Debunking the kiteboard growth myth

pdxmonkeyboy · Fri Mar 27, 09 11:30 am **Debunking the kiteboard growth myth**

So Chooch and I were talking last night about the growth of the sport and what not and he mentioned something that I have heard quite allot of people say recently and that is "when the sport grows, gear will become more and more affordable" And I'm kind of shaking my head, uh huh, uh huh, that would be nice. Cause it makes sense, economies of scale bring the price down for most things

But last night I got to thinking about this trend and I kind of think that this rationale is pretty bunk. While it sounds good at first, I'm not so sure that material and shipping costs are what is driving the prices of kites. You have to face it, kites are not DVD players and companies are not creating 100's of thousands of them yo sell each year.

If you look at the trend in the past 5 years, increasing demand (and I'm sure material costs) has caused the prices of kite gear to increase over 100%. My first kite was a brand new 2003 SS fuel. If memory serves me correctly, I paid $900 for the complete setup. I purchased a SS SX board and it was $425. At the time, there were about 5-6 kite companies and the number of kiteboards was a very very small fraction of what there are today.

Now, the number of manufacturers has at least doubled, I couldn't even list all the different brands out there now, but there are at least a dozen of them and the sport has seen explosive growth. Like what, doubled or tripled in the last 3 years?

Now the a complete 11 fuel costs $1700.00 An SS SX board now costs $650. Ok, so there has been a ton of inflation you say. Well, my brand spanking new 06 crossbow cost me $1550. The same crossbow today is $1,900. 2K bucks for a piece of nylon, a carbon bar, and some spectra strings. When the waroo came out he complete deal was what $800? Now a new waroo is $1250 direct from best.??

I am a reasonably intelligent guy despite my sometimes childish posts but in all honesty, I don't really know what costs go into making and selling kites. While I understand that increased competition amoung companies drives the prices down, and the number of units each company is making drives the price down, so ummm why are kite prices continuing to rise (well outpacing inflationary increases) ? In the back of my mind I always think prices in this sport are driven more by manufacturers knowing that we are all reasonably well off, thoroughly addicted, and crave new gear that gets better and better each year than they are the true costs of bringing something to market.

If anyone with any insight would love to share their thoughts on this, it would be greatly appreciated. I guess I would like to create a more informed opinion on the matter.

Reaper356 · Since 10 Dec 2006 781 Posts Salem / LC Oregon Opinionated

I've noticed this increase. Just browsing, I saw my same 9m '07 kite I bought new can now be found for $150 more than what I paid in '07! The 09's $300 more.

I think the deal is that less people can afford a new kite, the used market is opening up, so people are going used. The kite companies have to raise prices to maintain their profit level. They know we can afford it to a point ...

Yardsale · Since 29 Mar 2005 387 Posts Portlanastan Obsessed

Petroleum....Oil is used to make plastics, and then transport costs, 3 or 4 markups later cha-ching!
Bottom line is margin for each link in the chain...if they aren't making margin (whatever that is) it doesn't pay for them to produce the kite. If kite makers can't sell at these prices...they will get out of the business. The way to reduce this is leave out retailers and distributors but then you have a limited ability to respond to demand. Kiting is such a tiny percentage in terms of numbers produced that there isn't enough $$$ to drive technology to lower production costs.

JMatic · Since 12 Aug 2008 252 Posts Boise, In Dat Ho Obsessed

'we are all reasonably well off, thoroughly addicted, and crave new gear that gets better and better each year than they are the true costs of bringing something to market.'

Pretty much sums up the reason the manufacturers have us all by the balls! Retail on my 09 Flexifoil Ion3's is $2,100....did I pay that? Well eff no, of course not--I got all 3 for $1500-tthat's what industry-insider bro's are for. Does everyone have access to a bro or pro hookup>obvious answer is no. But people will pay exorbitant amounts of hard-earned cash to get their fix--it's all relative really.

Think about how much a junkie pays for their drugs over the life of their addiction--kinda makes the $3K a yearto stay current with Kite gear pale in comparison considering the high (adrenaline rush) we get out of the deal. Plus, you get to keep your veins and other vital organs intact, unless you're the newb wondering how to do kiteloops w/out getting hurt.

Just My opinion, wonder what others think about the Ponzi scheme the kite co's have rolling on us.....

pdxmonkeyboy · Fri Mar 27, 09 1:03 pm

I understand the manufacturer, wholesaler, retailer link and the effect it has on costs. But unless everyone in that supply chain is demanding more of a percentage, it doesn't really explain the cost increase does it?

Best and SS for that matter, sell there stuff directly from their websites. So i'm not sure where the wholesaler and retailer costs go ..although do have to employ people to process and ship orders but that can't be more than one or two people and I doubt they are pulling down serious coinage. In fact, I'm quite sure of it.

"yeah,I grossed like 80k last year"
"oh yeah, what line of work are you in"
"I'm a entry level warehouse worker".

