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Old 03-14-2018, 06:40 AM   #121
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BUT, you got to carry the part of the store that very day.
Gotta pay for the connivence too.
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Old 03-14-2018, 10:02 AM   #122
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"$261 WM total reduced it to $181 to the iBoat/Amazon price."

WOW almost a 50% markup for most customers.
Right, we'll screw you if we can get away with it.
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Old 03-14-2018, 10:06 AM   #123
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Folks, remember stores must make a reasonable profit to remain in business.
Failure to make a profit, the will close the store.
It used to be a reasonable profit was about 30%.
That profit is built into the difference between list price and wholesale price, and is enjoyed by every retailer. West is, or has been, marking things up to 30% OVER list price, taking the normal retail markup plus ANOTHER 30%. To me that is unconscionable.
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Old 03-14-2018, 12:13 PM   #124
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That profit is built into the difference between list price and wholesale price, and is enjoyed by every retailer. West is, or has been, marking things up to 30% OVER list price, taking the normal retail markup plus ANOTHER 30%. To me that is unconscionable.
Just not true.

Here are some numbers. First, to compare WM to the market segment it's placed in and that is Automotive Aftermarket. For the last five years WM has averaged a gross margin of 29%, a pre-tax profit of 1.8% and a net income of 1.1%. Looking at those same three numbers, Autozone has 52%, 17%, 11%, O'Reilly has 52%, 18%, 11%, Advanced has 46%, 8%, 5%. Clearly gross margin is where they are short as their operating expenses are 27% vs 35%, 34% and 38% for the others. Now, Internet sales generally run around a 33% gross margin, a 3% pre-tax and 2% net income but on far greater volume. Amazon has a 37% gross margin, 2% pre-tax, 1.7% net.

So, the problem is that WM doesn't have adequate gross margins for their market segment. Apparel was their effort to get them as retail apparel averages 51% gross margins. Clearly WM has to figure out a way to negotiate with vendors and choose alternative vendors and products to get costs down and margins up as they can't do it by raising or even maintaining prices. This has been their emphasis on private labels but meanwhile they're getting destroyed on branded items. Their other approach is larger stores with a lower expense ratio which allows profits at lower margins. All these are challenges and they may or may not be successful.
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Old 03-14-2018, 12:16 PM   #125
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"$261 WM total reduced it to $181 to the iBoat/Amazon price."

WOW almost a 50% markup for most customers.
That would be a 31% gross margin which is inadequate to be profitable. If their actual cost is $160 then they're running a 39% gross margin at their normal price, not anything above normal expectations for such a business.
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Old 03-14-2018, 12:20 PM   #126
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Just not true.

Here are some numbers. First, to compare WM to the market segment it's placed in and that is Automotive Aftermarket. For the last five years WM has averaged a gross margin of 29%, a pre-tax profit of 1.8% and a net income of 1.1%. Looking at those same three numbers, Autozone has 52%, 17%, 11%, O'Reilly has 52%, 18%, 11%, Advanced has 46%, 8%, 5%. Clearly gross margin is where they are short as their operating expenses are 27% vs 35%, 34% and 38% for the others. Now, Internet sales generally run around a 33% gross margin, a 3% pre-tax and 2% net income but on far greater volume. Amazon has a 37% gross margin, 2% pre-tax, 1.7% net.

So, the problem is that WM doesn't have adequate gross margins for their market segment. Apparel was their effort to get them as retail apparel averages 51% gross margins. Clearly WM has to figure out a way to negotiate with vendors and choose alternative vendors and products to get costs down and margins up as they can't do it by raising or even maintaining prices. This has been their emphasis on private labels but meanwhile they're getting destroyed on branded items. Their other approach is larger stores with a lower expense ratio which allows profits at lower margins. All these are challenges and they may or may not be successful.
I don't doubt someone places them in the same segment as auto parts, but I think it results in a pretty abstract comparison. How they compare to other large marine retailers would be more meaningful. It's hard to imagine they have only been getting 29% GM when there is over 50% on the table.
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Old 03-14-2018, 12:47 PM   #127
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I don't doubt someone places them in the same segment as auto parts, but I think it results in a pretty abstract comparison. How they compare to other large marine retailers would be more meaningful. It's hard to imagine they have only been getting 29% GM when there is over 50% on the table.
The problem is there are no other large marine retailers, which is why they're in the automotive segment. However, you can put them in any retail segment outside of mass merchandisers, groceries and internet, and their margins are inadequate.

I don't know what you mean about "when there is over 50% on the table." There is no evidence that they have over 50% available to them. I doubt they can ever get to 50% but they need to increase rather than decrease margins and the ways of doing so are better buying and better product mix. The other approach is the larger stores doing more volume per store and therefore reducing expenses as a percentage of revenue. If they were able to increase gross margins to 31% and to decrease expenses from from 27% to 25%, then they end up with a 6% pre-tax profit and that would be ok for their industry.

They face a real challenge.

