making stuff in the USA and hitting the wall

I have been making tools for jewelers for a few years and I do all the work myself in my garage on old manual machines that are fully paid for and using scrap metal when I can and I am still unable to make a decent profit. I survive and I make more than if I had a minimum wage job but not anything close to what would be considered middle class and today one of my retailers told me that I need to think about getting my stuff made in Pakistan so that he can sell it cheaper and we can both make money. I have gotten quotes from suppliers over there through my retailer and I cant even believe the prices they are less than what I pay for scrap steel and even if I got the metal for free I cant match those prices. We are screwed. or I am. I am seeing first hand what everyone bitches about.

kpotter said:

I have gotten quotes from suppliers over there through my retailer and I cant even believe the prices they are less than what I pay for scrap steel and even if I got the metal for free I cant match those prices. We are screwed. or I am. I am seeing first hand what everyone bitches about.

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This is the problem, you are correct. I have seen this for over fifteen years now. It seems to have started in areas of manufacturing, like four/multi slide work, then injection molding then stamped metal parts bit by bit...

Can you sell direct?

Amazon, ebay, etc. Maybe it's time to sell direct.

kpotter said:

I have been making tools for jewelers for a few years and I do all the work myself in my garage on old manual machines that are fully paid for and using scrap metal when I can and I am still unable to make a decent profit. I survive and I make more than if I had a minimum wage job but not anything close to what would be considered middle class and today one of my retailers told me that I need to think about getting my stuff made in Pakistan so that he can sell it cheaper and we can both make money. I have gotten quotes from suppliers over there through my retailer and I cant even believe the prices they are less than what I pay for scrap steel and even if I got the metal for free I cant match those prices. We are screwed. or I am. I am seeing first hand what everyone bitches about.

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Sounds like something is very wrong here... Jewelers need more of these tools than they can afford at todays prices?... or are there that many more new jewelers just starting out and they need these tools? or some other reasons ??

I think back when I started out as an apprentice, we made minimum wage, or a nickle more... anyway, it was a 1959 and $1.30/hr. But even at this wage, we bought tools that may have cost $15.. $20?.. cant remember, but we would not have bought more if the tools were 30% cheaper...

What sort of tools and what costs??

Sounds like the retailer just wants a lower price, but my guess is he wont pass on that saving.. but, I could be wrong...

kpotter said:

We are screwed. or I am. I am seeing first hand what everyone bitches about.

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It is strange that some manufacturers are still screwing around as if China, Pakistan and India AREN'T breathing down their necks! By "screwing around", I mean wasting time in the process on B.S. that isn't necessary. Doing things the hard way, when another way is right in front of their faces. I guess they have some DEEEEEEEP pockets or they somehow think it is 1960 and "so what if we lose customers (by taking forever, then having to charge more for all the wasted time) there 100 more of them waiting in line!
It really makes me wonder how much longer they will be around.

Jeff

Let him go to Pakistan and set up a product line.

When his face shows up on CNN, offer to buy his company.

And you can continue to sell "Made In USA" product, directly.

He makes more money (if he comes back).

And you make more money.

When he gets tired of all the complaints, be nice and let him sell your goods.

thanks for the replies I went to an accountant and brought him all the books, he informed me that I was a retailers wildest fantasy come true. I have been holding the inventory and not charging enough and being to liberal on the payment terms. Starting tomorrow prices are going up 25% and no more drop shipping and no more ordering one at a time. This is not a mom and pop company so it is not like they cant afford this. He showed me how I can be profitable just by changing a few things, my products sell and even if I increase the wholesale price he shouldnt have to change the retail price he would still be making a decent profit. I will let you know how it goes I was told to get a spine and learn to be a capitalist.

One of the reason for the lower cost is probably because they skipped out on the R&D. The guy making and selling the stuff most likely has no clue on how it works. Depending on how much control you have on the marketing and distribution of the product, going overseas is not necessarily a good idea.

For something that is not patented or has a large barrier to entry, it won't take long for the locals to pickup on how to make the product, I mean you do have to teach someone to make the stuff to take advantage of their relatively cheaper labor cost. Basically you are exchanging your know how for their cheaper labor.

Once the locals start making the products, you just lost your technological advantage. However, you will still have your marketing/distribution advantage. Though in today's internet age, if you have a competitor, the locals will probably find them and offer to sell your products at a much lower cost than what you can produce them for.

