Rod Warranties
- This topic has 14 replies, 13 voices, and was last updated Oct 1, 2007 at 3:21 pm by
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Hey guys –
I want to address something Loghova said in the Overpriced Industry thread about rod warranties.
I had a fascinating conversation at the Denver show with a friend of mine.
(( Hey Spencer, thanks for paying for all my busted rods !!
www.dsaphoto.com
A picture is thousand words that takes less than a second while a thousand words is a picture that takes a month.
The problem for some, as Zach said, is that they miscalculated, or didn’t calculate, the relative cost of rod warranties when they established them.
I guess it was Orvis’ 25-year warranty the eventually prompted other rod makers, when sales began to slow after the big sure in the late ’80s, to institute the unlimited warranty.
Zach, that’s a fascinating look at some of the numbers. It would be interesting to know more of the details.
I suspect that a $25 service fee might make a profit on some individual repairs (i.e. cracked ferrules need reinforcement, a snake guide needs replacing) but not when viewed all of them. The cost of replacing a broken blank section must be higher than that. Again, this gets into more specific numbers than any company in their right mind would be willing to share, not because they’re concerned about consumers knowing but because they’re concerned about their competition.
So I took a crack at the numbers, a little different than yours, but I come to a very similar place. First, the mark-ups at each part of the process may be closer to 100% than they are to 40-60%. A rod that costs $150 to manufacture (parts, labor, marketing, customer service) would get marked up to $300 by manufacturer, and then the retailer marks it up to $600. Many shops give employees 50% discounts– they’re not losing money. I don’t begrudge them that figure– they have overhead like the store and employees to pay for, not to mention the money they have tied up in inventory. In a specialty business like ours that’s not uncommon or excessive.
So if the $600 (retail) rod only costs $150 to manufacture, then how much do they need to cover their warranty repairs? If your return figure of 3% is correct, then then the additional markup to cover full replacement on 1 rod in 33 would be $4.50. If there are profit markups (manufacturer and retailer) on that along the way it could be between $9 and $18, which is not much!
The big caveat is something that this is what I, in my past life as a marketing consultant for Fortune 100 companies, would call a “2007 FOMA” study. (All the numbers are “From Outa My Ass”) But the figures are awfully close to yours, and don’t come anywhere near the commonly cited “doubling your rod price” argument.
I’ve always suspected the service fee was just to reduce frivolous claims, but thinking it through more carefully I bet you’re right– it probably covers a large percent of their costs.
Very interesting– nice thread, Zach.
Hey Charlie –
When my friend said his company turned a profit on repairs, he was speaking of the entire repairs division.
So I took a crack at the numbers, a little different than yours, but I come to a very similar place. First, the mark-ups at each part of the process may be closer to 100% than they are to 40-60%.
I noticed that too.
Interesting debate particularly as referenced to warranties.
BUT
lot of common misunderstanding between two retail concepts mark-up and margin. My father was in wholsesaling distribution and had it beaten into me at birthRe: Loomis, its $65 for expedited shipping but also not the only warranty option they’ve got. You can also pay $20 and get a traditional repair job.
Not sure how many people take them up on the $50/$65 replacement but I know that, unless I was really desperate, I’d be looking at the $20 repair/new section route.
I don’t really care how the various companies work their warranty/repair stuff; I just wish more would offer to sell you a rod w/ out the tube.
Loomis and Redington both offer complete rod replacement,would the fact that they are also pretty much the only fly rod manufacturer’s that have a full range of conventional tackle rods have any bearing on this?
It’s obviously a selling point for some but how much influence does the warranty policy have on your rod choices?
I know for me it’s fairly low on the list of criteria.cheers
CourtyAlthough this has nothing to do with the price or cost of fly rod warranties, the discussion has moved much in the direction of retail pricing so– I’ll add my 2 cents worth. This is an area I know well as to the differences between high and low turn-over retailers. Something that is almost always left out of discussions of this sort is turn rate. This is the number of times the entire stock of a retailer turns over in one year. So consider this: It’s my understanding that the average chain grocery store has a turn rate of about 52. I’m not sure what their average mark up is, but I seem to remember once hearing 20%. That would mean that 1/6 of the price of goods is gross profit. If the grocery store carries $150,000.00 in goods, (assuming, for the sake of disscussion, that is…) then gross sales for the year is: $7.800,000.00. This results in gross profits of: $1,300,000.00. This is brought in by “churning” that original $150,000.00 investment 52 times over the course of a year. In other words, 866.666% return on the grocers original investment in goods. Now to be fair, the expenses of running the grocery store are very high and at years end the net profits are nothing like this 866+%. I don’t know the turn rate in fly shops, but I gaurantee you that it’s far lower than a grocery store. In jewelry stores, it seems to be rather uniform, around 1 (one) give or take 20%, in all stores–chain or mom and pop. That’s why there are still a lot of independant jewelers. The big chains don’t get the high turnover of goods that many chain operations get so they must make it on big mark-ups even though their cost of goods is lower. So–my point is that all low turn rate retailers must survive by a higher mark up!! I can gaurantee you that the mark-up in fly shops is lower than that in jewelry stores. I just watched our best local sporting goods/fly shop go under after many decades in business. I wanted to put this into the discussion because the great majority of persons, not having primary (Owner, manager, etc.) retail experience do not understand these little-known, yet all pervasive facts that have a major effect on the the price of goods. (Fly Rods, of course!!)
Now–the balancing consideration is this: When high volume discount retailers move into new areas (Wal-Mart being the prime example) they put many small retailers out of business and the rate of Food Stamp needs go sharply upwards–a cost to the community that these big retailers fail to pay for. I’m not going to draw any further conclusions about the cost of fly fishing goods. I simply wish to shine a little more information into the discussion.
Regards, Marc
It’s obviously a selling point for some but how much influence does the warranty policy have on your rod choices?
I know for me it’s fairly low on the list of criteria.It’s a very important selling point for me. I wouldn’t pay several hundred dollars (or even a couple hundred) for a rod without a warranty for replacement or at least inexpensive repair. Stuff happens, and rod tips are easy to break. My first fly rod was a $200 Bass Pro rod with a 1-year warranty. At one year + 4 days, I made a bad cast and broke the tip with a clouser. No warranty, and they offer no repair options – my only choice was to go back and buy another rod.
I bought another rod, of course, but it wasn’t from Bass Pro. I don’t mind paying for the G.Loomis expeditor service a bit – $65 to replace a $600.00 rod is nothing.
It actually relieves me a bit to know they’re at least breaking even on the deal – even though the warranty is “no questions asked,” I always felt a bit guilty about sending in a rod broken through negligence (like the GLX that my two year old got hold of last year), because I don’t want to be hurting a rod company I like so much.
bd
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