Thread: Festool Price Maintenance...or not?

Originally Posted by Yanis

The best I could find for the Rotex was a German seller. $126.24 inc postage and GST for two, a saving of over $50, 30% discount. The sanding disks no longer stick to the pad that is on it now

Great Scott! I've an ROTEX 125 (essentially unused since the Mirka) and just thought to look at the prices given this comment.

$86 for a backing pad! Bloooooddddyyy hell! EIGHTY SIX! https://www.idealtools.com.au/festoo...-125?limit=all

edit: Turns out I purchased a few of these in June 2012 for AUD$32. Quite some inflation.....

Originally Posted by aarggh

So long as the pad itself is okay,why not just buy some self adhesive hook material?

Yes, this did occur to me. The pad is still fine but of course you need to get one with a good adhesive or maybe use a quality contact cement. It needs to be able to cope with the elevated temperatures you get with long term use.

$90 - worth the effort
$54 - marginal
$20 - why bother

My take anyway.

Originally Posted by Yanis

I am sure that they are precisely the arguments that the prestige re-sellers and the agent used. It completely goes against the purpose of the legislation. The outcome is certainly beneficial to Festool and to the re-sellers.

This is not an essential service item it is just power tools, if they were not worth the price they are asking they would be out of business. There are lots of other brands on the market at different price points so the option is with the consumer
At the end of the day the consumer dictates the price and rules by voting with their wallet. Do you not think they would change their whole marketing strategy if it was not acceptable to the free market?
Nit everyone runs their business on price point

Originally Posted by aarggh

So long as the pad itself is okay,why not just buy some self adhesive hook material?

you need 48 precise hole posisioning for extraction.

Originally Posted by Yanis

I am sure that they are precisely the arguments that the prestige re-sellers and the agent used. It completely goes against the purpose of the legislation. The outcome is certainly beneficial to Festool and to the re-sellers.

Sorry, Yanis, but that ain't necessarily so.

Some years ago when I was working as an accountant, I questioned this very point with a client who ran a quite large independent electrical appliances store - stoves, fridges,etc. Most "high end"
white goods are sold on an "agency basis" where the importer owns the goods in the store and the retailer sells the goods on his behalf and receives a sales commission. This effectively bye passes the need for exemption under the competition legislation, and is a very effective method of retail price maintenance.

When I questioned this practice he told me to look at the Bosch-Siemens products and to compare prices in Europe and in Australia. The german company Bosch-Siemens has a world wide hierarchy of brands, which, in order of price, quality and features are:

• Gagganau
• Siemens
• Neff
• Bosch
• Balay

At the top Gagganau is a very high quality, very expensive range of products.
Balay are very cheap products initially produced for the Spanish market when Spain was a basket case under Franco; it is now sold throughout Europe via the super discounters.
In Europe Bosch is their mass market brand targeted to the heart of the middle market.

In Australia, Gagganau, Siemens and Neff are all sold under agency agreements, so that effectively Bosch-Siemens specifies and controls retail prices. By an historical quirk, an independent distributor imports Bosch white goods and applies very large margins at the distributor level. Bosch-Siemens basically adopted the agency system to stop others raising the prices of their products excessively.

Quoting my client: "If I could legally import a few containers of Bosch stuff, then I could retail them for 25-30% below competitors and still earn a higher margin."

Just compare the prices of identical products between Europe and Australia; the variance is self evident.


Cheers

Graeme

Originally Posted by Lignum

you need 48 precise hole posisioning for extraction.

Piece 'o cake. I have customised sanding disks using hole punches. Us the same technique to punch the holes into the Velcro. Use a Festool sanding disk as the template.

Originally Posted by Beardy

T
At the end of the day the consumer dictates the price and rules by voting with their wallet.
Nit everyone runs their business on price point

Ahh the old "free market is the best market" argument.

It is because the free market model is fundamentally flawed that we have consumer protections. Wherever there has been an unfettered free market large and powerful players have taken advantage of the free market to manipulate the price. This is the whole purpose of the consumer legislation, to change the balance so that it is a more fair system. (Amongst other things of course.)

The exemption biases the system to favour the agent and away from the consumer. It essentially completely removes those consumer protections and allows unfettered retail price maintenance. Thus the so called "free market" becomes a rigged market with a free licence to set whatever price they can get away with.

This goes well beyond power tools and is far worse in some industries.

Originally Posted by Yanis

Ahh the old "free market is the best market" argument.

It is because the free market model is fundamentally flawed that we have consumer protections. Wherever there has been an unfettered free market large and powerful players have taken advantage of the free market to manipulate the price. This is the whole purpose of the consumer legislation, to change the balance so that it is a more fair system. (Amongst other things of course.)

The exemption biases the system to favour the agent and away from the consumer. It essentially completely removes those consumer protections and allows unfettered retail price maintenance. Thus the so called "free market" becomes a rigged market with a free licence to set whatever price they can get away with.

This goes well beyond power tools and is far worse in some industries.

I can’t see how a player with such a minority stake in a market place can control the market can you?
Let’s put the shoe on the other foot and say you made a product or provided a service and a third party tried to dictate to you the price it can be sold at how happy would you be? I know I would be pretty about it.
I have no issues with essential services being checked but object to this big brother/ nanny state type interference of general free trade that can find its own level with supply and demand.

If I can’t justify the price of an item I don’t buy it and look at the alternatives, it is that simple. There are plenty of big brand names that have gone by the wayside because they have not adjusted their ways to consumer demand, Festool are no different.

