no more than 20 hours a week when school is in session and 40 hours when school is out, and requires the employer to follow all child labor laws. Once students graduate or leave school for good, they must be paid $5.15 (AUD$6.67) per hour.

The Minimum Wage In Australia
The minimum wage payable in Australia is $467.40 per week or $12.30 per hour. The ACTU in February 2005, on behalf of Australia's 1.6 million low paid award workers has made aplication to increase this minimum rate to $494 per week or $13 per hour.

In short, come work for me for half minimum wage and I'll get you all your stuff at US prices (I'd be making a loss on the cost of these things, but hell, I'll getting some CHEAP labour :) )

More cost of living information
A house for your average newlywed couple in the suburbs of many major US cities sells for around US$130,000 (AUD$173,459(. Can you say the same for your city in Australia?[/color]
That in it's own should be enough for people in Australia to work out just how things work and why you absolutely can not directlly compare US prices and Australian prices.

Other stuff
If you're importing you need to guard yourself against a poor dollar turnaround that could happen at anytime. When the Aussie mark was below 50 cents I didn't hear too many people bitching about the price of stuff here compared to the US. Many wholesalers lost some signifcant amounts of money having to absorb that, when times are good they need to try and recoup some of those losses too.

But the dollar's 90c now!
It can take months for favourable currency shifts to reflect in the market. Much of the stock in the marketplace now would have been built, bought and shipped months ago, when the dollar was 15% or more lower. What you see in currency conversion on any given day almost never has any relationship to the price of a product you're looking at that same day if it's stocked. Even if it's not stocked, it's inevitable the dollar will go down again. If an importer quotes you a price at 90c on something that mey be months away he will almost certainly take a hit on it when it is ready and needs to be paid for as the dollar would have dropped by then. maybe it won't, but there's a better than even chance it will. The importer is playing a risk game either side of currency shifts.

Doesn't look so straight forward anymore does it? :P

There are stacks and stacks of things to consider, Tyson, you're a business cat, what do you think you can add?

Please, feel free to discuss this, and ask of me anything you wish. It's basically the same for New Zealand too incidentally.

Edit: It has come to my attention this post is being quoted at another forum. This quote, in particular, seems to be being used for some sort of ammo to dicredit everything written:
I buy stuff from there (and Japan) myself so like I care I've likely bought significantly more than anyone who rings me up and decides to tell me he bought a Line 6 pedal from the US for such and such like he's an expert import/export consultant all of a sudden and I know shit.

At no point did I say I buy stuff from the US and Japan that wasn't already available here. I would be buying something not available in Australia. As many know, we are an importer of some brands too, so yes, we do buy stuff from the US and Asia in those cases also.
There are other points being argued that I would dsipute but I'm not going to get into them, things are as they are and nothing will change that.
Last edited by guitarsatbmusic on Mon Nov 05, 2007 3:03 pm, edited 6 times in total.
2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 & 2016 Australian ESP Dealer of the Year
www.bmusic.com.au
FaceBook

User avatar
viperzz
Super senior
Posts: 152
Joined: Sat Jan 31, 2004 9:41 pm

Post by viperzz » Tue Sep 13, 2005 10:59 am

Whoah- Alot of text here, but a very informative read which as always, is right on the money. And don't forget everyone, the extra $ you pay from an aussie dealer is well made up for when your overseas gear explodes and you've got no one to fund the bill but yourself.

User avatar
roarke
roarkasaurus rex
roarkasaurus rex
Posts: 56
Joined: Thu May 13, 2004 6:01 pm
Location: Sydney, Australia

Post by roarke » Tue Sep 13, 2005 1:32 pm

this is gonna get linked to sooooo often :)

for anyone reading this for the first time a few months from now:

:smt117

go on, get the chicken

User avatar
tollund23
Stoodley Explorer
Posts: 440
Joined: Wed Sep 08, 2004 2:14 pm
My Rig: Splawn Pro Mod
Framus CS 2x12
Egnater Tweaker 15 1x12 Combo
Tokai LP
Custom Explorer
Martin Australian Series
Seagull S6 Original
Location: Tasmania, Australia

Post by tollund23 » Tue Sep 13, 2005 2:32 pm

Nicely said Shane. You've covered a lot - one interesting point there on the tax difference between Aus and the US is for education too - instead of taking the tax directly out of an employees pay or, asking them to contribute a certain amount if tax is not taken out (this is a Federal thing), they pay for the school through the local council by having a portion of their rates go to the schools. Interesting (if indeed I remember correctly)!

