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Old 02-02-2014, 10:25 AM   #101
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Forget justifying costs.

To answer your original question, the bottom will not fall out of the RC heli market any time soon because of the trends.

Helis are becoming increasingly powerful and the level of technology is advancing very quickly.

The end result is that there is a lot of churn. People are not happy with the status quo and are always looking for the next new heli, next new whatever else.

"In general", what was good enough 5 years ago is not nearly good enough to sell viably today.

FBL controllers are becoming more sophisticated and competition demands that they continue to add features.

ESC's are becoming more powerful and need to handle more current and bigger motors.

We are now putting 6S batteries on 450 sized helis!

14S helis didn't exist just a short while ago. Now we have 14S and 16S ESC's and 5-10kW motors to go along with 70C batteries.

The world speed record is broken every year. This year the fastest single pass was 177mph.

I got a TX in 2013 that reads telemetry back to me verbally and offers the type of configurability that was only something you could dream of 3 years ago. I also got a BT module to configure my Kosmik ESC with my Android phone. In addition I tried a GPS bailout system among a number of new technologies.

Batteries have come down a lot in price but have leveled off in recent history and are now advancing in current capability but not showing drops in price.
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Old 02-02-2014, 10:43 AM   #102
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Here's a perspective from a dealer ... and a consumer.

Firstly, I can tell you that the margins made by dealers are not what some might think. With a discount / sale coupon, most businesses are barely covering their costs and lucky to put a few dollars in their pocks. A brick and mortar business cannot sustain itself only helicopters unless they are able to carry many different lines of models. Pressures from Asian retailers are constantly eroding profits as well.

The market is VERY finite for this niche hobby. Think of all the online retailers plus the LHS that are in Canada / USA alone. Then think of how many people are actually involved in the helicopter hobby and how many new kits each of them purchases annually. I'm constantly reminded and aware of how small the heli community is, and how connected we are to one another via this site.

While it may or may not be true that the raw production costs might be low, consider the R&D, tooling of machinery in the plants, labour, materials (always increasing especially metals and polymers), design, testing, packaging, service/warranty, etc etc .... there's a LOT of costs involved, and for most pilots, will only purchase a kit for that model once.

One of the other issues being faced in the market is the emergence of a new middle class in countries like China, and the costs of labour increasing because of this.

Then, there's the governments which always want their share of the pie when you import these products into the country.

... there's a lot more to this, and while it may seem that prices are high, with a finite market, the prices are where they need to be in order for these companies to survive in a finite market.

The price of starter helis like Syma are designed to hit a broader market base because of how easy they are to control and are disposable thanks to a low retail price. The reason the retail price is lower is because they are able to achieve a higher volume since many are sold as "toys" in the mainstream retail marketplace.
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Old 02-02-2014, 10:45 AM   #103
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Hey Xray. Sorry if I offended you earlier. Like I was telling Mike, I took it more as being facetious or sarcastic and not meant to offend. Like a bunch of guys hanging around at work arguing about nothing. I do hang around a lot of construction workers, though, so maybe I have become a little abrasive. lol

Your words in italics

There are no set "fair" prices in a free market economy, and even if there was, which entity will determine what someone can charge for their items? The "fair" price of any item is dictated by what people are willing to pay for it.

Of course. I didn't think I needed to explain that I am talking about a market correction, not some kind of Soviet takeover of the free market. The market sets the price, but since markets do correct sometimes it is not unreasonable to ask if the time has come.

There is no monopoly or price fixing in this hobby, and there are a LOT of choices, so if one company is selling a similar item at too high a price compared to what you can get it for elsewhere, then they will get no customers and will be forced to lower their prices.

I don't know how you can so easily state this as a fact? Maybe it has not been exposed? Shrug. No, I am not some conspiracy theorist, and I don't think there is widespread collusion going on. I do find the pricing very odd, though. I think we all agree that the prices are waaaay beyond the cost of materials, so doesn't it seem just a tad coincidental that all the quality kits wind up at nearly the same astronomical multiple? Maybe it's all on the up-and-up, and maybe someday someone will find a cheaper way. Something just seems fishy, is all.

