Canadian pricing

[EcoFurniture]

Dear Festool:

Please have a look at the current exchange rate (US-Can) and please adjust your pricing for us Canadians.
I know that there are custom fees and such involved but for bigger shipments that really should make that much of a difference.

Thank you.

 

[Inner10]

Please, this IS hurting your Canadian retailers.

While your at it you may also want to have a quick look at section 45 of the Competition Act (C-34).

 

[JohnDistai]

Inner - why do we waste our time on this?  Any discussion of price is urinating in the wind.

 

[WarnerConstCo.]

I have the same feeling when my customers try to get me to change my prices.
I have the same amount of overhead every week, the price is the price.

They are talking pure exchange rate differences.

 

[JohnDistai]

It would be naive to think that Festool is not aware of the exchange rates on a monthly, if not daily basis. I'm sure they employee a team of Financial Analysts that do plenty of analyses to take advantage of, or hedge against rate fluctuations.  The only difference between accounting for an exchange rate and a change in price is the magnitude of profit.  I think the original requests are asking for the magnitude of the profit to be returned to the same magnitude of profit as when the price was originally set.  The price has to be adjusted to reflect this change in rates.

I can understand why this request would fall on deaf ears.  The company I work for has claimed an increase in revenue each year for the last 34 years.  This last year was a tough year due to the economy.  However, they did a lot of business outside of the U.S., and those exchange rate differences offset any sales deficiencies in the U.S.  I think they said something to the effect that every Euro of revenue represented a $1.50 or so in revenue when returned to the U.S.  International companies keep a close eye on this, and I surely wouldn't count on any reductions in price due to rate fluctuations.

 

[JohnDistai]

Oh, and Warner, you seem to not be phased at the prices.  I think one thing that is overlooked here is the difference between business and hobby use.  As a business, each dollar you spend on a tool purchase doesn't equal a dollar.  You get the opportunity to  deduct and depreciate that cost over time.  So each $1 may only cost you $.75 or less when the final accounting is done.  Hobbyists have to pay the full dollar.  So in essence, your $500 TS 55 may only cost you $375, where it costs the rest of us the $500, plus whatever amount we have to pay in income tax to get our $500 of purchasing power.

 

[mouppe]

I have mentioned the Canadian pricing issue several times in the forum. Two years ago when the dollar was at similar levels, everybody I know went to the US to buy their cars, and presumably Festools! A year later, the Canadian dealers slashed their car prices. Now we are back again at dollar parity. 90% of Canadians live within 100 miles of the US border- it takes me less time to enter the US than to leave Manhattan through the Holland Tunnel at rush hour!

As I said elsewhere, I really want to support my local dealer, but recently I was able to buy an OF1400 for $470 in the US versus $594 in Canada. This is just wrong and it is the Canadian dealers who suffer. If Festool are serious about building a business here, they need to support the dealers by helping them on pricing.

 

[mastercabman]

Oh, and Warner, you seem to not be phased at the prices.  I think one thing that is overlooked here is the difference between business and hobby use.  As a business, each dollar you spend on a tool purchase doesn't equal a dollar.  You get the opportunity to  deduct and depreciate that cost over time.  So each $1 may only cost you $.75 or less when the final accounting is done.  Hobbyists have to pay the full dollar.  So in essence, your $500 TS 55 may only cost you $375, where it costs the rest of us the $500, plus whatever amount we have to pay in income tax to get our $500 of purchasing power.

I wouldn't go that far. Keep in mind that as a subcontractor we use the tools everyday,all day. More wear,witch mean that we need to replace/repair more often.
We maybe able to right it off but we are paying more taxes.
We also need to carry insurance(work comp./liability) and we have other over head to deal with.I know that's what happen when you're in business.
But that $.75 ends up been more like $.90-$.95!

 

[peter halle]

John,

I don't think that the hobbyists versus professional comparison really has merit when the discussion is about Canadian prices versus US prices.  There are professionals and hobbyists in both countries I suspect.

