Are we being ripped off?

[AstroKeith]

A provocative title, but I am bemused by the prices being charged for some simple jigs.

Areas that I have looked at recently:

Parallel guides
Rail Squares
Dovetail jigs

Some of these items, or components of systems, are essentially pieces of anodised machined aluminium. Once designed and programmed a cnc mill will produce them all night quite cheaply. Yet we are being asked for 100's of pounds and dollars. Some of the systems which can amount to a few cnc milled parts plus a few turned items are up to £500.

I recently bought a new no5 bench plane. Lie-Nielsen and Veritas are unobtainable at the moment with no sign of deliveries coming through. So it was between a Clifton and a Quangsheng. A factor of two in price. Both have good reviews. I wanted to buy British but was curious about the Quangsheng, so I got both on sale or return. I judged that the Quangsheng was better made (very much up to a LN No4 I have) but I liked the thicker iron in the Clifton and it did look a bit more hardy. So I went for the Clifton but probably shouldn't have!

The Quangsheng was the same price as a simple rail square from our beloved brands. Is this right?!

 

[DeformedTree]

How much it cost to make doesn't dictate how much something sells for other than sale price is generally higher than cost to produce.  If people pay, then the price is right.

Far as parallel guides,  you have a nice strong extrusion with a scale that needs to be accurately added, and then 2 cast parts, plus a lot of other bits.  $300 for the set may be a bit high, but people clearly buy at those prices. 

They are an item that doesn't change, but like all products, someone had to design them, Festool had to tool up for them.  This has to be paid back. It's not like Festool moves stuff at massive volumes. So it takes time to pay off that cost.  Plus they and their retailers need to make a profit.

Don't be confused by stuff that is out there that is overly cheap.  If you just copy a design, and make it in places like china with very low labor rates, lack of concern for environment, and then sell it in stores that run with almost zero profit margin and make it up in volume, sure they will be cheaper.

No one minds when they sell a tool and they get a lot of money for it.

And CNC isn't free.  Someone has to design the part, then program the machine, the machine needs to be paid for (CNC mills bill an hourly rate just like a person). Still plenty of people involved, still consumes material, takes energy, time, etc, needs to be replaced in time.

No one running a company is going to just lower the price because they can. They maximize profit, so they find the balance between sales and price to maximize profit.  If they find a way to cut their manufacturing cost in half, they aren't going to lower the price of the product any.

 

[ChuckM]

One word: R&D.

It costs the sky to get an idea to a successful product
. Don't forget the failures in between. A current example: vaccines for COVID-19.

 

[TwelvebyTwenty]

Yes. Festool is a rip-off in many ways. But as with many things in life you have to decide whether being without a particular tool or product is more or less palatable than having your back passage stretched when you come to pay for it.

 

[AlexThePalex]

Yes, you're being ripped off, with everything you buy. The bigger the company that produces or sells it, it the bigger the margin.

There is a reason the richest 10% of the population owns 90% of the world's wealth.

 

[rmhinden]

To answer the question "are we being ripped off", I think the answer is we are not.

To produce a product and make some profit there are the direct cost of materials, production costs, inventory, sales and marketing, R&D, deprecation of facilities and tools.  The selling price needs to cover all of these. 

Last year I had two aluminum parts made for my sailboat traveler, approximately the size and complexity of a guide rail square.  I produced the design file myself (got to learn how to use QCAD).  I took the design it to a local shop who could make it, cost me $200 cash.  Took it to another shop to have it anodized for about $50.  Then there was the cost of the hardware, plus of course my time for all of this.

By comparison, TSO sells they GRS-16 guide rail squares for $159.95.    Based on my experience, it is a bargain. 

Bob

 

[Svar]

Yes, you're being ripped off, with everything you buy. The bigger the company that produces or sells it, it the bigger the margin.

No. Profit margin is typically large on small volume, unique, luxury, brand name, and accessory items. Or combination of thereof. Think of accessory cup holder for your Ferrari made by Tiffany or ink cartridge for your printer [mad]. Yeh, especially the last one.
Giants like Honda, McDonald's, or Amazon have tiny profit margins.

No doubt profit margin on ETS125 is smaller than on Festool rail square. Once they trap you with basic tools they squeeze you dry with the accessories, because they can.  [big grin] I see no ill will in that, customers do it voluntarily. Except printer ink, that one is pure evil  [mad].

 

[AlexThePalex]

You guys got no clue.

Only tool I bought new from Festool was my DTS 400.

New price was €278, the dealer threw in €76 of free sandpaper and pads.

