Neodymium

[LelandCrooks]

Seems to me if a retailer pays 100% for a product and sells it for 110% he makes 10%. If that same retailer has to pay 200% for the same product and sells it for 205% his margin is the same.....?

You're confusing margin and markup. Two different things. In a period of rapidly increasing prices where your replacement cost is constantly rising if you don't defend margins vigorously you're out of business.

[Harley]

In a period of rapidly increasing prices where your replacement cost is constantly rising if you don't defend margins vigorously you're out of business.

Profit is king

No profit ( read low profit ) means you're down the gurgler.

[wounded horse]

Any retailer - even online - operating on 10% margins will not survive. There are thousands of items bought daily in the world that carry huge margins. Want a birthday card? The major multiples mark them up 500%. Want a headlight bulb for your car? I was in the motor parts retailing business - my own - and a bulb that we sold for £4-99 Uk cost me 60-70p. That little bag of screws for £1-49 in B&Q costs them 10-15p. Volume for margin never works. I used to cut keys and I reckon I've done a quarter of a million in 20 years. Cylinder (yale,union front door) we charged £2; cost me 10p a blank. If I'd dropped them to 50p I wouldn't have cut any more. More hassle for sure and still wear the machines out. I tried to get distributor status as a K & N performance filter seller. They wanted me to stock £5000 worth and I would have made 10%. A waste of time and money.

I reckon even online retailing and operating from home with minimal overhead, a business would have to mark up 35% to achieve a near 26% gross profit. Anything under this and all you're doing is moving cardboard boxes. If it's an electrical/electronic part with the potential to go wrong (read: be broken/misused/toasted) then your margins are even further eroded.

Universal retail practice is to increase existing stock prices on notification of impending increases. Back in the late 70s my then area manager would visit the shop I was managing and his first port of call was to look for the price updates folder. If not done, big trouble. How we loved peeling off those old price tickets way before the days of bar code scanning.

[LelandCrooks]

How we loved peeling off those old price tickets way before the days of bar code scanning.

+1!
(I need a sarcastic smilie)

[el_ingeniero]

Makes you wonder who is really behind China's move.

They're considering their own industrial needs, and they'd rather sell finished goods containing magnets than the magnets themselves. But I don't see Chinese hybrid cars sweeping the world market, so it seems an odd decision to jeopardize long term revenues with this move.

Late to the thread, but the Chinese are leaders in windmill technology ...

[NCcrashman]

[quote="Bill Fitzmaurice"

In the long term we benefit, as every production stage from mining to manufacturing to shipping creates US jobs.[/quote]
+1
I too agree it sucks for us all but I see it as a positive thing for those who build for profit. Those big commerical cab's are gonna be super heavy or the commercial makers will have to redesign their cabs to make them smaller. Horns aren't economically justified for mass production as their designs are tough and it takes WAY longer to build than "radiators". Even using heavy mags, we're still "Lighter and louder". Hey, that's a killer slogan for bills designs: Bill Fitzmaurice speakers...."We're Louder and Lighter"...hehehe.
-Patrick

[Harley]

Late to the thread, but the Chinese are leaders in windmill technology ...

You missed out the word 'copying' in between 'in' and 'windmill'.

[Bill Fitzmaurice]

Late to the thread, but the Chinese are leaders in windmill technology ...

You missed out the word 'copying' in between 'in' and 'windmill'.

The same way the West copied gunpowder, written language and pasta?
Not that I agree with the lack of IP protection in Asia, China in particular, but we are only reaping the rewards of our own colonialism. Payback is a bitch.

[el_ingeniero]

Late to the thread, but the Chinese are leaders in windmill technology ...

You missed out the word 'copying' in between 'in' and 'windmill'.

Can't speak to the situation in NZ, but in the US, windmill, solar & other alternative energy sources get no support worth speaking of from the USG. On the other hand, the Chinese government is moving to make sure that the PRC dominates the market. We will be regretting the lack of foresight, and the PRC will be reaping the rewards for their foresight for the next generation.

[Harley]

.. and the PRC will be reaping the rewards for their foresight for the next generation.

The inherent problems of corruption and cheating that are rampant in China needs to be overcome for them to address their quality problems. Whilst their stuff is as cheap as chips, people get sick of the lousy quality due to the cheating on material specs, copying without truly understanding and taking shortcuts to gain an extra bowl of rice.