IS there any difference between Festools business model and MacDonalds?
Nobody is riding them for consistency in pricing between outlets

Originally Posted by Yanis

I am sure that they are precisely the arguments that the prestige re-sellers and the agent used. It completely goes against the purpose of the legislation. The outcome is certainly beneficial to Festool and to the re-sellers.

I disagree
The purpose of Australia's consumer legislation is to protect Joe and Jane average from unconscionable conduct by manufacturers, importers and retailers. It is very difficult, if not impossible, to demonstrate that the average consumer is harmed by Festool Australia's retail price maintenance. As I said earlier there are plenty of lower cost alternatives that the weekend warrior can purchase.

Festool successfully argued that at the premium end of the market, RPM benefits both retailers and consumers in that [premium] market by providing margins sufficient to allow the premium dealers to survive and the premium consumer to access the services those dealers provide. In particular, discounting by one or two retailers was an example of "free riding" whereby those retailers were benefiting from the sales effort of other retailers. ("Free riding" is regarded as an example of market failure which consumer law should intervene to correct.)

As shed dwellers we can bitch as much as we like about Festool's pricing, but at the end of the day, for a business, the cost of a tool is measured in productivity gained not dollars spent. And Festool primarily sells to businesses. The same businesses that don't blink when it comes to spending $2000 on a biscuit jointer able to insert Lamello's Zeta connectors.

Originally Posted by Beardy

IS there any difference between Festools business model and MacDonalds?
Nobody is riding them for consistency in pricing between outlets

As far as I know, McDonalds are primarily a real estate company who own the store location but franchise the store's operation. As a franchiser you can only sell what the franchisee supplies.

Festool dealers are independent businesses who sell stuff made, or wholesaled, by many different people.

...

Originally Posted by ian

As far as I know, McDonalds are primarily a real estate company who own the store location but franchise the store's operation. As a franchiser you can only sell what the franchisee supplies.

Festool dealers are independent businesses who sell stuff made, or wholesaled, by many different people.

Yes that is how I understand it as well but fundamentally you have individually owned businesses that are not allowed to compete competitively on price with others selling the identical product.
Festool retailers, whilst I acknowledge the business legal structure is different they are essentially operating a micro Festool business within their business agreeing to the terms of trade just like any other franchise style trade agreement.
Legal structure of the business aside, from the consumers point of view are they not the same? There is a price maintenance going on

Ian, as far as the whole "we should be able to fix prices because our products are the best, out pre-sales is the best, we demonstrate tools, we'll lend it to you for a day, and so on with all the other arguments they mount....of the 10-12 Festools that I have purchased (and sold 4 or 5) I have had none of them demonstrated, loaned or anything else that requires any kind of price fixing that can be justified. I have purchased them after reading reviews or other recommendations.

As far as I am concerned the RPM is a completely unjustifiable action - what the ACCC is saying is preposterous: Festool is the most unique product on sale in all of Australia - not just amongst tools but amongst every single product of ANY kind that is for sale in the country. I say BOLLOCKS!

Originally Posted by Beardy

I can’t see how a player with such a minority stake in a market place can control the market can you?

Well Festool is certainly doing a good job of controlling their own market. Apart from price fixing they try as hard as they possibly can to lock the purchaser into using only Festool consumables. Take one of the belt sanders as an example (the bigger one). The Australian model has a different length belt to other countries that the same sander is sold in. It goes something like (and I can't remember exactly so there may be an anomaly in here) if you buy the Australian model, and pay the extra Stralia Tax, you can use standard belts which are generally available but if you buy the European model the belts are 10mm shorter and that means you either
get them custom made,
or buy the crazy expensive Festool belts (here or there, they are extraordinarily expensive compared to USD1.00 each from Klingspor),
or modify the machine to take longer belts.

There are other examples of this within the Festool range such as the 491594 Clamp for $93.50 - that's ONE clamp - not a pair. One miserable clamp that you can get in another brand (perzackly the same clamp in different livery) from Germany for €27.90 or about $46 including double our GST rate. That clamp is also available out of China (and make no mistake - that's where the Festool version comes from) for peanuts.

I'm thinking that Beardy has not done any real research into Festool products and doesn't know much about how the system comes together to try to obviate any other remedies being put into place. I have done extensive research over the years. It pays to know what is being defended or attacked, rather than just backing a principle, because the devil is often in the detail, especially with something like the complexity of the Festool system and all of the bits and pieces that go with it.

Originally Posted by Beardy

Let’s put the shoe on the other foot and say you made a product or provided a service and a third party tried to dictate to you the price it can be sold at how happy would you be? I know I would be pretty about it.

"Pretty" what? It looks like a word has been censored out of that. Regardless, this argument doesn't hold water. Given that we are talking about the prices being too high, if somebody makes an object to wholesale for $nn why the hell would they care if the retailer sells it for less than usual/RRP? As long as the wholesaler makes the margin they require, then let the free market determine what the acceptable retail price is. Some retailers will discount, some will not and will sell less as a result. If they want to guff on about how much pre-sales effort they put in (and we all know how much stupendous effort Carbatec put in, just to single out one Festool dealer)

Originally Posted by Beardy

IS there any difference between Festools business model and MacDonalds?
Nobody is riding them for consistency in pricing between outlets

Yes there are big differences, and Ian has pointed out one. Other differences are that McDonalds are not exactly at the premium end of the food spectrum, and their prices are pretty competitive....if you want that sort of thing. There are numerous other options in a similar price bracket, and many of them are better quality, so the whole comparison just doesn't work in any sense I'm afraid.