If three guys are selling at a similar price, and someone else sells the identical items lower, then the others will all have to lower their price to compete. Its the very premise of a free market economy, and there no set amount of profit margin one is allowed to make. There are plenty of other places in the World to live that will dictate these things for you though.

Now see, again, I was not talking about some kinda communist takeover, and frankly I really don't see how anyone could come away with that notion. Markets do sometimes correct themselves! I feel this market may be due for a bust, and I may be wrong, but you might wrong instead. I agree with you about the market generally being right about pricing, but we differ in that I acknowledge sometimes it needs corrections. That is not an opinion, we have seen it happen many times.

Clone always get pulled into these discussions, but once again people don't consider them to be of the same quality as the other manufacturers, or else the mainstream names would have already gone out of business from them or forced to lower their kit cost to the same as clones. Its hasn't happened, so there is no bottom and and nothing is going to fall out. Also consider that the clone guys invested nothing into R&D and simply stole the design from one of the other companies who did invest their time and money into developing and testing them. Use stolen development, poor quality metal, plastic and fit tolerances, along with some 10 cent and hour labor, and of course you can sell an item that appears on the outside to be the same as other higher cost items do, but the market will always weed them out once in the hands of the users and the flaws appear.

I hear you. I will buy some generic products, but I am buying JIF peanut butter no matter what! I agree with you on the clone makers, but they were never part of my assertion anyway. I just don't believe that the R&D, manufacturing, shipping, marketing, retailing, etc justify the current prices. Like I said, something seems fishy. I have learned that few agree with me. That is okay, too.
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Old 02-02-2014, 10:55 AM   #104
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I just don't get your point with any of this. This hobby along with any other is not a necessity of life. If you feel prices are too high, then demonstrate your lack of support by not participating in it. All hobbies are expensive and luxuries, and no one is forcing you to participate in any of them, so doing it knowing full well the cost and then complaining about it doesn't make sense to me.
Settle down, man. The original post was "When will the bottom fall out..." It was just a question, and it turns out few even agreed with the premise, much less the possibility of a bust. I never said I refused to pay or anything like that, and I didn't actually complain. You are absolutely right, this hobby is expensive and a luxury. But it is okay to wonder if prices are artificially high. Really, it is okay.
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Old 02-02-2014, 11:00 AM   #105
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Originally Posted by Cincinnatus View Post
You are absolutely right, this hobby is expensive and a luxury. But it is okay to wonder if prices are artificially high. Really, it is okay.


It's always OK to wonder and question. The moment we stop is when manufacturers really do get their way with pricing, this goes for anything including food and clothing which really are spiraling out of control.

Think about it ... jeans haven't changed in design, there really isn't any new technology going into them. Denim is denim. Yet, we get charged $100+ for a pair of "designer" jeans, but can get an equally good pair at Costco for $15. Now THAT is artificially inflated!
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Old 02-02-2014, 11:14 AM   #106
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The bottom falls out when EVERYONE flys toy helis
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Old 02-02-2014, 11:15 AM   #107
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Originally Posted by Jeff_Barrett View Post
Here's a perspective from a dealer ... and a consumer.

Firstly, I can tell you that the margins made by dealers are not what some might think. With a discount / sale coupon, most businesses are barely covering their costs and lucky to put a few dollars in their pocks. A brick and mortar business cannot sustain itself only helicopters unless they are able to carry many different lines of models. Pressures from Asian retailers are constantly eroding profits as well.

The market is VERY finite for this niche hobby. Think of all the online retailers plus the LHS that are in Canada / USA alone. Then think of how many people are actually involved in the helicopter hobby and how many new kits each of them purchases annually. I'm constantly reminded and aware of how small the heli community is, and how connected we are to one another via this site.

While it may or may not be true that the raw production costs might be low, consider the R&D, tooling of machinery in the plants, labour, materials (always increasing especially metals and polymers), design, testing, packaging, service/warranty, etc etc .... there's a LOT of costs involved, and for most pilots, will only purchase a kit for that model once.

