Time to face the music, economics, and know when to quit
02-13-2001, 05:46 PM
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Though I don't see myself as the quitting kind, "never say die" is also not something I care to endeavor. Over the past year I've personally seen the rise of many entrepreneurs, from Pinky, myself, to Rick. I remember the questions and the doubts people posted on all of our inventions. Through it all my alloy dead pedal went through 4 major revisions, my aeroscreen went through 5 variations, and I'm sure Pinky and Rick also went through their own growing pains as their products matured. I tried dabbling in aftermarket resale, first catering to low end, mass consumption products on other websites, then by a stroke of luck Import Development became an authorized dealer of Spoon Sports, Endless/Zeal, KG/mm, JR Filters S.A., Neuspeed, and other major names.
I tried shifting my company's focus from extremely low margined products (thus generating volume) to development, service, and feedback on as many products my company carried as I can. R&D costs skyrocketed (dyno is not cheap), the company started carrying inventory (something I was strongly against), and all of a sudden everybody around me was dropping prices on Spoon products like flies. I'd really like to find out what the original x brace GB buyers paid for their X brace, but I can't seem to find the threads. As many of you know I have a full time job, and I am going to school for my MBA, and this company was initially set up as an experiment for my MBA projects and thesis. Well, humans are naturally competitive, and of course I want the company to succeed, thus began a price war of very detrimental proportions to myself.
Well, if you've taken economics you'd know that a product's supply/demand curve's equilibrium point would have a specific price/quantity. Well what happens when there was an artificial/temporary shift of the price (in the currency market, it'd be a result of government intervention or speculation)? What happens when this shift of price dips below a point of economic viability for a company? This company would 1. Go out of business trying to lose money and compete or 2. Stay out of this particular market or 3. Change the elasticity of demand (availability of substitutes) curve.
Import Development is going to try the third option - at least on certain products. I honestly don't have the capital nor the financial backings of the former Internet start-ups, therefore every single product my company sells need to have a set level of profitability to drive the R&D and all the unseen expenses related to running a company. I must honestly say that a price war was waged, and I lost the battle, so I'm here to bow out of the race here for many popular S2000 products for now. I hope Bottle at Phroneline.com will fare better in light of this competition because selling parts online is almost as bad if not worse than selling computer hardware.
Import Development will continue to be developing exclusive products for the S2000 (re: my question I asked about copycat), but it will no longer participate in price wars where the company with the most cash flow and liquidity survive. It's really difficult to spend many hours trying to secure orders with only 5 or 6 dollars of margin, and besides, any more reduction in prices would mean the loss of my authorized dealership status due to unfavorable pricing of a company's products, devaluating its market value and status, etc. etc.
Some who always love to pick a fight with me on the pricing issue will remember my comments long ago about another company's dead pedal and my comments at the time, but that's a different story than the reality my company is facing here because Import Development didn't build/design/fabricate Spoon products. My aeroscreen has gone from the original $160 to $98 (2 months ago) to the current $89 group buy pricing because I was able to work with the engineers in developing better and less complex fabrication processes while improving the material and tolerances. The dead pedal's prices has remained fixed since its introduction.
I hope I didn't bore you guys with all that stuff, but I just wanted to make this announcement before I leave to go study. It really has been more than a pleasure to do business with you guys, and hopefully those inventors out there can partner up with me, much like Pinky and I did, to improve upon the one thing that really matters: the S2000.
Richard aka Mingster
I tried shifting my company's focus from extremely low margined products (thus generating volume) to development, service, and feedback on as many products my company carried as I can. R&D costs skyrocketed (dyno is not cheap), the company started carrying inventory (something I was strongly against), and all of a sudden everybody around me was dropping prices on Spoon products like flies. I'd really like to find out what the original x brace GB buyers paid for their X brace, but I can't seem to find the threads. As many of you know I have a full time job, and I am going to school for my MBA, and this company was initially set up as an experiment for my MBA projects and thesis. Well, humans are naturally competitive, and of course I want the company to succeed, thus began a price war of very detrimental proportions to myself.
Well, if you've taken economics you'd know that a product's supply/demand curve's equilibrium point would have a specific price/quantity. Well what happens when there was an artificial/temporary shift of the price (in the currency market, it'd be a result of government intervention or speculation)? What happens when this shift of price dips below a point of economic viability for a company? This company would 1. Go out of business trying to lose money and compete or 2. Stay out of this particular market or 3. Change the elasticity of demand (availability of substitutes) curve.
