From bruce@ashbysolutions.com Wed Dec 07 16:32:29 2005
Subject:Re: fair CX-3 price

Hi All,

>> The average MI retailer turns (sells through and replaces) their
>> entire inventory 3.2 times a year.
>
>> After ALL expenses (advertising, rent, payroll, etc.) are deducted
>> the MI retail industry average NET margins are ONLY
>> 0.8%.

And there you go. 0.8% margin 3.2x a year works out to 2.56% ROI. Taking the same money and putting it in a 12-month CD will give 3.5-4.5% ROI. No wonder the mom-and-pop stores are going under! Two local mini-chains have gone under in my area this year; one had three stores, and the other five or six.

If GC does significantly better, then it's not simply by better margins -- they're driving costs down, as far as I see, which has to affect margins, too. It's by the Wal*Mart/Home Depot model: a) use your sales volume to beat up on your vendors to offer insane product costs; b) carry as many "special package" deals as possible, where it's hard to tell what the package is really worth; and c) hire help for the lowest possible wages, and deal with the turnover. (Every time I walk into GC, there's someone new behind the counter.)

Personally, I hope that Best Buy or someone like that doesn't enter the MI game. I already have to compete with the noise from six other departments to audition something at GC. Now I'll have to compete with computer games and home theater systems, too? And ever tried to get the real skinny on a product from the sales staff at one of the big electronics chains? You can get as many opinions as you have time to ask for them.

>But don't worry. Some day GC and others will all be
>owned by Microsoft anyway, then we can watch what
>prices do!

Umm ... my OS, word processor, spreadsheet, etc. have gotten larger and more costly as the years have gone on. They're filled with features that I really don't need, or even want, but I have to take them anyway, because it's the "industry standard" created by a company who knows better than I do what I "need." Hardware prices have plummeted, but software versions keep going up in price. This is a good thing? ;-)

Regards,

-BW

--
Bruce Wahler
Design Consultant
Ashby Solutions™ http://consult.ashbysolutions.com
978.386.7389 voice/fax
bruce@ashbysolutions.com

[Non-text portions of this message have been removed]