RC Observation

[sherbs]

More years ago than I will admit while in a Business Course one of the many points I remember is a percentage amount. At the time it was taught a business of any kind cannot survive if it carries a 10% or higher backorder or out of stock level. I can think of more than a few RC manufactures that have a 10%+ rate right now. I wonder how long they will be able to keep their heads above water. A 33% profit was the least also to stay in business so if they are above that level maybe that is how they are doing it.

[DrIsotope]

I don't think the RC industry has anything to worry about, because supply shortages are hitting everyone. Bike shops still haven't recovered from the first lockdowns where everyone got sent home and decided to buy a bike. In year two of this ongoing thing, apparently buying a hobby-grade RC car (or four) is the way to go, because if you look at availability on Amain, their stock level on kits and RTRs is probably around 60%. They're selling them as fast as they can get 'em. Profit comes from some items having ridiculously wide margins-- where a $500 RTR might only make a shop $50-60, consumables (tires, bodies, etc) might be as much as +50% profit. Back in bike terms, I recall seeing crazy variability in margin-- one tire might be $70 invoice and sell for $89. Another invoices for $13 and sells for $50. Every industry is like this. That $12 pinion gear might invoice at 25¢, so long as you buy a thousand of them.

[svt923]

Those business performance metrics and ratios will vary widely from industry to industry so there is no way to say any business needs to maintain a X% ratio to function. RC as an industry is completely made up of nonessential purchases, there are not many options on most products, and customers develop extreme brand loyalty. The base level thought is if a company is out of stock, customers will seek alternatives and if that happens with too many products then sales are significantly impacted. In RC, if a customer wants Vanquish wheels or a Gspeed chassis, they will wait for those products to become available and very few will seek alternatives. Most RC companies with any level of brand following are selling nearly everything they can produce right now.

[OnTheTrail]

Originally Posted by sherbs

More years ago than I will admit while in a Business Course one of the many points I remember is a percentage amount. At the time it was taught a business of any kind cannot survive if it carries a 10% or higher backorder or out of stock level.

Everything has changed now as far as traditional "business" metrics due to the global pandemic and the supply chain issues going on.

In addition, I think the true business metrics from your course years ago may have changed due to "just in time" inventory that many companies have converted too. I work for a durable goods manufacturer and pre-covid we have several factories that can get an order on a Monday and have the item built on Wed and on a truck to our dealers to show up the next week.

[sherbs]

I agree with all that commented. I will try to give an example of what I meant. The following- company B would normally sell 1000 kits a month which is followed up by certain $$'s spent in addition to each unit sold for a total of X number in gross profit. If because of supply chain issues there is now a lack of product. This causes company B to only have 750 kits to sell, how is the loss made up month after month? They are selling everything they get that is popular but the lack of units has to have an effect on their end of month numbers. But to what point, layoffs, downsizing , closings? How long can this loss be sustained?

[OnTheTrail]

I think most RC business (manufacturers and retailers) are doing quite well. If the number in your example were across the board with all RC manufacturers/retailers, then yes. Those number would devastate the industry.

What we're saying though is that the manufacturers/retailers that normally would sell 1000 kits a month, are now sell 1300 kits a month on average. Yes, somewhere along the beginning of the pandemic, they were only selling 500-750, but the smart ones invested and took advantage of the market conditions and planned to build/sell many, many more kits then ever in their history. My LHS normally would carry about 80 RTRs in stock. During the beginning of the pandemic he was down to three. His back orders with Traxxas alone was eight pages long (kits and accessories). He's now got plenty of stock which continues to sell and he's getting more flowing back in. I was there last Saturday and his parking lot was so full, the customers had to park out on the road or park behind another parked car and one lady decided just to park dead center in middle of the parking lot! I'm guessing he's having a record year and good for him.