THE Cub Report, Your Week In RC- 11.08.09 – Part 1 of 2

This week I guess I went a little long with all the industry quotes, so the boss man has asked that I break the report up into two parts… look for the second part to be posted in a day or so, it’s on some different topics than this part anyway.

Last Cub Report, we crushed the record for hate mail received at the BigSquid offices. Much of the email addressed the issue of me going off on the manufactures that did not display at the iHobby show a couple weeks ago. There are two sides to every story of course, so here’s part of an email we received from a west coast industry insider regarding the reasons why some west coast companies didn’t show at ihobby this year. West coast industry guy- “Simply put, the big manufactures did not attend not because all of them band together and decided to boycott the event together….. they have decided not to attend simply because for the $$ spent vs. the exposure they get, it is not worth it” This west coast industry insider went on to say- “iHobby as an industry representing show has really gone down hill over the course of the past 5-6 years and for what they charge, it just doesn’t work out for these big manufactures.”

So there ya go, the other side of the why show up for iHobby story. Yes, it’s expensive for any manufacture that has to fly people in and ship booth hardware to the show. There are a lot of reasons to not attend the show, yet, there are a lot of reasons to make it. In the end, I feel you only get out what you put into something. If you don’t show, you save some cash, but you get nothing out of it. If you do make the show, you may make that one industry contact that doubles your sales next year, or you may talk with lots of real world consumers that help you make smarter marketing decisions based upon your chats with them. In my mind the “real” best reason to be at iHobby is getting the chance to eat some authentic Chicago deep dish pizza. Awwww, the best pizza money can buy.

Seems we also started a firestorm in the last Cub Report with the mere mention of the “Asian Invasion”. The iHobby trade show cemented the trend of overseas manufactures selling straight to American consumers via the internet, bypassing the normal distribution chain in the industry. Here’s a hodgepodge of quotes from various email and phone conversions I’ve had about the subject of direct overseas selling over the last week…..

“the idea of American companies acting “shocked” by this is laughable. They were just trying to squeeze as much low-labor cost $$$ out of the deal as possible before the other shoe dropped…”

“the writing was on the wall for this one. You can’t be an American company sending your blueprints overseas to take advantage of “bowl of rice a week” labor, and then acting surprised and shocked to see your designs being sold under someone else’s brand name in a few months… ”

“HK (Zippy) works with factories over there to purchase all their “old stock” lipos. Basically they buy the cells/packs that have been sitting on the shelves for several years. They buy them in bulk at a very heavy discount because the factories are trying to unload them and can not sell them to any reputable companies. They also will take all of the ding/damaged/low voltage cells. They send the packs out without paying any import duties here to the USA by laying on the import documents and calling them a gift. Therefore, shafting the American tax payer and getting a tax dodging advantage on the US Companies…”

“(American manufactures) Need to figure out a reason for American consumers to buy from them, instead of a comparable product from an overseas company… Maybe it’s service, reputation, something… But the cost difference is SO great between the “direct” products and the “Brand Name” versions that people EXPECT a slight decrease in quality or service.”

“I have LOOONNNGGG said that the US Hobby Industry needed a REAL cohesive industry organization to stop (or at least discourage) these practices, but what do we get instead? The iHobby people gladly selling these companies BOOTH space, LOL!!!! It’s like nobody’s paying any attention.”

“Yeah, this is trouble.”

“Their (the overseas direct marketers) customer service is horrible. If you don’t believe that, just look on their own forums at complaint after complaint.”

“They are trying to establish themselves in the market with very cheap prices, but they will have to raise their prices to be a sustainable business model.”

“Now, it seems to be pretty much the EXACT SAME PRODUCTS that are showing up, not even Clones anymore!!!”

“Unless we here figure out a way to “add REAL value” to our brands, figure out something that would be difficult or impossible for the overseas manufactures to do, we can expect the loss of the American RC Hobby Industry as we know it within a decade.”

“Calendar year 2009 has been devastating to the Chinese factories. After years of ramping up production via manpower and larger facilities, the sudden sales slump took their feet right out from under them… late 2008 into 2009 saw orders drop so dramatically that the factories had excess stock for the first time, well…ever…. the ideology behind direct China factory selling is in my opinion, about 90% the direct result of simply having to move overstocked product somewhere else, and keep the factory workers busy by any means necessary.”

Those are just a few notes from close to 50 email exchanges and phone calls I’ve had over the last week on the subject of direct overseas selling to American end consumers. American manufactures can’t just say “Buy American!!” because American consumers will buy from who they see fit, you have to look no further than the full size auto industry to see proof of that. Time after time I’ve seen overseas manufactures screw over American companies that are sourcing product from them. In my eyes, it’s just a matter of time for them to start screwing over American end consumers as well. Once the American consumers lose trust in the dirt cheap overseas direct sellers, it won’t take long for it to spread via word of mouth. Screwing over just a few people here in the internet age will prove very costly to all the overseas direct sellers. The clock is ticking…

That’s it for part one, hate-mail is gladly accepted and appreciated, and support your hobby/industry in any way you can. Watch for part two soon.

Your Cub Reporter