One of the other issues being faced in the market is the emergence of a new middle class in countries like China, and the costs of labour increasing because of this.

Then, there's the governments which always want their share of the pie when you import these products into the country.

... there's a lot more to this, and while it may seem that prices are high, with a finite market, the prices are where they need to be in order for these companies to survive in a finite market.

The price of starter helis like Syma are designed to hit a broader market base because of how easy they are to control and are disposable thanks to a low retail price. The reason the retail price is lower is because they are able to achieve a higher volume since many are sold as "toys" in the mainstream retail marketplace.
Those are all very good points. Do you have any thoughts on why all the quality kits in a given size wind up at about the same price? I suppose you feel that that is the current state-of-the-art and that is simply the minimum price that they can be sold? That is plausible. I guess I just don't buy it, though.

In other industries where the actual product (software, pharmaceuticals) costs way beyond the actual cost of production, I am willing to buy the R&D, volume and other arguments to a certain extent (although those industries are known to command much higher profit margins than normal!). But with helis I just don't really buy it. Companies invent, manufacture, sell innovative products every day and survive just fine on 10%-15% margins. Heli makers are not doing anything or selling anything that justifies markups in the hundreds of percent over the cost of the materials involved. Just think if the latest vacuum cleaner with $40 in parts sold for $500. Dyson gets away with it, but everyone else has to sell theirs for $80 or whatever. Apple does it in their industry. But ALL of the heli makers do it...just not...quite....right.
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Old 02-02-2014, 11:20 AM   #108
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I'm the OP on this thread, but since it seems like all the salient points have been made and we are getting to the point of repeating ourselves, I think I will close my participation here--time for Super Bowl Sunday. I'll leave it open so anyone else can follow up it they didn't have a chance. Have a great day everyone!

In the end, I am totally surprised (more like flabbergasted!) that iirc there were only a couple people who agreed that prices are too high. Wow. So it seems my entire premise was wrong--the bottom will not fall out because the buyers think prices are fair. Some even fervently believe they are actually a bargain! Yep, flabbergasted.

I'm right there with ya and I totally agree. . . . Without going to deep into it and just a simple example. . About 6 months back I bought a goblin 500. . I was expecting very , very good quality for what I paid. After going thru the kit I was disgusted for what I thought to be mid grade quality ( Align like) for like you said a box of screws, cf, and a little bit of metal.

I'm also surprised your thread made it this far.. Most get trashed by page 2 or 3 from people who disagree. . . way to hold your own.

And +1 to Jeff barrett for post #105
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Old 02-02-2014, 11:35 AM   #109
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Those are all very good points. Do you have any thoughts on why all the quality kits in a given size wind up at about the same price? I suppose you feel that that is the current state-of-the-art and that is simply the minimum price that they can be sold? That is plausible. I guess I just don't buy it, though.
Well, they all use around the same amount of materials in a similar size class. Also, to remain competitive in the class, they must all be priced around the same.

Buy it or not, it's an unfortunate truth for these particular niche in the hobby. Let's face it, helicopters are not nearly as accessible to the masses and far more intimidating to most looking to get into the hobby.

When a parent is faced with getting their kid into an RC hobby, 9 out of 10 times it will likely be land base due to options available and the ease of operation. This is one of the limiting factors on our finite pool of consumers.

Quote:
Originally Posted by Cincinnatus View Post
But with helis I just don't really buy it. Companies invent, manufacture, sell innovative products every day and survive just fine on 10%-15% margins. Heli makers are not doing anything or selling anything that justifies markups in the hundreds of percent over the cost of the materials involved. Just think if the latest vacuum cleaner with $40 in parts sold for $500. Dyson gets away with it, but everyone else has to sell theirs for $80 or whatever. Apple does it in their industry. But ALL of the heli makers do it...just not...quite....right.
Apple and Dyson both have HUGE pools of consumers to sell to. RC Helicopters have a very small finite pool of consumers. This is one of the largest factors.

Additional costs include the cost to pay staff at the dealer, utilities, shipping supplies, paypal and debit machine fees, accounting costs, website hosting, website development, free shipping if offered, brokerage costs, cost to ship good to the dealer, customs/duties costs .... they all nickel and dime the total cost. There are many more hidden expenses that aren't considered or thought of.