So he still made money giving away €76.

Festool Turbo Suction Brush 450644, sold for around €150 by Festool, costs only €49 at my local vac shop without the label.

Especially products from companies in the LUXURY class of products, which Festool surely is, have the highest margin of all. Just like Apple, Gucci, Cartier, Chanel, people pay more just for the brand name, and you guys do the same for Festool.

Open your eyes instead of giving in to your fantasy ideas about economy and production.

In the used market, I can buy tools for 50 euro, clean them up and sell them for 150. People pay it, and got no clue that they can get it cheaper if they use their brain.

 

[MaineShop]

When it comes to the cost of tools for me, we do high end work that more then justifies the cost. We have many brands other then just festool in the shop and in the trailer but happily pay for the festool when it does the job well. As a carpentry business the cost of festool isn't that bad in the big picture. Much cheaper then the 80k skid steer working in the yard on the job and my time is billing out at more then his. Tools that make the job easier and faster are better for me and my clients.

That being said if I was a homeowner I would not be working with the same metric. I guess I would ask myself what is most enjoyable to me to use since that is presumably why you are buying and using the tools.

 

[jeh]

I'm glad they offer the tools they sell and am not particularly concerned about the prices. Sure it would be great if they were lower, but the tools are great and come with good warranties and trial periods. The accessories and consumables seem expensive, but the profit from those might be subsidizing tool prices as insane as that sounds. Nobody except the accountants and upper-level management know how much margin they have. None of us know how many employees they have nor how well they are treated. Considering that in general Europeans are paid similarly, but have significantly better benefits like at least a months vacation, healthcare, and more level wages across all earners. Unlike some corporations in the US where employees are slaves in fear of termination, Europeans have better rights.

 

[DeformedTree]

Alex,  used market doesn't matter to the discussion.  Without a new tool market there is no used market.  Discussions like this have to be about new or about used, you can't go criss crossing between the 2.  If this was about value retention/etc then that's different.

To Svar's point,  yup, as you get big the margins are tiny.  Till recently the most valuable company in the world was Exxon-mobile.  People complain about gas prices, even though it's insanely cheap for what we get out of it it, and in the US it's very cheap. What many forget is the profit margin on gasoline is very very low, one of the smallest margins, it is all about the volume.  Plus if gas companies charged a lot, folks would look to other solutions.

Then to JimH2, yeah I have no issue supporting the Euro business model of things. Who knows if the US will ever get there when we have so many who think life in Europe is so horrible for folks.

The flip to this is when you have customers willing to pay these prices, and support you, you don't do dumb things, you don't cheap out. This is where I have issue with Festool.  I'm paying good money for your stuff/or willing to, and yet you do things like take away inch markings on tools as an example.  Taking the thing away which is the reason for buying your stuff is nonsense. It's caused me to look and buy other options (that cost far more). I'm not paying good money for stuff when you do stuff like that.  Now we have things like the edge sanding attachment.  That was a "shut up and take my money" item.  But then find out it works with old sanders, but not the newest one...madness.

This is where "high" prices run into problems. To many companies have a nice product, and then get greedy/cocky and start making changes people don't want and think they will keep buying. Sometimes they do, othertimes they move on.

 

[kevinculle]

If you think you are being ripped off you should go find a better deal somewhere else.  Last I checked nobody puts a gun to your temple when you walk up to the register or click on the buy button on a website.  Every business including Festool is subject to the economic votes of its customers.  If people don't buy because the price is a ripoff the seller will either find a way to lower it or go out of business.  If enough people line up to make the ripoff price a profitable transaction for the seller then it isn't a ripoff price.  I for one am baffled by many of Festool's prices but enough willing customers fork over their money to prove that the prices aren't a ripoff, to them.

 

[05r50]

My opinion is that if you only think in terms of price then yes it prob is a ripoff. However, when you factor in the intent of the tool, how long the life expectancy is for the item, on the job savings of time, etc then maybe there is still a value proposition in these prices.

I am not a pro, just a hobbyist and my decision to get a few Festool items was originally focused on the fact that I had to have portability since my workspace also has to hold 2 cars.

If I needed parallel guides I could certainly throw a jig together based on Peter Millards versions in MDF. They won’t last forever, but they will do. If I was running a production environment day after day then I think I would look for something that can stand the test of time.

A friend of mine has a metalworking shop that has been in the family for multi-generations. I doubt there is a major piece of equipment in that shop that was built after 1940. It is a fascinating place, but the point is his ancestor had to make the decision to invest in that machinery at the time and whatever the cost was it is still in operation 80 years later making them money.

