Could climbing gear be cheaper?

Keller Rinaudo wrote:In response to the comments above, I've spent the last couple weeks talking to small US gear manufacturers. The bottom line is that a lot of these companies are getting pushed out of the market altogether by larger European suppliers and REI's monopoly control of the retail sector. The companies I've spoken to (not naming names, but these are big companies) have said that to get into REI, they would have to decrease the quality of their products in order to meet REI's price points. Many have refused, and have been kicked out of that channel accordingly. So people who are saying that climbing gear is cheap or expensive are missing the point. REI's monopoly is destroying the manufacturers that make the best gear! On the discussion of markups, it's true that wholesale is 40% off of retail. But large distributors pay far less than wholesale. In REI's case, after pre-season discounts and bulk discounts, the store is getting gear at 56% off of retail. So the manufacturers are getting 44% of MSRP. That's a crazy setup. And I have to believe that there is a better way. All the suppliers we've spoken to agree. But I'm really hoping to hear your guys thoughts. You can be mean sometimes, but at least you tell it like it is. Keller

I'll play devil's advocate here for REI. One, I'm not sure where you're getting wholesale price info from, but generally that's considered confidential information so I'd be careful throwing numbers around unless you want to get one of the manufacturers who have been nice enough to speak with you in trouble.

Second, the preseason and bulk discounts have their place in the market. It allows manufacturers a heads up to forecast how much sweet sweet gear to produce, and in turn they offer a discount for placing that early order. In another way, it also allows them to make enough for an REI and have product left for the smaller shops as well. Like, say REI decided not to preseason any Spirit draws, then decided mid season to buy their year's worth from whatever Petzl has left. Now no local shops have your favorite draws and you have to buy them at REI for whatever price they choose. This is obviously pretty exaggerated, but a thought anyway.

I suppose I could see some of the smaller companies testing the waters on an idea like this to try to get their gear on the market. How does your "directly with manufacturers" plan work? And where is this member-website's money coming from? It's a lot easier and cheaper for companies to ship to a limited number of addresses (retailers) than to each individual customer. Many companies that appear to sell direct-to-consumer online actually have a regional shop send the merchandise instead. I doubt those same retailers will be happy to ship at 20-30% off. But with North Face, Mountain Hardwear, etc. shops setting up all over the country maybe a manufacturer-direct market is where we're headed.

I'm cutting myself off here. Shop local :)

Let's say you magically found a venue to purchase gear from the manufacturer for 50% MSRP and you decide to pass the savings directly on to everybody else. With that type of savings, it wouldn't be long before you're selling thousands of pieces of gear per day. With that many transactions, you'd need a website and database to manage and process the orders. Paying a web designer + hosting = $. Then, with so much inventory moving around, you find your basement flooding with gear and decide to rent a warehouse. Rent = $. Then when you get sick of packaging and mailing all of the orders yourself, you'll need to hire some people to help you out. Employees = $. Finally, you remember that you have loads of debt and/or living expenses that you need to personally survive, so you need to take a cut. More $.

Eventually you end up with $+$+$+$ = $$$$, and since $ doesn't just appear out of thin air you come to the conclusion that your business model is unsustainable and thus are forced to reduce the savings to the customer. This process continues, and Rinaudo's Equipment Inc. ends up being just another REI.

Hey guys,

To Matt, Berl, Matt, and Ian, thanks for the thoughtful responses. I'm new to this arena, and you guys know a lot more than I do. I already screwed up in terms of how I framed this whole discussion, and I'm sure I'll make a lot of other bone-headed mistakes when we build out the site...

Anyway, you guys make great points. It seems as though the biggest question is, "What would be the long-term competitive advantage of this business?" Even if our idea could be marginally profitable now, how could we control costs in the long run?

REI and Backcountry both sell gear for MSRP. Their business models rely on large margins (athlete teams, huge marketing budgets, stores (REI), etc). There are some sites that offer large discounts (25-30%) on gear, but these sites typically lack selection, buy gear in tiny quantities from manufacturers, or are selling old gear that the main outlets couldn't sell. The Clymb and Steep and Cheap are extreme examples, though they are usually selling random stuff (water bottles, sunglasses) and the auctioning of gear means that you can rarely purchase what you want when you want it.

I think that our sustainable advantage will come from building a site with a good selection of new, high-quality gear that people actually want. We may not always beat everyone on price, but our relationships with manufacturers will allow us to stock items that you can usually only find for retail or close to it (9.2mm double dry ropes are a great example). Our costs (shipping, storage, credit card processing, servers) have all been built in and will scale linearly.

Most of the manufacturers we've talked to are anxious to build out a distribution channel other than the brick and mortar retail one. For them, building a strong community of climbers around their brand is really valuable. And they'd rather be taking market share by offering cheap gear to an influential membership base rather than pouring money into REI's pockets.

What do you guys think? Are there ways that we can make this idea better? Can it work in the first place?

Keller

caughtinside wrote: I don't yet see a new idea here.

What's new is the subscription angle. It's an adaptation of the Costco model. You have to pay a membership fee to gain access to the exclusive club.