I respectfully agree to disagree with you on this ... I wish as much as the next guy that prices were less as it would mean my inventory costs would go down significantly (and my own personal flying costs) if what you were saying were true, but the sad hard cold truth is, we are in a very small market when it comes to hobby grade RC helicopters.

I agree that cost of kits and parts may seem artificially high and would like to see them lower. The reality is that the hobby market is already a "luxury" market, and the rc helicopter market is just a tiny niche within it. The prices are where they are because they have to be in order for businesses to survive.
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Old 02-02-2014, 11:42 AM   #110
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Since you think so little r&d goes into a heli I suggest you design you own and buy the machine tools to build it. Then let us know what it will cost.

I think you would be floored by the price tag of a single industrial grade 3 axis CNC mill....


China floods the market with cheap ripoff clones built with $2 labor and raw materials they get below cost on govt subsidy and suddenly everyone is convinced that quality gearprices are a conspiracy. Then we stop buying quality and then complain where did all our jobs go
Add walmart homedepot and cosco to the china list too ... i bet if you bought a boxcar full of align 700s they would give you a deep discount too .

Take one canopy ... some one has to cut a plug ... build a mold ..... next how many molds for one canopy do they have ... so repet 25 times ... now pay a person say 3 bucks to build the halves ... then some one joins the halves .... primers them paints them .... ships them from a farawy land to the importer he marks it up and sends it out to the distrubors they mark it up and then the shops get them and now there 40- 140 bucks ...
Mean while that little co made squat on one canopy ...

The price we PAY does not represent wht the manufacture makes . Especially when there is so many middle men, customs forien exchange rates and such ..

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Old 02-02-2014, 11:43 AM   #111
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OMG now this fool thinks I'm Xrayted. LMAO

An intelligent person would be able to make his or her point without resorting to name calling or insults.
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Old 02-02-2014, 11:47 AM   #112
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This one is $107 from local EU warehouse plus $10 shipment.

Did you mean 1m competition sailing boat?

I know CF, kevlar, custom buil etc. can be pricy.
Real boat....

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Old 02-02-2014, 11:48 AM   #113
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Originally Posted by Jeff_Barrett View Post
Here's a perspective from a dealer ... and a consumer.

Firstly, I can tell you that the margins made by dealers are not what some might think. With a discount / sale coupon, most businesses are barely covering their costs and lucky to put a few dollars in their pocks. A brick and mortar business cannot sustain itself only helicopters unless they are able to carry many different lines of models. Pressures from Asian retailers are constantly eroding profits as well.

The market is VERY finite for this niche hobby. Think of all the online retailers plus the LHS that are in Canada / USA alone. Then think of how many people are actually involved in the helicopter hobby and how many new kits each of them purchases annually. I'm constantly reminded and aware of how small the heli community is, and how connected we are to one another via this site.

While it may or may not be true that the raw production costs might be low, consider the R&D, tooling of machinery in the plants, labour, materials (always increasing especially metals and polymers), design, testing, packaging, service/warranty, etc etc .... there's a LOT of costs involved, and for most pilots, will only purchase a kit for that model once.

One of the other issues being faced in the market is the emergence of a new middle class in countries like China, and the costs of labour increasing because of this.

Then, there's the governments which always want their share of the pie when you import these products into the country.

... there's a lot more to this, and while it may seem that prices are high, with a finite market, the prices are where they need to be in order for these companies to survive in a finite market.

The price of starter helis like Syma are designed to hit a broader market base because of how easy they are to control and are disposable thanks to a low retail price. The reason the retail price is lower is because they are able to achieve a higher volume since many are sold as "toys" in the mainstream retail marketplace.
I can respect your comments I just have a problem with the 30% profit margin built into the retailer model. You can't go in to many businesses and expect a 30% return on investment. Then add in that manufacturers require that a retailer have a retail location and that there product must be a certain percentage of sales. This pretty much ensures no one ever creates a better business model. And we are left frustrated dealing with incompetent hobby shops that are in it for their 30%.

