AMERICAN IN AFRICA: Distributors And Retailers Don’t Overcharge

Let’s Talk Turkey … WORDS: George Robey III* It’s become an all-too-common myth that SA distributors and retailers hike prices to “make a killing.” Complaints about the angling industry do not end there and include niggles concerning small tournament sponsorships, puny pro staff incentives and an overall lack of investment into conservation efforts. Many anglers look to the American market where pricing is believed to be consumer friendly, sponsorships huge, pro staffers amply rewarded and environmental leadership above the pale. The comparison is misleading however, and here are a few reasons why: MARKET SIZE: The recreational fishing market of South Africa pales in comparison to America. Whereas an American regional soft plastic company can earn a fractional piece of market share and remain viable with gross profits in the millions of dollars, the same company here must garner a huge piece of the total local market share just to keep the lights on. Distribution companies in South Africa import from large American companies but remain autonomous with an expectation for earnings. No distributor comes to Africa to lose money and the only way to turn a profit is through volume sales. VOLUME: The ability to maintain consistent, large volume sales provides the greatest opportunity for low retail pricing. Simply put, the more products a distributor can move, the greater the opportunity to lower margins. American markets that wholesale hundreds of thousands of products can sustain profitable margins at 10-15%, but when dealing in smaller volume, such as the case here in South Africa, profit margins MUST increase. It’s Business 101. It would be too simple to blame a small market for poor volume. Many other factors are at play. Among them, competition, which is a double-edged sword. Competition is healthy but in a small market the introduction of too many brands dilutes total sales volume among many distributors. The current economic situation throughout the country reduces volume. Fishing requires expendable income, and many anglers no longer have enough of it. As the owner of one large retail chain recently told me, “Gone are the days when anglers walk in and empty the pegs.” Weak retail sales change the way stores do business. Economic uncertainty cause retailers to make smaller wholesale purchases and re-order only when necessary. This increases administrative costs and causes distributors to hold larger amounts of stock at greater risk. UNSTABLE CURRENCY: The volatility of exchange rates between the Rand and US dollar creates havoc. Virtually all fishing products are imported and purchased for US dollars. When the Rand weakens the price of goods increases. Compounding the problem are the ever-increasing transport costs. Many distribution companies purchase on terms. In other words, a purchase is made from a foreign company and payment is due in 30 or 60 days. When there is instability in the currency market, importing becomes a huge risk which must be calculated into final pricing. TAX (VAT): Foreign fishing tackle suppliers increasingly provide convenient online shopping that appears attractive. Foreign prices seem much better than local prices, but it’s not always what it seems. Do the math: if a bag of soft plastics in SA costs R190.00 (US $10.30) and the same product sells for US $7.00 (average price), a local angler must still pay 14% VAT to clear the shipment, which brings the price to more than R216.00. Shipping costs, that this year have increased some five-fold, wipes out all savings, if any. Unlike South Africa, American sticker prices do not include tax. Therefore, to make a fair comparison, the checkout price for an American angler is about 16% more than the sticker price. State sales tax average 6% and fishing tackle remains subject to a 10% Federal excise tax. Certainly, there are isolated deals to be made by shopping overseas, but the argument can be made that anglers on both continents pay similar amounts for tackle. A better argument suggests that supporting the SA tackle market would increase volume and lead to reduced retail prices. *Like his grandfather George, and father, also George, before him, George Robey III is an accomplished and much published freelance outdoor photo journalist, bow hunter, angler and photographer. With many years of hunting and fishing experiences, he settled in South Africa with his wife Catherine some ten years ago as proprietor of the Venom Lures agency in Africa. Email him on info@venomluresafrica.co.za; follow him on Facebook/All Outdoors Africa.

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AMERICAN IN AFRICA: Distributors And Retailers Don’t Overcharge

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