Contractors still have to fork out the initial outlay just like anyone else.  That is still money spent.  We could certainly warp the thread further and talk about depreciation strategies, section 179 deductions, the paybacks due to the government if you don't show a profit in three out of five years.......

I have a solution for those in the US.  If you are a hobbyist and you want to get tax advantages for purchasing tools, then create something and sell it.  Hobbyists are allowed to deduct expenses up to the limit of their sales just like contractors are, but they are never allowed to show a loss - it is a hobby after all.

If you interested in this idea - please consult your tax adviser.

Peter

 

[JohnDistai]

Peter,

I appreciate your addition and clarification.  My mention of the tax subsidy was a retort to one particular member who seems unaffected by prices and comments about our complaints regarding it.  I just wanted to point out that based on our usage, his dollar of purchasing power may only cost him $0.75, where my dollar of purchasing power actually costs me $1.30.  If my effective cost were nearly half I wouldn't be complaining about the price, either.

 

[EcoFurniture]

So far I was able to claim part of my tool expenses too.
But my point was:
Why, when the Canadian Dollar (for quite some time now), is very close to the US $ our pricing doesn't adjust? For some online retailers that may be quite a pain in the butt to always update the website. But that's how it is when you are in business! For me as a customer it really bugs me when I see that both dollars have almost the same value but we have to pay over $300 more for a Kapex  (I'm not in the market for one, already got one...) But there are other items like the CT33, the cordless drills...
Again, I understand that these tools have to go through customs and shipping isn't cheap either.
Anyhow, there is a solution to that! Why not bring them directly to Canada, without going through Festool headquarters? There is already a warehouse in Ontario, right?

Festool: Please don't take this as a bashing. I highly respect you guys. But this is something I can't grasp, other then seeing it as a money grab.

 

[peter halle]

John,

The way life is going for contractors many of us will be hobbyists before it is all over.  That being said, when I buy a tool for my business - just like any other contractor who is in it for the long haul - I have to evaluate cost of the tool, opportunity costs, odds that the tool will survive past the depreciation schedule that I choose ( that is where you make money as a contractor), etc.

This discussion is like a graph, we can depict it anyway we want.  As an example - hobbyists should be rejoicing because the contractors had to pay the same price for their tools as the hobbyist.  None of the contractor discounts like you can get in some supply houses.  The hobbyists will ultimately have the upper hand because everyone will have opened their wallets and pulled out the same amount of bills.  The hobbyist's tools in five years may or may not have had the same usage as the contractor and thus when they sell the tool they gain more money - not taxable.  The contractor sells the tool and then he may have to deal with taxable income from the sale as well as lower value at sale time because of condition.

It all works out in the end equally based on time.  You just have to go thru the layers.

Peter

 

[WarnerConstCo.]

I was just trying to make the point that maybe they can't lower the price.

I know I would rather sit at home and play candy land with my daughter, then go work for less then what I need/want.
It's proven over and over it is cheaper that way.

 

[Inner10]

Inner - why do we waste our time on this?  Any discussion of price is urinating in the wind.

I realize that we may sound like broken records sometimes and many requests fall on deaf ears but eventually the word will make its way around.  Like the old advertising adage goes the messages sinks in the ten thousandth time.

This discussion is like a graph, we can depict it anyway we want.  As an example - hobbyists should be rejoicing because the contractors had to pay the same price for their tools as the hobbyist.  None of the contractor discounts like you can get in some supply houses.  The hobbyists will ultimately have the upper hand because everyone will have opened their wallets and pulled out the same amount of bills.  The hobbyist's tools in five years may or may not have had the same usage as the contractor and thus when they sell the tool they gain more money - not taxable.  The contractor sells the tool and then he may have to deal with taxable income from the sale as well as lower value at sale time because of condition.

It all works out in the end equally based on time.  You just have to go thru the layers.