Even though you and the locals are producing the same products within close proximity to each other, they can still beat you on price because they have a much lower overhead, unless you want to forgo the luxuries of being an expat and go really local, but that will be really loco.

So, if you move your production overseas now because of pricing pressure, you will probably end up facing the same pricing pressure a few years from now as well.

Regardless of where the product is made, we are all after making the products better and cheaper. "Made in the USA" does not change that fact. Luckily, law of diminishing return cuts us some slack. We don't have to make our products 100% better to charge a 100% premium, but the product does have to be noticeably better to justify that added premium.

We're not screwed, yet. I would much rather spend the time and money making the product better than to think about investing in an overseas operation. If you do go, make sure it's a democratic country because we don't need another China building stealth fighter/cruise missiles with the money they made from us to target our carriers.

The volume of tools that I sell is so low that it is silly to even consider out sourcing they just want cheaper prices. I am one of the only makers of these tools and I can make more than I can sell no problem. The demand is real low for this stuff less than 100 per year. He is just used to the stuff coming out of china and india and he thinks I will work for those wages, not.

Kevin;
We need to go to lunch and have a chat. Your retailer is trying to improve his bottom line at your expense. You really do not need him.

I only wholesale when I want to quickly pay for a trip to Vegas. And then it is CASH on delivery in Vegas. You have a quality product that will virtually sell itself. The more of the pie that you keep, the less hours you have to put in.

Call me in a week and we'll have a lunch business meeting.
Jim

Hi jim I will call you this week thanks. I do sell the products myself but this relationship started a few years ago when I had no outlet for my stuff, I was not very informed as to what a wholesale retail relationship looked like. I made fine jewelry and the terms were brutal. I give them the jewelry they triple the price and pay me when it sells. I hold all the inventory and jump when they say jump. I have come to learn that most retailers outside of the jewelry industry get by on 20-40% mark up and have to purchase the inventory. The accountant showed me why I am going broke and it is because I am holding too much inventory just to satisfy spikes in orders from them. I got more equipment I am holding onto more finished goods than is reasonable and I am getting taxed on all that while he is using me like a bank with no interest charges and I was not charging him enough. I was not a very good negotiator when I started this I was just happy someone wanted the stuff and I figured I had to be as cheap as china and india to compete but that is not true.

I will be very interested to see this thread topped in 6 months.


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Think Snow Eh!
Ox

How would I find out what you have for sale?

Interesting flatware, some of it a little too weird for me but the Copenhagen set looks nice. $110 for 5 piece set isnt cheap but not that bad either, I have seen worse for more.

Charles

Gordon, Kevin is far from a neophyte.
He already has a website, he is pretty sophisticated in his posting of videos, running a blog about his work, and answering questions online.
His dealer that he is complaining about is the largest, probably oldest, and most well known in the USA.

His problems are more in the line of it being a small, niche market- jewelry and metalsmithing in the USA is the province of schools and hobbyists- and its just not the same as a consumer product, or even one that is oriented towards modern industry.

His direct competition is very old, very expensive, companies, probably less than 3 or 4 worldwide.
They have higher prices than he does, they have bigger factories and machinery that was paid for decades ago, and do enough business to justify processes that he cannot- his main competition drop forges their stakes.
That requires forges, big hammers or presses, and a large investment in tooling- big upfront costs, which result in lower per piece prices down the road 50 years or so.
I have catalogs from the 1920's that have his competitors products in them, unchanged to this day. Probably forged on the same dies in the same press.

He is doing everything right- in terms of hitting the right market with the right product at the right price, being flexible and innovative. But its just not a big market, and its not one that will pay any price- its hobby types, and they have their limits.

I think if he revises his wholesale pricing and practices, he will end up okay.

As for Georg Jensen- that stuff is not exactly new to americans- the USA has been a large market for them for over 50 years, and the older stuff is highly collectible here. I have some friends who have quite a bit of it.
The US flatware manufacturing sector has been decimated in the last decade or so- I think there is only one sterling flatware manufacturer left standing in the whole country. The stamped chinese stainless stuff costs less than the shipping costs of US made products.

