Could American-made lights be as cheap as China lights if marketed correctly?

Off-topic Chatter
1

Referencing the title of my post, I kind of doubt it because of the difference in wages Americans make vs the Chinese.

But... I work in an industry that involves retail sales. I have seen first-hand how "some" but certainly not all retail works.

I sell a product we'll call Product X. When I started working where I work everyone where I work ordered this product from Company C. Company C sold the product for $190. Doing a little research I found out that Company C bought Product X from Company B. So I called Company B to find out if they would sell it to me cheaper. They said no, they cannot undercut the companies they sell to. OK, I get it. A little more research on my part and I find out Company B doesn't even make this product, they buy it from Company A and put Company B labels on the product. So I call Company A and they don't have a policy like Company B, and agree to sell me the product for $87. So I got the product for less than half of what we were paying before and now I'm able to offer the product to my customers at a MUCH cheaper price.

But keep in mind I only buy about 10-15 of Product X a year, so Company A doesn't offer me the "good guy deal." I'm sure if my volume was thousands of units per year Company A would come down quite a bit off of that $87 cost that I currently pay.

To summarize... Product X gets manufactured by Company A, they sell it so Company B that marks it up in price, Company B sells it to Company C at a marked up price, then Company C sells it to the retailer at a marked up price (AGAIN!) and the retailer marks up the price (AGAIN!!!). So Product X that probably costs $20-30 to manufacture ends up costing the retail customer nearly $400 (I sell them for less than half that because of my research and my special deal).

Don't get me wrong, I'm happy that Companies A, B and C as well as the retailer all employ lots of people and all make money.

But what if... and this is where flashlights come in... what if a flashlight manufacturer in the USA decided to sell direct with no middle-men like Companies B and C or a retailer? The manufacturer would have to hire more people to process the orders but their sales would increase dramatically if they could sell the product for 25% of the former retail price. Company B and C would lose money but Company A would make the same money and be able to offer their product at a much cheaper price. Heck, Company A might grow so big that they could employ everyone that used to work at Companies B and C and then some.

Think about it. If you could go to Maglite.com and order a 350 lumen light for $20 and have it show up a few days later, wouldn't you? If Maglite (or any other USA MFG) made tens-of-thousands of them at that price it would be a win-win for everyone.

I know, I know... if they just did internet sales it would hurt the retail store sales. But even if they offered a 350 lumen light for $50 at a retailer lots of people would still buy it.

Off my soap box now, thanks for reading. And no, I'm not an economist. Just an average guy thinking out loud.

2

The only way to do it would be direct sales from a small manufacturer, and then you would be limited in quantity.

This would likely drive up the price, due to scarcity. :)

You hire another guy, you need to pay him, the government, insurance, etc.....and STILL make a profit. Why be in business, otherwise.

This sends the price UP again, until the economy of scale kicks in. Then, do you LOWER prices, or take the hard-earned profit?

3

We all know there are plenty of "small" manufacturers and we know what their price$ are. I'm talking about a big MFG. Someone on the level of Maglite or Surefire.

4

Still hard to compete when you compare several dollars per hour vs several pennies ;)

CREE can still be highly profitable manufacturing in the USA most likely because much of the manufacturing process is automated and requires few hands on the product relative to the quantity produced. But then again, they do have a few hundred employees

5

It can be done , there have been several threads about this over the years over several forums ....

Mass production [ Large runs VS small runs ]

If you set out to manufacture limited numbers of lights , lets call it 100 Units , your production costs per unit will be up ..

Your parts per unit cost will be up [ driver - clicky - rubber switch boot - O rings etc ]

So to make a profit , the light simply has to cost more - and what profit margin are you working on ..

Wasn't so long ago in the West that anything bellow 300% was considered unprofitable [ Oh yes ]

And many manufacturers move production out of the USA [ Australia - England etc ] when there profit margins went bellow 200% , as it was considered too low to be sustainable in the long term ...

Now take the Chinese , the Indians , and other 3rd world manufacturers , they are working under 100% profit margin ..

And depending on the product the profit margin may be as thin as 5 to 10% or possibly less depending on the competition .

Ive seen products here , and now , that are working on a 500% to 1000% profit margin because of a lack of competition . [ That's insane ]

Good for the seller , but still insane !

It can be done , but , the variables and the bottom line ,

6

Maglite would likely not be interested in sabotaging the dealer network they have cultivated over the years.

Neither would Surefire.....remember, the dealers make THEM money.

I hold to the tenet that it would be most likely with a smaller company with less overhead. The examples mentioned are too top-heavy to be able to pull it off in a financially responsible manner.

7

You've essentially described what Costco already does as far as eliminating the middleman.

There are reasons that some companies do it that way however. They can specialize as a manufacturing company and let other companies do the distributing and wholeselling.

If each company is efficient (not necessarily likely) then it makes little difference if they are 3 different companies or 3 departments in one larger company.

If you have one larger buyer however (Costo) then it's easier.

(Flashlights aren't likely to be made more cheaply here no matter what you do however or any other commodity).