Import Development is going to try the third option - at least on certain products. I honestly don't have the capital nor the financial backings of the former Internet start-ups, therefore every single product my company sells need to have a set level of profitability to drive the R&D and all the unseen expenses related to running a company. I must honestly say that a price war was waged, and I lost the battle, so I'm here to bow out of the race here for many popular S2000 products for now. I hope Bottle at Phroneline.com will fare better in light of this competition because selling parts online is almost as bad if not worse than selling computer hardware.
Import Development will continue to be developing exclusive products for the S2000 (re: my question I asked about copycat), but it will no longer participate in price wars where the company with the most cash flow and liquidity survive. It's really difficult to spend many hours trying to secure orders with only 5 or 6 dollars of margin, and besides, any more reduction in prices would mean the loss of my authorized dealership status due to unfavorable pricing of a company's products, devaluating its market value and status, etc. etc.
Some who always love to pick a fight with me on the pricing issue will remember my comments long ago about another company's dead pedal and my comments at the time, but that's a different story than the reality my company is facing here because Import Development didn't build/design/fabricate Spoon products. My aeroscreen has gone from the original $160 to $98 (2 months ago) to the current $89 group buy pricing because I was able to work with the engineers in developing better and less complex fabrication processes while improving the material and tolerances. The dead pedal's prices has remained fixed since its introduction.
I hope I didn't bore you guys with all that stuff, but I just wanted to make this announcement before I leave to go study. It really has been more than a pleasure to do business with you guys, and hopefully those inventors out there can partner up with me, much like Pinky and I did, to improve upon the one thing that really matters: the S2000.
Richard aka Mingster
02-13-2001, 05:51 PM
#2
Goodluck. It is nice to see some competition from
a buying standpoint, but...that usually means the
"Wal-Marts" (whore's)of the world survive and the rest don't.
Once all the little guys go out, then the Wal-marts raise
the prices and reap all the rewards. Hopefully that won't
happen here.
I like my dead pedal! I guess the GB on spoon wheels is
possibly dead???
Scot
a buying standpoint, but...that usually means the
"Wal-Marts" (whore's)of the world survive and the rest don't.
Once all the little guys go out, then the Wal-marts raise
the prices and reap all the rewards. Hopefully that won't
happen here.
I like my dead pedal! I guess the GB on spoon wheels is
possibly dead???
Scot
02-13-2001, 06:10 PM
#4
Former Sponsor
For us owner-entrepreneurs-inventors, the only way to have a business is to:
1. Have another well-paying job that makes your real living
2. Don't imagine for even an instant that you're going to put a roof over your head or send you kids to college selling things for the S2000
3. Develop products for the S2000 that meet needs Honda didn't anticiapte but that don't require tons of R&D capital
4. Rely on other owners of the car for insights about what to make
5. Have fun
But you already know this, Mingster. You're returning to your S2000 owner-inventor roots
1. Have another well-paying job that makes your real living
2. Don't imagine for even an instant that you're going to put a roof over your head or send you kids to college selling things for the S2000
3. Develop products for the S2000 that meet needs Honda didn't anticiapte but that don't require tons of R&D capital
4. Rely on other owners of the car for insights about what to make
5. Have fun
But you already know this, Mingster. You're returning to your S2000 owner-inventor roots
02-13-2001, 06:37 PM
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Richard;I hope you were not referring to me in your comments.Because if its so I will like you to remember that I did not start any price war with you.
The first GB on the Spoon x braces was done at $205.00 (at that moment the only Spoon x brace sold in the US was purchased from a member at$260.00).We now sell them at $205.00,same as the GB price.We did a GB at $190.00 also.
I did not drop the prices of Spoon or any other products like flies;first because I was selling them before,secondly I had them already very competitive compare to other companies .
You might recall that you started (nothing wrong with that)
to lower the prices;now you cannot blame Bottle or me or somebody else for doing the same thing you did in the first place.
Giampiero
MG RACING
The first GB on the Spoon x braces was done at $205.00 (at that moment the only Spoon x brace sold in the US was purchased from a member at$260.00).We now sell them at $205.00,same as the GB price.We did a GB at $190.00 also.