 

[mino]

No, we are not.

"Ripping off" presumes the seller/manufactured is making a killing. Sorry. I do not see the TTS Tooltechnic or TSO owners living in gold palaces.

If anyone is "ripping you off" those are semi-monopolies like Apple or Google which can charge "custom" 30% margins for a commodity simply because no one has a couple tens of billions on spare to create a competition to these - if it was even technically possible to begin with ref. compatibility. Look how Huawei struggles with Google. And these are folks who have pretty much unlimited resources.

On topic:

Living off China/Asia sweatshop produce for their whole life people tend to forget how much individual and semi-industrial production is expensive in the "first world". Festool or TSO workers do not cost a dollar an hour. More like 50-100$/hr labor cost.

As yes, the likes of Festool, UJK etc. *mostly* produce:
- at 3x-5x East Asia labor rates (and more)
- at best at 1/10 but more liek 1/1000 volumes which do not justify mass automation/industrial production => they have a much higher labor to material cost ratio
- at volumes which are UNPREDICTABLE => when you introduce something new, you do not know how much it will sell so you cannot price it for "mass market production" - as there is no "market" at that point
- the customers EXPECT AND REQUIRE the piece to be long-term available => you cannot just "make a big batch at ODM1" and "make another slightly different batch at a different ODM" two years later and expect people to be OK with it

In addition:
First, it is NOT easy to get to a successful design - there are MANY dead ends ahead. The more unique piece, the more dead ends.
Take the Domino - I do not know the numbers, but I would not be surprised if it tool several years of sales to recoup its development costs.

Secondly, even if you get to a successful design, you do not know how much it will sell per above => you cannot setup "industrial production" for it as most likely that would end in a loss.

If you look at Festool prices, you will see this actually very well:
- "common/known-quantity" pieces are reasonably priced (say between 10-50% above competition prices to cover the reduced production volume and customer service costs)
- "unique pieces" are priced a bit higher, say 100% above what a hypothetical mass market would charge - but - for such pieces there is no mass market to being with, so the point is moot ...

And I do not agree Festool is a "luxury" brand. It is not. It is a high-end manufacturer operating on the top-end of the market.

For some tools, it is worth it even for a hobbyist to invest - like a tracksaw or a Rotex.
For other tools /and accessories/ designed for low-volume manufacturing use it makes zero sense for a hobbyist or even a small shop owner to go for them - they are not the target market.

I believe that is how it should be.

Is there a mass market for a piece where Festool/Maffell/TSO/Incra etc. have a comparable competition at a much lower price?
=> Great! Go for it. That will force Festool to reduce the price or exit that market if it cannot.

Is there nothing but a Festool/TSO/Incra product out there because there is no mass market for such or it is under Patent protection?
=> Tough luck. Buy if the value matches to your use case or live without like the rest of the world does.

 

[AlexThePalex]

And I do not agree Festool is a "luxury" brand. It is not.

Well, you're wrong in every account in your post.

Other German brands like Bosch and Metabo, who produce under the same circumstances can deliver perfectly good tools for half the price Festool does.

Sorry. I do not see the TTS Tooltechnic or TSO owners living in gold palaces.

You honestly think that owners of a multi-million dollar multinational with a revenue of €340 million and offices in 26 countries are not wealthy?  [huh]

And I do not know if you know this, but Festool had their way they'd still have this -illegal- price fixing strategy which only stopped because their own dealers in the UK took them to court.
https://www.festoolownersgroup.com/...-tts-fined-8-2-million-euros-for-price-fixing!/
https://www.bundeskartellamt.de/Sha...essemitteilungen/2012/20_08_2012_Festool.html

Funny thing, after that court ruling dealers in Europe could set their own prices instead of being dictated by Festool.

As example, the Festool CS70 Set that I own was previously sold at €3200, but now the average price at the dealers dropped to €2600 and in some cases to €2400.

And imagine that, they still made a profit.

 

[mino]

And I do not agree Festool is a "luxury" brand. It is not.

Well, you're wrong in every account in your post.

Both Bosch and Metabo are "mass market" companies. While they make also high end products /not much cheaper to Festool/, their bread and butter is elsewhere.

A product is not high end because it is "German-made" but because of how it is made. I mentioned the German/Czech wages not because it justifies their prices. Of course you cannot justify a price like that. But it is a reason why at those prices they do not "make a killing" like they would seem to you when compared to a company using ROC or PRC ODMs in the mass market with no 10 year of parts commitment etc.