8

This will be fun ....:P

skilled labor in china 8$ a day unskilled 4$ a day

9

But labor is only part of it ...

With modern machine centers you could be spitting out 10 to 30 parts per minute [ variable ]

So even if labor was $45 per hour , maybe 500 parts per hour , the labor equation would be like 9cents a part .

Where they get you is in set up costs , to set up a machine center they might hit you for $5000 ,

So to run of those 500 parts would be like $10.09 per part ... You would really want to run of a lot of parts to eat the set up cost ...

Or find some shop that does not charge like a wounded bull ...

Manufacturing is a very interesting field , and could easily fit in a volume of books

10

Labour is such an incredibly small percentage of the total cost in something like flashlight production as to be near negligible in any halfway modern factory. What you have to remember is that China has something like 1/4-1/5 the cost of living of the US, and this lowered cost also includes:

Packaging

Insurance

Electricity

Taxation

Rent or Lease costs

Shipping

Raw Materials

And that's just to name a few. Then we get in to things like Chinese companies don't really pay for marketing - they release their goods to wholesalers and drop shippers and let them handle that part. Many major factories got training and machinery paid for (or at least substantially underwritten) by producing goods for North American and European countries.

In short, the entire structure of business for low-cost export goods in China doesn't exist anywhere else in the world. The closest would have been Japan in the 60-80s.

11

Is trying to retail sufficient units without using a large retailer...and of course if you do that, there goes your margin.

Personally I don't see any future in Western manufacturers trying to compete with China on low cost/large volume items. To me the best method seems to be concentrating on quality and innovation.

12

I've been designing/selling automotive parts and software for years, and you are correct.

One CANNOT compete with Asian manufacturers on price alone. Period. One's price can ALWAYS be undercut.

Creating VALUE is another discussion entirely.

13

Well , the reasons why are interesting ...

The West has literally priced itself out of the competition with unrealistic expectations developed in the 70's and 80's from price gouging ...

A really good example is the Aero Space industry / military complex and related industry - Government Contracts .

Hasn't this been a Cash cow , as well the lack of competition until about the 80's when the Japanese started to make some seriously good stuff ..

So the issue is , that western manufacturers , having not invested in development , technology , etc found themselves unable to compete or worse yet , unwilling to compete [ the case more than not ] , all was well when you could make something that worked for what ever price you wanted . But when the competition came knocking , a lot of companies simply folded , moved overseas with there antiquated equipment [ moved entire factories to china or mexico or india or what ever ] rather than improve worker skills , or invest in modern machines .

Its a woe full tale of excuses , but the bottom line is greed , and a lot of people simply refusing to work with a smaller margin ...

Or take the time to re equip / re train / and go head to head ...

And for anyone looking to manufacture in the West , especially small production runs , its simply cost prohibitive due to the business practices adopted by Contractors .

In some cases it would be cheaper to lease premises , machinery , put together a small work force and start manufacturing yourself ...

14

No.

15

Not to mention the intentional dumbing down process here in the U.S. ... we just aren't capable now. Just look at the spelling and grammar on various forums, the product of our public schools. I wouldn't have graduated elementary school, no less get/hold a job. The powers that be are fully intent on getting richer while the rest of us (that's YOU!) become dumb, pliable, working poor wage slaves tranquilized by GMO food and imbecilic TV with no living standard. Glad I axed my cable years ago....

Read this: http://library.flawlesslogic.com/soc_rev.htm with an open mind.

Corporate greed needs to be outlawed and the American worker should have taken to the streets years ago, like Greece and Egypt recently.

Enough.

Rich

16

I don't think the American worker taking to the streets would improve his/her grammar or skills would it?

17

once the bussiness refer to the different region, especially the different countries. the labor should be the primary factors. would it? in China, there are many companies such like dealextreme.com are cooperate with the foundries which they are fix a price for a model or something like specs. so we will think they are fake but not the genuine, and that means the cost is cut down. but in US, this seems unbeliveable. so i dont think it works, anyhow exchange rate about ￥ is always rise. the foreign investment continuelly increasing. and the economics problem come out. who knows.

18

It just dawned on me - we WILL have American products made as cheaply as Chinese products one day.

When the Chinese economy booms, the dollar will free-fall - rendering imports uneconomically unfeasible.

We will be forced to return to manufacturing to support our domestic needs, wages will drop, and so will prices to be able to compete in the new economy.

In the future, the USA will make the $6 torches and sell them to the new Chinese middle class for $40.

TURBA: You failed to mention where product "X" comes from. I'm going to guess it's imported from a country where prevailing wages are much lower than the West.

Company "A" also violated any dealer/supplier deal they typically have, stealing the sale from companies "C" AND "B."

This would not be tolerated by most retailers, and they would be looking for a new wholesaler.

Long-term, it's poor business practices for company "A" to sell to you at all.

19

I don't think so, Africa has a whole lot of cheap labor waiting for their turn after China joins the first world and wages rise.

20

I agree...Africa, India, Central and South America, the Middle East...most of the world other than the U.S., Western Europe and Japan has cheaper available labor.