Peter that was very very well said.  Thank you.

Besides I need to make more money to be able to write off my tool expense.  [big grin]

I was just trying to make the point that maybe they can't lower the price.

I know I would rather sit at home and play candy land with my daughter, then go work for less then what I need/want.
It's proven over and over it is cheaper that way.

I agree, but in your business you can at least compete on price and quality.  This is a comparisons of commodities which in many instances have no value-added by the dealer.

I'm trying to say is your are comparing apples and oranges.  Lets say hypothetically there is a magical group or trolls that steals 20% of all products that crosses the boarder and that is why they can't sell good at the same as US retail; fair enough, in that case let the retailers compete on price instead.

Lowering the price in Canada to that of the US would help increase sales in Canada, but lower sales in the US.  Net change on Festool's end could be negligible, but what it would help with is increasing and establish its popularity in Canada in the long-term.

 

[WarnerConstCo.]

I think I saw a show about those Trolls, it was monster quest or something!! [big grin]

 

[wnagle]

I was just trying to make the point that maybe they can't lower the price.

I know I would rather sit at home and play candy land with my daughter, then go work for less then what I need/want.
It's proven over and over it is cheaper that way.

Darcy,  I always liked chutes and ladders...

 

[JohnDistai]

Have they ever found one of those monsters on Monster Quest?

On a pricing-related note, I was thinking about this whole dealer network, fixed pricing, and inventories.  So if I decide to become a dealer, how do I manage my inventory?  I guess that I would need to estimate what my stock levels are, arrange floor plan financing, and buy my inventory.  But how do I provide my customers with variety, service and selection?  I would have to purchase a lot of items, and tie up a lot of money in product and retail/storage space.

But what happens if sales are slow in a particular product category?  If I owned any other type of business, I would have a "promotion", and mark down the stale inventory to move it so I could recoup my capital and apply it more effectively.  But if I sold Festool products, I wouldn't be allowed to do that.  My stale inventory and floor plan financing would slowly hemorrhage my business of money.  But Festool will have upheld their strict discounting policy.  To offset this, I may choose to carry a small inventory and field customer's requests with the "I don't have that, but I can order it.  It will be here within a week" response.  The customer would of course go somewhere else.  I'll lose the sale.  But Festool will have upheld their pricing policy.  The brand value will remain strong, even though sales channels suffer and the number of purchases may be kept low due to this.  Its the policy that counts.

 

[peter halle]

We will never know the Festool Sales policy - and rightly so.  None of our darned business.  This complimentary place to come and ask questions
and then the attitudes at times becomes we deserve to know.  Nope.  Notta.  What company in the world would discuss their strategies on a searchable place in the internet?

Perhaps the business model that has existed in more parts of the world for longer than we have been alive works and it is just us - notice the plural form - who don't understand.  Just because it isn't understood by some but understood by others doesn't make it wrong.  It just is.

 

[WarnerConstCo.]

I was just trying to make the point that maybe they can't lower the price.

I know I would rather sit at home and play candy land with my daughter, then go work for less then what I need/want.
It's proven over and over it is cheaper that way.

Darcy,  I always liked chutes and ladders...

It is like 50/50 between chutes and ladders and candy land.

I tell you one thing, got to watch that girl, 4 year olds know how to cheat!! [big grin]

 

[mouppe]

A simple alternative would be to allow US dealers to ship to Canada. This would eliminate the pricing disadvantage and presumably increase sales because prices would be lower. Canadian dealers would have every right to complain but really their first complaint should be to Festool for establishing a situation which encourages consumers to buy their Festools in the US.

I know this is just a forum, we are just venting our opinions and they will probably fall on deaf ears but it is clearly a sentiment shared by many of us.

As an aside, although I am a "hobbyist" I expense all my tools through my company and then sell the finished goods to my family, my office etc. So there are ways to get around the tax folks.

Richard.