Sasquatch · Since 09 Mar 2005 2103 Posts PNW Bigfoot

"Awww, come on guys, it's so simple. Maybe you need a refresher course.
Hey! It's all ball bearings nowadays. Now you prepare that Fetzer valve with some 3-in-1 oil and some gauze pads. And I'm gonna need 'bout ten quarts of anti-freeze, preferably Prestone. No, no make that Quaker State."

Ever see the James Bond movie "Live and Let Die"? Drug lord makes the product cheap; then gets the users addicted, then plans on jacking the price once demand is through the roof. Seems like a clever way to make $ to me.

FlyDunes · Since 09 Oct 2007 1034 Posts Aloha XTreme Poster

Reaper356 · Since 10 Dec 2006 781 Posts Salem / LC Oregon Opinionated

Anyone have some financial data on a kite company (yearly gross etc)?

JMatic · Since 12 Aug 2008 252 Posts Boise, In Dat Ho Obsessed

Couldn't find any kite companies, but here's Volcom's financials for FY08......at least they're in the ballpark industry wise.

http://www.marketwatch.com/news/story/10-k-volcom-inc/story.aspx?guid={4F8231F5-F685-4C82-95B9-E5A4E9969FB6}&dist=msr_1

pjc · Since 06 Mar 2005 649 Posts Addicted

A more interesting question is - does hedonistic pricing apply?

What would you prefer - a brand new 2004 kite with the 2004 price, or a brand new 2009 kite with the 2009 price?

For me, kites took a big step forward in 2006 or so, but not everyone agrees.

FlyDunes · Since 09 Oct 2007 1034 Posts Aloha XTreme Poster

MIXWELL · Fri Mar 27, 09 4:14 pm

Kite prices are getting so ridiculous that i have to wonder just who the target market is??
Doctors, Lawyers, and other six figure jobs holders!

kyle.vh · Since 11 Jul 2007 713 Posts city of angels Addicted

good point monkeyboy! prices were supposed to drop...weak.
i think poweredUp is right: we'll happily pay whatever. and those you can't scour ebay for the left overs...
kiteboarding gear is an inelastic market. (i think, i slept a lot in that class)

wytcap · Since 10 Mar 2005 203 Posts NW oregon Stoked

I used to think it was crazy that companies sold direct on there web site for retail, no deals, but here's one way to look at it, as a company with a product to sell you have to decide where you want to sell, if you set up a network of dealers that’s who you are selling to, they sell to the end user. so as a company you also sell on your web site and when a customer calls you "make a deal", well its great for the customer but you just screwed you dealer! You will see this year and next the companies with a strong dealer network will not sell for less than retail on there web site.
Pricing has a lot that goes in to it, marketing, R&D, a huge one is shipping, and materials, there is a lot more but those are some big ones, There is only basically one company making the kite material.
Are kite companies getting rich, I do not think so, it is no different than what the Windsurfing industry.
My two cents.

pdxmonkeyboy · Sat Mar 28, 09 9:46 am

So did the windsurfing industry lower their prices when more people started windsurfing?

That was the point of my thread. I don't think that prices are going to lower on kite gear, at least not in the next decade. The demand is too high and the user group is to affluent.

wytcap · Since 10 Mar 2005 203 Posts NW oregon Stoked

Prices seemed to level off on windsurf gear, I do not think we will ever see the prices go down!

NateDogg · Since 05 Mar 2005 627 Posts I caught your mom on cineaptic.com

"If I were in this for the money, I would have left a long time ago"

I think if you asked, you'd find that most in the industry would agree with this statement. Nobody is ballin out of control, driving a Lambo and running a tight crew of string bikini groupies everywhere they go on kiteboarding money alone. Well, except maybe my boys at Real...no Lambo's though...just groupies...

Kiteboarding prices are going up because the industry is growing at the same rate as it's customer base. The problem here is it's the wrong type of industry growth. Instead of established companies taking bigger pieces of a growing pie, new companies are entering the picture and taking shrinking pieces of the same small pie. New profits (I'm talking revenue earned after initial investment) go to start up costs for smaller companies when they could have gone towards the bottom line for companies already beyond start up phase. Economies of scale are canceled.

Don't get me wrong here, I think having new blood and innovation in the industry is great, it's what drives everyone to do it better next year. But sometimes you can't have it all, ie new blood and decreasing prices. Especially in an economy where your cost of goods sold and shipping expenses are at best extremely volatile. You could leverage this volatility by holding a mix of petrol options, but I doubt anyone in the industry has the kind of cash war chest to be able to afford the risks.

Everyone wants to live the dream, and that'd be great if kiteboarding was growing at an exponential rate. Industry growth would be outpaced by rider growth 10 to 1. But growth in kiteboarding seems to be more in the linear stage than the exponential. Industry revenue growth is being soaked up by new companies, increasing costs are attacking the bottom line, and that's forcing everyone to raise prices just to stay above water. It's a precarious mix.

Walter Sobchak: Those rich fucks! This whole fucking thing... I did not watch my buddies die face down in the muck so that this fucking strumpet...
The Dude: I don't see any connection to Vietnam, Walter.
Walter Sobchak: Well, there isn't a literal connection, Dude.
The Dude: Walter, face it, there isn't any connection.
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