Anyhow, on the whole argument of "it's cheaper in the US" - Shane pretty much hit the nail on the head. I think the biggest concern to me is that many people cannot take a step back and consider the bigger picture. It is simply not as simple as going to a US website, looking at the product, wacking the amount in $US into a currency convertor, and then complaining that it's so much cheaper over there.

It's been said before many a time on this forum that OTHER FACTORS MUST BE TAKEN INTO ACCOUNT. Shipping costs, brokerage and customs / import fees and GST are some of the tangibles. A major intangible might include the amount of RISK associated with buying off a company so far away - not trying the product first, shipping damage and so on. Some people are prepared to take the risks - I myself have done this and will be doing it again shortly, but not after lengthy consideration. All these factors must be considered, and to a certain extend if things go wrong you have to be prepared to take it on the chin if you are risking it.

Shane's direct from the manufacturer argument is also very good. From a a consumer's point of view, instead of buying off a store, like, hypothetically, StoneHardAmps, you go to the manufacturer, Zplawm amplification, and you are cutting out the middleman and saving yourself at least $300 or $400 Aussie dollars.

And as for Shane's example of the Framus Cobra, he might very well be selling it for the same price or even cheaper than the US depending on the exchange rate. The dollar only has to swing a small amount to make a big difference in an expensive purchase.

If I think of anything later I'll add some more but at the moment it's off to managerial social responsibility..fun fun!

User avatar
guitarsatbmusic
Site Admin
Posts: 6984
Joined: Fri Jan 09, 2004 3:00 pm
My Rig: Cool shit
Contact:

Post by guitarsatbmusic » Tue Sep 13, 2005 2:36 pm

hypothetically, StoneHardAmps, you go to the manufacturer, Zplawm amplification
:)
Nice hypotheticals mate, so wonderfully veiled :P
2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 & 2016 Australian ESP Dealer of the Year
www.bmusic.com.au
FaceBook

User avatar
poidaobi
ESP CS Scythe for Poid
Posts: 517
Joined: Tue Feb 03, 2004 6:41 pm
Location: Victoria Melbourne Aust.
Contact:

Post by poidaobi » Wed Sep 14, 2005 9:49 pm

thats great...but Mesa are fucking gay...

if i can get something overseas cheaper i will do so....

User avatar
guitarsatbmusic
Site Admin
Posts: 6984
Joined: Fri Jan 09, 2004 3:00 pm
My Rig: Cool shit
Contact:

Post by guitarsatbmusic » Wed Sep 14, 2005 11:25 pm

I understand that Poida, and as I said, I do the same if I know the facts. Mesa is a different study though, that company's policies are kinda different and make things difficult for anyone outside the US (and even in the US to some degree).
2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 & 2016 Australian ESP Dealer of the Year
www.bmusic.com.au
FaceBook

User avatar
roarke
roarkasaurus rex
roarkasaurus rex
Posts: 56
Joined: Thu May 13, 2004 6:01 pm
Location: Sydney, Australia

Post by roarke » Wed Sep 14, 2005 11:37 pm

you can get green crocodile faux leather grills on mesas though.... hotness

User avatar
poidaobi
ESP CS Scythe for Poid
Posts: 517
Joined: Tue Feb 03, 2004 6:41 pm
Location: Victoria Melbourne Aust.
Contact:

Post by poidaobi » Wed Sep 14, 2005 11:56 pm

Mesa is a different study though, that company's policies are kinda different and make things difficult for anyone outside the US (and even in the US to some degree).
Price fixing..... aren't there hippie laws to stop that shit?