The only ones that are going to disrupt this business model is places like hobbyking. People can hate them all they want but we probably owe a lot to them dragging the prices down to reasonable levels.

I also don't buy the R&D bs..... As an engineer myself you learn those costs are amortized over the life of the product. And if you share a similar design over multiple models then it's amortized across all those products. It ends up being a small fraction of the expenses.
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Old 02-02-2014, 11:57 AM   #114
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Doesn't the whole Assault 700 debacle sort of prove that there isn't a whole lot of room to drop prices? Stolen design (no r & d), crappy materials, cheapest possible mfg? There wasn't that much savings if I understand correctly, and maybe none once you retrofit the parts to make it airworthy. Do we think they made big bucks selling those kits? I wonder if they will even sell all of the first run...
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Old 02-02-2014, 11:58 AM   #115
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If nobody flew 700s they would stop making them or lower the price .Its that sipmle .. i dont like 700s ... cant justify battery and blade cost ..
But people buy them at the price they are so that price will stay and go up as something esle shinny is born ... i will fly wht i have untill i cant get parts for ... im not in the flavor of the week heli club ..


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Old 02-02-2014, 11:59 AM   #116
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I can respect your comments I just have a problem with the 30% profit margin built into the retailer model. You can't go in to many businesses and expect a 30% return on investment. Then add in that manufacturers require that a retailer have a retail location and that there product must be a certain percentage of sales. This pretty much ensures no one ever creates a better business model. And we are left frustrated dealing with incompetent hobby shops that are in it for their 30%.
If you're making 30% after your operating costs, then I want to know how it's being done because I'm not making that much and I could certainly use the extra cash. LOL!

Quote:
I also don't buy the R&D bs..... As an engineer myself you learn those costs are amortized over the life of the product. And if you share a similar design over multiple models then it's amortized across all those products. It ends up being a small fraction of the expenses.
You know the going rate for a trained engineer then and that they aren't cheap.

I respectfully agree to disagree. R&D is only a sliver of the entire pie, but it's still in there like it or not. Especially with models and designs changing so rapidly in our hobby these days.

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Old 02-02-2014, 12:05 PM   #117
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We appreciate that this thread went from really bad to more in line with the helifreak motto. Obviously this includes the OP and participants. As said, you can debate a subject without resorting to attacks. Please lets keep it this way so we don't have to close it.


Response to topic:
It's all about volume of sales. This technology can't be compared to car batteries and cell phones being that they are some of the highest volume items you could mention. Its a niche market, period.

Let's test your theory. Look at some well known helicopter manufacturers and see whether their owners are filthy rich.

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Old 02-02-2014, 12:13 PM   #118
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I think the problem here is that people "think" they know what the costs are based on what they "think" are comparable markets.

Let's look at the niche market of tournament ski boats. They consist of a V8 truck engine, bulldozer transmission and cable based steering and throttle/ FWD/Reverse. So fiberglass, epoxy, a windshield, some vinyl seats a few gauges later and you have a boat ski boat.

That's probably 12K in materials. So how can they get $50,000 dollars for one of these?

What a rip off right? Funny thing is that a lot of ski boat manufacturers went out of business and the ones left over have really done lousy for the last few years.

Most boat dealers don't make that much either. So what gives????

A lot more costs than we typically think about.
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Old 02-02-2014, 12:13 PM   #119
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Have you ever owned a Schluter heli? Kalt? Kyosho? MSA?Kaven? They are all out of business andt you don't have parts support.

I hope the current manufacturers make enough profit so it is worth it for them to stay in business for years to come and we don't end up with nice looking paper weights.

How do you turn a large fortune into a small one,produce RC models.
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Old 02-02-2014, 12:13 PM   #120
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My dad was complaining abot the car dealership chargin 175.00 to hook his truch to the computer ..

I asked him how much is that pc they use ...
How much do they pay the guy runing the pc .. including the cost of employee work comp and such ....

How much do they pay for lights and so on ..

Yep its expensive i agree
I charge 90.00 hr labor .. it is expensive to be in bissness

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