The larger stores might work as an approach as they could provide service on the main products they sell, but still have room to add some additional sales and margins on other items they haven't been stocking adequately.

Here's a bit of an odd type rule of thumb. The smaller the store, the higher the gross margin must be. So, take a 10,000 sq ft West Marine store and 29% is deadly, but increase that store to 27,000 sq ft and it's not as bad. Then utilize the extra space to increase gross margin slightly and you have a workable solution. In my opinion, their smaller stores can't work. They remind me somewhat of the old Sears Mail Order stores that carried a few products but everything else had to be ordered. Those stores lost so much money.
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Old 03-14-2018, 01:15 PM   #128
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Thanks, BandB, for injecting some rational analysis into the WM bashing.

Everyone is free to vote with their dollars, but I don't understand the bitterness and bashing. If you don't like their prices or anything else about WM, don't shop there.

I happen to be a big fan of both WM and Amazon. My local store has things I need and I can walk out with them and be back at my boat in 15 minutes. I find their prices fair for a brick and mortar retailer and the service in my local store is very good. They have helped me track down unidentified parts and solve problems. Not likely to get that from Amazon.

The boating world benefits from having WM and I hope they prosper and continue what they are doing for many years.
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Old 03-14-2018, 03:13 PM   #129
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I would think increasing their online sales would benefit their margins, as that should be a more efficient distribution channel than the retail outlets. If they offered free delivery to their stores, it would also increase traffic in the stores as well.
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Old 03-14-2018, 04:23 PM   #130
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I wonder how much labor costs impact WM margins when compared to other similar retail? IE, the people at WM are often longer term, mostly knowledgeable, and you could argue higher caliber than a typical retail employee. Are they paying more for that?
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Old 03-14-2018, 04:39 PM   #131
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...WM has averaged a gross margin of 29%...
Amazon has a 37% gross margin...
Thanks for breaking down the numbers! That was an interesting read.

If we assume Amazon sells their stuff for quite a bit less than WM, your numbers suggest Amazon buys it for a LOT less. No wonder they're disrupting all of retail!

But of course Amazon sells a lot of cheap stuff. It would be interesting to compare the markup on specific items.

[Edit] twistedtree was posting at the same time as me. But he said it better. I was also wondering how all the other marine outfitters are able to routinely beat WM's prices, if they're all subject to the same wholesale costs.
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Old 03-14-2018, 04:39 PM   #132
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The problem is there are no other large marine retailers, which is why they're in the automotive segment. However, you can put them in any retail segment outside of mass merchandisers, groceries and internet, and their margins are inadequate.

I don't know what you mean about "when there is over 50% on the table." There is no evidence that they have over 50% available to them. I doubt they can ever get to 50% but they need to increase rather than decrease margins and the ways of doing so are better buying and better product mix. The other approach is the larger stores doing more volume per store and therefore reducing expenses as a percentage of revenue. If they were able to increase gross margins to 31% and to decrease expenses from from 27% to 25%, then they end up with a 6% pre-tax profit and that would be ok for their industry.

They face a real challenge.

The larger stores might work as an approach as they could provide service on the main products they sell, but still have room to add some additional sales and margins on other items they haven't been stocking adequately.

Here's a bit of an odd type rule of thumb. The smaller the store, the higher the gross margin must be. So, take a 10,000 sq ft West Marine store and 29% is deadly, but increase that store to 27,000 sq ft and it's not as bad. Then utilize the extra space to increase gross margin slightly and you have a workable solution. In my opinion, their smaller stores can't work. They remind me somewhat of the old Sears Mail Order stores that carried a few products but everything else had to be ordered. Those stores lost so much money.
What I meant by "50% GM on the table" is with respect to Automotive parts stores. I agree it's unlikely 50% is available in marine, hence the not-so-great comparison to automotive where there apparently is.

I guess what I don't understand is how other retail marine outfits can operate on the margins that remain after selling somewhat below MSRP, where West needs MSRP+30% and still isn't as successful as they want/need to be. Any business that sells at MSRP+30% seems to be broken to me.
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Old 03-14-2018, 04:48 PM   #133
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...where West needs MSRP+30% and still isn't as successful as they want/need to be. Any business that sells at MSRP+30% seems to be broken to me.
Sorry if you said it earlier and I missed it, but can you give an example of something WM sells at MSRP + 30%?
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Old 03-14-2018, 04:52 PM   #134
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Sorry if you said it earlier and I missed it, but can you give an example of something WM sells at MSRP + 30%?
The very first thing brought up in this thread. It was a Racor filter where normal price was ~30% over Parker/Racor list price, and nearly double typical retail price.
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Old 03-14-2018, 05:21 PM   #135
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I would think increasing their online sales would benefit their margins, as that should be a more efficient distribution channel than the retail outlets. If they offered free delivery to their stores, it would also increase traffic in the stores as well.
When I go online to WM they do offer free delivery to their stores for orders above $49 or something in that range.
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Old 03-14-2018, 05:24 PM   #136
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Actually I was wrong--I just checked the web site and it is free shipping for all orders to be picked up at a store and free shipping to your home or another non WM store address for orders $49 or more.
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Old 03-14-2018, 05:32 PM   #137
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MSRP is really an arbitrary number. How does it calculate its "suggested" price ? Minimum wage is $5.15 in Georgia and $11.00 in California. Unemployment is 2.1% Hawaii and 7.3% in Alaska. I have no idea what retail rental rates are, but I am sure there is a considerable difference between New York City, and Alabama. I'm sure Florida sales are a lot more consistant than somehwhere seasonal like New Hampshire or Maine. Up there you have to earn January's rent on sales you make in July.

