Shopsmith's new website is up....

[RFGuy]

I assumed the 25X sales increase target meant 25X more sales not the same number of sales at 25X the price.

+1

Econ 102 increasing price too much results in lower total revenue.

I agree. I didn't say it wouldn't have a negative effect on the market dynamics. I would argue this has been their default mode on other products for years, e.g. PP is a prime example. Just now, elevated prices are started to be noticed by more of their customers as repair parts get priced up.

[algale]

Did you forget about the 25X sales increase target comment from the interview? One way to increase revenue is to raise prices. Econ 101.

I assumed the 25X sales increase target meant 25X more sales not the same number of sales at 25X the price.

+1

Econ 102 increasing price too much results in lower total revenue.

It could be a combination. 10X more sales at 2.5X the price.

[dusty]

As I remember Econ 101..in the market place increasing price drives sales down; drive sales down far enough and you kill the business.

I believe that is what we have been watching for the last few years.

[RFGuy]

Inflation was suggested as a potential cause of recent Shopsmith price increases. I think we can all agree that to a first order, inflation is not the reason Shopsmith has raised prices, at least not by the significant increases being reported here on this thread. In the first graph below you can see that inflation (rate) has almost returned to normal of around 3%. What is surprising is that pricing (2nd graph) has NOT come back down at all. This means that even though inflation has normalized, many manufacturers continue to gauge consumers on pricing, i.e. prices are overly elevated right now. It has been this way for about 2.5 years now. IF there are any economics experts on the forum, perhaps you can explain this to me; when will prices normalize? Post pandemic some companies are reporting record profits, so is it price gauging or shrew business maneuvers, excessive high customer demand, etc.? Is it the significant increase in minimum wage in many states in recent years putting upward pressure on prices? Is it pandemic related garbage putting pressure/strain on companies still? Is it supply chain contraction resulting from decoupling from Chinese manufacturing? Is it supply chain related due to wars (Ukraine-Russia, Israel-Hamas)? Is there still excessive consumer demand driven by access to free money (pandemic stimulus)? Anyone want to take a shot at answering this for me because I would really like to understand better why some prices are still elevated significantly from where they really should be? On average they are now 20% higher than where the "normal" market was 2-3 years ago. Assuming Shopsmith tracks the market average, I could accept that their prices are now 20% higher than where they were 3 years ago, but we are seeing some parts 85% higher now which seems like price gauging - perhaps the part is manufactured by one of Shopsmith's suppliers and Shopsmith is only passing on this increase, but it would still be good to understand where these price increases are coming from.

Inflation Rate (CPI Year-Over-Year):

InflationRate_2020_2023.jpg (92.54 KiB) Viewed 206925 times

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CPI (Consumer Price Index):

CPI_2020_2023.jpg (71.5 KiB) Viewed 206925 times

[HopefulSSer]

Inflation means prices going up. If they're rising at rate X and the rate goes down to Y, that just means that at Y prices aren't increasing as fast as they were at X. They're still going up. If the inflation rate falls to zero, that means prices stop rising and remain level. If they start going down, that's called deflation (and sometimes it can be a very bad thing).

And I would say yes, it's price gouging if a company's profits increase. If the company was solely adjusting prices to compensate for inflation then while prices would go up, profits would remain level. If the profit increase is slight then "gouging" might be too strong a word, but it's disingenuous of a company to say "we're only raising prices to cover inflation" while their profits increase on the same sales volumes.

As for SS specifically, might it be the case that some items were significantly under-priced previously and now they're more in line with what they should be? Just making up numbers here, but if a part previously was selling for, say, only a 5% markup, raising it to a more sustainable, say, 30% markup would mean a big jump.

There are a lot of factors in play here.... and only the folks at SS even know what they all are.

[edma194]

My feeling is that the price of an initial Mark whatever machine has to become more affordable so that the parts and accessory sales at any price will sustain the company. Without new customers increasing sales across the board simply raising the prices of everything else will have a regressive effect. Inflation is a general factor in increasing costs to the company but the prices of items are already disproportionally high reflecting much more than costs of the parts. Just my opinion on the subject.

[RFGuy]

My feeling is that the price of an initial Mark whatever machine has to become more affordable so that the parts and accessory sales at any price will sustain the company. Without new customers increasing sales across the board simply raising the prices of everything else will have a regressive effect. Inflation is a general factor in increasing costs to the company but the prices of items are already disproportionally high reflecting much more than costs of the parts. Just my opinion on the subject.

Ed,

Thanks. Yeah, I agree with you. I was just playing devil's advocate to perhaps dive a little deeper into the macroeconomics going on out there that "might" justify ANY price increase by the mothership. Given the recent price increases by the company, it seems like price gouging to me - unclear if the beneficiary of this is the mothership or their suppliers.

[edma194]

Ed,

Thanks. Yeah, I agree with you. I was just playing devil's advocate to perhaps dive a little deeper into the macroeconomics going on out there that "might" justify ANY price increase by the mothership. Given the recent price increases by the company, it seems like price gouging to me - unclear if the beneficiary of this is the mothership or their suppliers.

I wouldn't call it 'gouging'. It's not like there is a sudden increase in demand. Early in my career I worked for a company that was saved from bankruptcy by hiring a managing executive who started a new policy where products had to be sold for more money than they cost to make. It's a foundational concept in business, but not so simple as it seems.

Without demand for a product it doesn't matter what the price is, a company needs sales and for many businesses discount prices are needed to drive demand. For some companies 'loss leader' sales will spur further sales, but this is more like the ink-jet printer model where low entry prices on the printers create sales of ink at high prices. This is further complicated by the availability of parts from other sources such as bandsaw blades.

I used to by Shopsmith brand bandsaw blades because I knew they would be the right size. Now I can find alternatives online, get them delivered for free if they're available on Amazon, and return them without great problems if necessary. I believe Shopsmith has to make their consumable parts more competitive in price or stop providing them. And there are plenty of more complicated considerations.

Again, this is just a personal opinion, but I think Shopsmith ought to do everything possible to drive down the initial price of Mark 7|5|4xx{S} machines to gain new customers for the future.

[RFGuy]

Without demand for a product it doesn't matter what the price is, a company needs sales and for many businesses discount prices are needed to drive demand. For some companies 'loss leader' sales will spur further sales, but this is more like the ink-jet printer model where low entry prices on the printers create sales of ink at high prices. This is further complicated by the availability of parts from other sources such as bandsaw blades.

Perhaps Shopsmith tools are the ink-jet printer of the woodworking tool world. They see replacement/repair parts as equivalent to ink unfortunately.

P.S. They just forgot that the "printer", aka Mark 5/7/PP headstock, are supposed to be sold for less than material costs to entice customers to purchase.

[JPG]

I see SS's major problem is they are not really in manufacturing, but rather in assembly of externally procured parts. i.e. suppliers are already reaping potential profit.

Trouble is their market is too small for major investment of capital tooling etc.

Maybe Nick needs to visit woodpeckers(think blue spruce).