I did not drop the prices of Spoon or any other products like flies;first because I was selling them before,secondly I had them already very competitive compare to other companies .
You might recall that you started (nothing wrong with that)
to lower the prices;now you cannot blame Bottle or me or somebody else for doing the same thing you did in the first place.
Giampiero
MG RACING
02-13-2001, 07:10 PM
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Originally posted by Giampiero
Richard;I hope you were not referring to me in your comments.Because if its so I will like you to remember that I did not start any price war with you.
The first GB on the Spoon x braces was done at $205.00 (at that moment the only Spoon x brace sold in the US was purchased from a member at$260.00).We now sell them at $205.00,same as the GB price.We did a GB at $190.00 also.
I did not drop the prices of Spoon or any other products like flies;first because I was selling them before,secondly I had them already very competitive compare to other companies .
You might recall that you started (nothing wrong with that)
to lower the prices;now you cannot blame Bottle or me or somebody else for doing the same thing you did in the first place.
Giampiero
MG RACING
Richard;I hope you were not referring to me in your comments.Because if its so I will like you to remember that I did not start any price war with you.
The first GB on the Spoon x braces was done at $205.00 (at that moment the only Spoon x brace sold in the US was purchased from a member at$260.00).We now sell them at $205.00,same as the GB price.We did a GB at $190.00 also.
I did not drop the prices of Spoon or any other products like flies;first because I was selling them before,secondly I had them already very competitive compare to other companies .
You might recall that you started (nothing wrong with that)
to lower the prices;now you cannot blame Bottle or me or somebody else for doing the same thing you did in the first place.
Giampiero
MG RACING
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02-13-2001, 07:49 PM
#9
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Mingster,
Please do not be discouraged for this is the very nature of business. As the market expands (w/ 2001 owners), more vendors want a piece of the pie and competiton subsequently intensifies.
More often than not that leads to price war, where the bigger fish always come out on top. Smaller fish will have to find their "niche" in differentiation and customization. In this particular case, that means offer lower-volume, unique products at higher-margin prices. Then again, I am sure you already know that.
Good Luck!
Please do not be discouraged for this is the very nature of business. As the market expands (w/ 2001 owners), more vendors want a piece of the pie and competiton subsequently intensifies.
More often than not that leads to price war, where the bigger fish always come out on top. Smaller fish will have to find their "niche" in differentiation and customization. In this particular case, that means offer lower-volume, unique products at higher-margin prices. Then again, I am sure you already know that.
Good Luck!
02-13-2001, 08:15 PM
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as a former small business owner - believe me i know your pain.
i think this market presents complications that are difficult if not impossible to overcome (i.e. very small market size, distribution challenges, foreign sourcing issues, capitalization challenges and a mix of specialized niche retailers and high-volume general retailers). this mix of competitive challenges, capitalization challenges and distribution/sourcing challenges is bound to be discouraging.
at the same time, i honestly believe that you can succeed.
one option is that pursued by Rick (the "labor of love" approach). or you could pursue a less niche business (broadening beyond S2K, for example), or you could address some of the distribution/sourcing issues (by working with custom fabricators for example, or by trying to negotiate exclusives with some of the less common japanese aftermarket producers). finally, you could try approaching this from the capitalization angle - perhaps you could raise capital from S2K members (offer ownership priveleges including parts at cost plus as an incentive for example).
on the other hand, i know i don't have the heart to own another business (did four startups), so i can understand your desire to walk away.
good luck.
i think this market presents complications that are difficult if not impossible to overcome (i.e. very small market size, distribution challenges, foreign sourcing issues, capitalization challenges and a mix of specialized niche retailers and high-volume general retailers). this mix of competitive challenges, capitalization challenges and distribution/sourcing challenges is bound to be discouraging.
at the same time, i honestly believe that you can succeed.
one option is that pursued by Rick (the "labor of love" approach). or you could pursue a less niche business (broadening beyond S2K, for example), or you could address some of the distribution/sourcing issues (by working with custom fabricators for example, or by trying to negotiate exclusives with some of the less common japanese aftermarket producers). finally, you could try approaching this from the capitalization angle - perhaps you could raise capital from S2K members (offer ownership priveleges including parts at cost plus as an incentive for example).
on the other hand, i know i don't have the heart to own another business (did four startups), so i can understand your desire to walk away.
good luck.