User avatar
roarke
roarkasaurus rex
roarkasaurus rex
Posts: 56
Joined: Thu May 13, 2004 6:01 pm
Location: Sydney, Australia

Post by roarke » Thu Sep 15, 2005 12:07 am

yeah but only for me poid *does the dirty commie dance*

User avatar
tollund23
Stoodley Explorer
Posts: 440
Joined: Wed Sep 08, 2004 2:14 pm
My Rig: Splawn Pro Mod
Framus CS 2x12
Egnater Tweaker 15 1x12 Combo
Tokai LP
Custom Explorer
Martin Australian Series
Seagull S6 Original
Location: Tasmania, Australia

Post by tollund23 » Thu Sep 15, 2005 12:18 am

Price fixing..... aren't there hippie laws to stop that shit?
There's always a way around that though.

User avatar
guitarsatbmusic
Site Admin
Posts: 6984
Joined: Fri Jan 09, 2004 3:00 pm
My Rig: Cool shit
Contact:

Post by guitarsatbmusic » Thu Sep 15, 2005 1:42 am

Price fixing..... aren't there hippie laws to stop that shit?
The USA doesn't have an ACCC Poid :-D
2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 & 2016 Australian ESP Dealer of the Year
www.bmusic.com.au
FaceBook

User avatar
tollund23
Stoodley Explorer
Posts: 440
Joined: Wed Sep 08, 2004 2:14 pm
My Rig: Splawn Pro Mod
Framus CS 2x12
Egnater Tweaker 15 1x12 Combo
Tokai LP
Custom Explorer
Martin Australian Series
Seagull S6 Original
Location: Tasmania, Australia

Post by tollund23 » Thu Sep 15, 2005 10:14 am

And we don't have Alan Fells anymore :(

User avatar
poidaobi
ESP CS Scythe for Poid
Posts: 517
Joined: Tue Feb 03, 2004 6:41 pm
Location: Victoria Melbourne Aust.
Contact:

Post by poidaobi » Sun Oct 09, 2005 12:03 am

So why are only US amps overprices here and no amps from germany/britain?

Do we have extra tariffs against the US?

do you know if free trade will help out at all?

User avatar
guitarsatbmusic
Site Admin
Posts: 6984
Joined: Fri Jan 09, 2004 3:00 pm
My Rig: Cool shit
Contact:

Post by guitarsatbmusic » Sun Oct 09, 2005 12:42 am

Read it again Poida. The Americans pay a lot for German amps, very similar to what we do for most everything from other countries as their conditions for German import are the same as ours are for imprt from most other countries. Free trade won't do much, 5% duty drop, still have the same conditions for people to have to make their income from their role as distributors.
What do you consider over priced? You need to read it carefully and understand that the US price has no relativity to the conditions here, like it says, if you work for one third of what you do now things in Safeway would be a whole lot cheaper too wouldn't they? But you aren't expected to work for the same minimum wage an Amercian works for, and nor should anyone considering the way our economy is structured. You need to rethink it and remove the mindset that "someone is out to rip you off" when you buy an American amp. It's this simple actually, if you have a half a million bucks or so and you want to do something with it, take it to an accountant and say I want to start importing Mesa Boogie amps, here's what they'll cost me and here's what I'll sell them for. Even if you told him/her you were going to sell them at the price they're at now from Pro they'd likely laugh at you and say something along the lines of "what the hell do you want to do that with a half a million bucks for? You could make more money investing it in an inifinite number of different ways". Truth. Accountants are actually surprised at how this industry operates on such low margins when compared to other industries where a serious shitload of cash is put on the line for the stock to come in. Sure, there are occasions where some things are probably overpriced, but I don't think Mesa is, it may surprise you to hear that. I won't disclose what I do think is overpriced and the companies responsible are making too much money, but we have a simple philosophy, we don't deal with them. If every store in Australia had the balls to do the same thing, ie sell some alternatives (which are more often than not better products anyway) rather than the easy sell lines. Those overpriced things would soon come down if no one supported them wouldn't they?
Last edited by guitarsatbmusic on Thu Nov 24, 2005 10:21 am, edited 1 time in total.
2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 & 2016 Australian ESP Dealer of the Year
www.bmusic.com.au
FaceBook

Post Reply