I know a guy, we used to share a rep, who has done very well living in India 3/4 time, and having all his manufacturing done there- he does high design, somewhat Jensen like stuff, modernized, and probably sources from 50 different companies in India, and sells in the states- but its not easy, the margins are slim, and it really only works because its a one man, labor of love type business, much like Kevins. It would not support a corporate structure, his brother in the US warehouses and drop ships to stores, and he coordinates manufacturing and designs in India. If he had a company like Jensen, he would have gone broke in a year, but he has been at it close to 20 years now, and is still plugging along.
MICHAEL ARAM OFFICIAL SITE

So a small, responsive company like Kevin's can work- assuming the owner puts in 110%. But for a mainstream, "thats the way we've always done it" type of manufacturer, its very hard to compete with the asians.
I used to make and wholesale a line of furniture, accessories, and home products, and I would get Pakistani guys come to my booth at trade shows, and offer to make my stuff for me for 1/3 of my wholesale price, if I bought a container full at a time, paid in advance, as you mentioned.
Not my interest- I prefer to be the captain of my own tiny rowboat.
But its very hard to compete with that.
I had several pieces knocked off by different offshore companies, and sold for a fraction of my price- I would just stop making the piece, and come up with something new...

website please?

"He already has a website, he is pretty sophisticated in his posting of videos, running a blog about his work, and answering questions online.
His dealer that he is complaining about is the largest, probably oldest, and most well known in the USA."

@Reis or Kpotter : What is the link to Kpotter's website?

What is the largest, oldest, most well known dealer in the USA? Is it Rio Grande or Otto Frei? Those are my best guesses.

There's lots of discussion on how not to price yourself out of business on the Ganoksin Project forum... 10,000 jewelers who want buy your quality tools.

Kevin, it seems to me that you've got a good reputation, your prices are fair, and your quality is good. The problem is as much low demand for your products as anything else.

Which kind of leads to a question of what you might do to stimulate demand? Some top-of-the-head ideas follow, perhaps most of them silly because I don't really know your business:

- It looks like you could provide most of the stuff (hydraulic press, dies, some secondary tools) for an entry level jewelry-making kit. It might be worth offering a starter bundle for under $1K.

- Perhaps schools, teams, clubs, churches, charities and other associations would be interested in such kits to provide one-of-a-kind items to sell to their members and friends. Should be at least as good a fund raiser as Girl Scout cookies?? They make maybe 200 of something -- cool design -- showing affinity for the team, school, club, etc. Sell them at $20 up. Repeat each year with a new design, more demand. Could try this idea with one or two local groups; perhaps loaning them a press.

- Looks like you have the skills to help such groups design their one-of-a-kind product and provide an appropriate one-off die and perhaps resist or repousse design for a price.

- A broader range of tools for small art metal items would be useful. Not much for a group to sell to guys, for example. How about belt buckles; team pins (hats etc.); "LiveStrong" type bands, only in metal; USB drive covers; and ?? The type of group might lead to product ideas (e.g. book club-book mark; car club-key fob; geek-USB cover).

- Maybe local jewelers might want to be your marketing partner. They work with local groups once a year to come out with a cool design and help the members produce the items. The get a design fee, contacts, and PR. The presses, dies, tooling come from you.

Anyhow, doubling or tripling demand might go a long way towards your goals.

I am not sure why Kevin hasnt posted his website- I will leave that to him.
But yes, its Otto Frei that sells his stuff- Under THEIR NAME-
Which I sure wouldnt put up with.

A brand is worth a lot.

OttoTech USA Cold Rolled Steel Stakes : Stakes-Fretz Miniature, Sinusoidal, Silversmiths-Ball, T, Forming, Raising, Spoon & Peddiman : Tools & Metals : Otto Frei OttoTech USA Cold Rolled Steel Stakes - Tools, Equipment, Findings, Supplies

If it was me, this would say "Kevin Tech"- or, actually, MY brandname, which is Manmade.
Nonetheless, he is giving away something that is valuable here- naming rights- and reducing himself from a brand to just another supplier.
For me to do what he is doing, I would want a guarantee of minimum purchases per year, at the least.

Kevin, do you know about etsy:

Etsy - Your place to buy and sell all things handmade, vintage, and supplies

Online marketplace for artists, artisans, anyone really, to sell their handmade wares. It's an interesting site and apparently getting bigger.

I believe I've seen tools for jewelers on there, and as yours are handmade by you, I'm sure they would be allowed.

There are a bunch of jewelers on there as well, which would presumably be potential customers.

-James

I'm wondering if

it would be possible to wholesale a container full a stainless flatware from China, scrap it all and make a profit.....