A "luxury piece" is about status, about the look, about being expensive for the sake of being expensive.

It is something which value is not based on rational calculations - like how many hours it saves you compared to a competition or how it protects your lungs but better dust extraction. A value of a "luxury item" is generally not intrinsic - it is emotional first and foremost.

I.e. if something can be justified on the value-price axis for a group of professionals it is marketed at, it is not a "luxury item/brand".

That does not mean that for many /most/ it can still be considered a "luxury". The same way a cheap car is a "luxury" for someone who cannot afford it /or does not need it/. But it does not make the car maker a "luxury brand/product".

Sorry. I do not see the TTS Tooltechnic or TSO owners living in gold palaces.

You honestly think that owners of a multi-million dollar multi-national with offices in tens of countries are not wealthy?  [huh]

And I do not know if you know this, but Festool had their way they'd still have this -illegal- price fixing strategy which only stopped because their own dealers in the UK took them to court.

You should not conflate value of a company /say hundreds of millions/ which includes the brand goodwill etc. with how much profit it produces /say millions/. Two entirely different things. You cannot live from the value of what you own only from the profits if you do not want to destroy/lose it.

Sorry ref the court case.
The fact that they did not want to have a price competition -between- their dealers is absolutely fine with me. That is usually done to prevent a "race to the bottom" situation and is common in the high end market where customer experience/service is seen as a part of the product.

The court case made it clear that this is not "OK" /I guess it would still be OK if Festool owned them or had a franchise arrangement/. Fine with me.

But that is all not important.
We live in a market economy and Festool & Co are businesses established to make money.

If you like to live in a centrally planned economy where price is cost+increment and R&D is centrally decided be my guest. DPRK is still available. I do not. I was born in such a country.

My grandparents saw those 40 years and how it /almost/ destroyed a once top industrial country.

After about 20 years of this, there were simply no high-end products available as no one could justify the R&D to the decision makers. As a result the Communist block economies thrived in quantities produces of "average" products but were unable to develop new ideas into production and thus and progress. There was no "trickle-down effect" as there was simply no incentive to improve as R&D cannot be recouped in prices. Thankfully, it is in the past.

It. Does. Not. Work. (TM)

EDIT: fix quotation

 

[AlexThePalex]

Mino, wow.

So if you realise you might pay too much for Festool, you should go live in a communist country?

Get out of here with that kind of reasoning.

The court slapped TTS with a 8,2 million euro fine. Darn commies.

 

[mino]

So if you realise you might pay too much for Festool, you should go live in a communist country?

Yes, absolutely.

If you like a centrally planned economy - economy where not the business-customer relationship but some external entity decides what are "correct" prices that is what you should do.

If you like to live in a market economy, then you should buy from a different company - or make your own.

Ref. EU - there is a running joke in the Post-Communist countries (heard the same local variations from Poles, Czechs and Slovaks alike) which are members of the EU:

"The Earth is certainly oval. We pushed communism back to the east and it came back from the west."

 

[jcrowe1950]

So if you realise you might pay too much for Festool, you should go live in a communist country?

Yes, absolutely.

If you like a centrally planned economy - economy where not the business-customer relationship but some external entity decides what are "correct" prices that is what you should do.

If you like to live in a market economy, then you should buy from a different company - or make your own.

Ref. EU - there is a running joke in the Post-Communist countries (heard the same local variations from Poles, Czechs and Slovaks alike) which are members of the EU:

"The Earth is certainly oval. We pushed communism back to the east and it came back from the west."

    Ultimately, where Festool is marketed, customers have the free choice whether or not to buy Festool products. In planned, collectivist economies, no such choice exists. Very simply put, if you feel Festool products are a ripoff, do not buy them. Those of us who appreciate that kind of choice often choose Festool products for whatever reason....tis our resources expended and no coercion was involved. As always, YMMY and OALA, EHOATAS.

 

[AlexThePalex]

If you like a centrally planned economy - economy where not the business-customer relationship but some external entity decides what are "correct" prices that is what you should do.

Could you please point out to me where exactly anybody DECIDES anything here in this thread?

If you like to live in a market economy, then you should buy from a different company - or make your own.

Funny thing about a free country with a market economy is, we don't have just two choices. We're not obliged to either agree to everything or shut up.

If you think that having a bit commentary on a companies pricing means the same as being in favour of a central planned economy, then you're going way over the speed limit here, and you just flew out of the bend and crashed. Things are not so black and white.