When you think of all the costs a business has to cover, and how variable those are from north to south, rural to metropolitan, etc. One, universal MSRP is not a realistic concept.
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Old 03-14-2018, 05:33 PM   #138
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The very first thing brought up in this thread. It was a Racor filter where normal price was ~30% over Parker/Racor list price, and nearly double typical retail price.
Ok, at least I understand your math. Few if any online stores will ship a $12 item for free, so paying WM's price may still be the least expensive way to get the Racor in hand if you are only buying one.

I watch prices pretty carefully and I haven't seen many examples of them being priced significantly above the alternative sources. Plus they will price match (always have in some version or another) and I'm good with that.

I get that you don't like them and I'm not trying to change your mind. Just offering a different perspective.
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Old 03-14-2018, 07:05 PM   #139
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I'm not familiar with WM charging more than MSRP. Perhaps more than a manufacturer's own site sometime.

As to other marine outlets able to charge less, a small mom and pop outlet has less overhead and likely less labor even. Others have different structures.

I suspect West Marine has been restricted at times by their Port Supply unit, now West Marine Pro. If they're going to sell it to the industry at discounts and even wholesale, then they can't cut their retail. They may even have restrictions from some vendors.

Yes, yes, yes to Amazon buying for less, to Walmart buying for less. But also to some Predatory behaviors and now to many Amazon sellers who are really Ebay sellers reincarnated, have no facilities of their own and are happy with 10% margins. So some of the real low prices you'll see are not Amazon at all.

As to the question of whether West Marine pays more, they do if they're smart. Now, then Amazon is only paying phone center and warehouse wages. West hasn't always capitalized on potentially well trained employees though. Put them in a small store with no product or busy selling outerwear then that doesn't take advantage of their experience or knowledge.

The answers are not simple. I only know the questions and issues. I don't know how I'd turn West Marine around as I don't have all the internal information. I do think the superstores but then what does that leave for the small community? I think still large stores. You don't see Walmart, Lowes, and Home Depot going to miniature stores where you have to order everything. I can't recall the last time I saw a Walmart or Target that wasn't a super center. WM just can't have adequate inventory in a small store. They can't be what a store like Hopkins Carter can be. Hopcar is the prime example of how a mom and pop store can be successful, just do what they do very well and be willing to go the extra mile.

I do think the price match is the first step in showing WM is going to be aggressive and not watch their customer base erode. That's a nice defensive move, but we haven't seen them on offense yet.

Incidentally, I've seen another industry leader take the offensive very recently. Office Depot and Max. $27.99 for case of 10 reams of paper with free delivery. Pushing tech services. Just look at the delivery war with grocers.

Sometimes it's not so complicated either. If I have a store with even dismal 29% margins (which must reflect a lot of markdowns) and 27% expenses. Well, just increase sales by 10% without increasing expenses and that flow though to the bottom line will nearly double your profit. Retail is dependent heavily on sales per sq ft and then on size of stores. The average retailer is around $325/sq ft. Apple between $5000 and $6000 sq ft. I haven't checked WM's numbers but I'll guarantee nothing like they could and should be. Just pushing that number up can do wonders. I'm sure when most of you walk into, if you do, a Victoria's Secret store you don't see what I do. What I see is one of the best organized, most profitable store layouts ever averaging 8500 sq ft and doing $850 per sq ft. Every item located in an ideal location within the store. Every inch used. Their layouts are a science as is their employee training and the customer never realizes what hit them. $7.2 million per store in sales and Pink is even more remarkable with 3400 sq ft at $1400/sq ft for nearly $3.5 million per store.

I'd say West Marine's business hasn't been as scientific as it needs to be.
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Old 03-14-2018, 07:12 PM   #140
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Ok, at least I understand your math. Few if any online stores will ship a $12 item for free, so paying WM's price may still be the least expensive way to get the Racor in hand if you are only buying one.

I watch prices pretty carefully and I haven't seen many examples of them being priced significantly above the alternative sources. Plus they will price match (always have in some version or another) and I'm good with that.

I get that you don't like them and I'm not trying to change your mind. Just offering a different perspective.
Shipping can be left out of the discussion. Those filters are regularly available over the counter in retail stores for around $12, and never more than their list price of $15.50 or whatever it was.
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