[TimeWarp]

I spent March in Shanghai visiting a chip assembly plant. Had quite a few dinners with the staff and their friends from other Chinese semiconductor companies. I've been in the semiconductor industry for 31 years. I see China being in a similar position as Japan was in the 70s.
You may remember when "Made in Japan" = junk. The Japanese were trying to copy without understanding what they were copying. Then something very unfortunate happened in the USA. Business in the US was good, too good and as a result US quality began to fall. USA quality "gurus" Demming and Juran pushed for the US to embrace quality but they were shunned in favor of high profits and short term goals such as year on year and quarter on quarter growth. Guess where Demming and Juran took their band wagon when the US wouldn't listen (or hire them).....Japan. And the rest is history. Japan adopted Demming and Juran's quality methods. Within a decade or so "Made in Japan" became a quality icon, Demming and Juran became famous and the US found themselves very much behind Japan in terms of quality (in the general overall sense. Certainly the US anad Europe have always led in several areas).
After a few days in Chinese semiconductor facilities I realized that they are very much where Japan was 30-40 years ago. China is copying. They have not adopted many of the quality standards and methods present in the US, Europe and Japan.
They do have well schooled engineers but they do not have the culture to empower these people. The people are raised to conform. If asked what they think, they reply with the answer that their boss gives. The work place thinking is militant in nature...you do what you are told and don't ask questions. I did saw some mavericks, the few movers and shakers. When these people make it into top management then things will change and change quickly. They are eager to learn the western style of thinking. I think in 2 generations the Chinese college grads (from Chinese universities) will be on par with the rest of the world. If the rest of the world is not paying attention they will find themselves in 2nd place.

Just my 2 cents

[UROK]

...to gain an extra bowl of rice.

You phrase that like it is a bad thing!

Remember mass starvation is within living memory for almost every mainland Chinese family (search: Great Leap Forward). Everyone knows hunger. Wanting to put food in your family's mouth is hardly morally unjustifiable even if it does end up with so-called "inferior" goods being eagerly bought by western consumers.

I take exception to the "them and us" characterisation of the situation too. Such points of view teeter on the edge of prejudice which gets none of us anywhere.

People can bash China all they want for whatever reason(s). But we are in this together. All of us. 60 million migrant workers in China lost their jobs in the wake of banking failures. And whose savings made the liquidity for sub-prime loans possible?

Bill and TimeWarp are on the money. We reap what we sow and we may lament the current situation but if China can be taken seriously after only a quarter of a century of development, how much so after another 50 or a hundred years?

As historical asides: Joseph Needham showed that the three inventions which Francis Bacon thought made the European Renaissance possible (gunpowder, paper, and compass) actually originated in China; tea planting technology and porcelain kiln technology were stolen by Britain from China in as underhand and surreptitious a manner as any modern industrial espionage; American weaving technology was got from Britain by US government encouragement to break GB laws; and when Charles Dickens visited America later in his life he was horrified to see cheap illegal reprints of his works on sale.

Le plus que ca change, le plus que c'est la meme chose.

[Harley]

...to gain an extra bowl of rice.

You phrase that like it is a bad thing!

Sorry you took it that way, but I did not mean it to be a bad thing and I was actually referring to exactly what you referred to - starvation is close in the memory for many in China plus the average wage for many is miserable. I still hark back to the rest of the text in my post and that was unless the problem of corruption and cheating gets solved, quality will never get up to high standards. Because corruption/cheating still exists, and the wages for many are misreable, people will take shortcuts to gain more food, income, whatever. Sheeeh - I repeat myself again

[UROK]

I agree. Nothing shows the rich world/developing world divide better than attitudes to food. I apologize if I misinterpreted you!

"Us" lecturing "them" about corruption and dodgy practices is just hypocrisy, though. Hence my historical asides to cast a wider perspective.

My plea was to move beyond ya-boo name calling and have an informed discussion since China has the power to affect us all such as with neo price hikes.

Actually, what is most interesting (er, at least to me) is how China has played the PR game so well that people are putting USA and PRC on same footing when the facts say different economically, politically, and let's not even mention militarily. Or culturally.

According to the Economist over three quarters of the world's manufacturing value is in North America.

So why is America so ready to rubbish itself? It could be, as TimeWarp points out, that Chinese are brought up and educated to conform whereas in America independent thinking has higher social currency.

[Radian]

...and about the quality thing. Last time I checked, most of the stuff actually "made" here (like no kidding) still ain't too shabby. Aircraft, satellite launch vehicles, generators, reactor vessels, pumps, gearboxes, bearings, industrial controllers, furniture, health and beauty products, firearms, paper, metals, food...etc.etc. Automobiles aren't the only thing we make, but there doesn't seem to be a shortage of people that like to gauge the entire state of our industry solely by the one's we produce.