What a LHS's profit margin you feel fair? - RC Groups
Shop our Airplanes Products Drone Products Sales
Thread Tools
Apr 11, 2003, 02:20 AM
Houng-wen Lin
GWS4CEO's Avatar

What a LHS's profit margin you feel fair?

What a LHS's profit margin you feel fair? In Taiwan, GWS has our own reatil demo shop.

The list price less 30% off for reatil shop from GWS factory.

Beginner and new guys pay full price. The registered basic GWS flyers get 5% off, however you get great service in our shop.

If you bought GWS products more than $300 in one year or purchased a completed set of GWS airplane, you will up grade to junior member get a 10% off. since you do not learn enough skill, can't fly solo by yourself and need too much cared.

If you bought GWS products more than $1,000 in one year , you will up grade to mid. member get a 15% off. Because of you did learn enough skill, can fly solo by yourself and do not need too much cared any more.

If you bought GWS products more than $3,000 in one year , you will up grade to sinior member get a 20% off. And a very experienced flyer who frequently help GWS shops teach new guys, may also qualified likewise.

Still not satisfied? I will suggest this guy, go to your home base near by to open a new GWS model shop. Of course, you will get 30% off!

How you think about what GWS did?
Sign up now
to remove ads between posts
Apr 11, 2003, 02:32 AM
Houng-wen Lin
GWS4CEO's Avatar

Before and After

Before you run a model shop, you always complain they charge you too much profit!

After you own a reatail shop, you always feel so difficult to earn your life!
Apr 11, 2003, 07:22 AM
Houng-wen Lin
GWS4CEO's Avatar
In Japan, YS Engine only give 15% off for their dealers. So I can see all the dealers sell YS at list price. No one make discount!

But is this fair? For a new comer and experience pay the same price?

What's you think?

GWS try to experiment the shops operation to see how it goes! So we can help our dealer even with more understanding.
Apr 11, 2003, 09:22 AM
dusty bible = dirty life
Majortomski's Avatar
Enough profit so that the LHS owner can;
A. Feed, shelter, cloath, and educate his family.
B. Have enough to reinvest in the shop.

I believe in the States that the major distributers have an agreement with the LHS's that there is a minimum street price that the distributors' own discount house will not sell below. This allows the LHS to sell the same product for the same price, and still make enough to cover costs.


A VERY satisfied GWS customer in OKLAHOMA
Apr 11, 2003, 09:28 AM
We want... Information!
Bruce Abbott's Avatar
A 30% discount to dealers is certainly not excessive. The LHS has to make enough profit to cover other costs such as freight, wages, rent, advertising, dead stock etc. Setting a retail discount rate of 15% or less is unacceptable, as it would probably not be enough to cover costs, and therefore the LHS may decide not to stock your products!

It seem to me that having discounts for frequent buyers would discourage beginners. I would feel a bit ripped off having to pay full retail price, while someone else gets a discount just because they are addicted to GWS stuff .
Apr 11, 2003, 10:11 AM
Senior Member
$3000.00 a year is a lot of Tiger Moths...
Apr 11, 2003, 11:27 AM
Houng-wen Lin
GWS4CEO's Avatar
Originally posted by lymon
$3000.00 a year is a lot of Tiger Moths...
If you bought GWS products more than $3,000 in one year , you will up grade to sinior member get a 20% off. And a very experienced flyer who frequently help GWS shops teach new guys, may also qualified likewise (without any purchasing. )
Apr 11, 2003, 11:52 AM
Houng-wen Lin
GWS4CEO's Avatar
So GWS was forced to start our own promotion and distribution. I did introduce a lot of Taiwan flyers who had seen GWS advertisement to LHS. But many LHS said: Don't buy GWS airplanes, Gas powered is better!.....

We have our own shops to teach beginners learn how to fly electric airplanes. So the other LHSs can't say electric powered can't fly!

Only 2 years, the sales in Taiwan local increased nearly 10 times! And still growing rapidly.

Thanks God! I did tell the flyers the time to go church, don't come to GWS shop. But they don't bought my story that is reason why his airplanes crashed!
Apr 11, 2003, 12:17 PM
Registered User
Ben Diss's Avatar
You're missing the point here. Margin is not a reflection of a discount level alone. Margin (assuming gross margin) is the difference between what an item is bought for and what it is sold for.

Department stores in the US typically operate around 30% - 40% gross margin. That typically results in 5% - 10% net profit (EBIT). Hobby shops probably operate with less margin.

Some things to consider when setting pricing stategy:

- Controlling minimum advertised price helps maintain fair competition amoung your resellers.

- Volume level discounts to resellers favors large organizations. Some would say this penalizes small companies. The hobby business is built on small Mom-and-Pop operations. Be careful not to reward the big guys too much.

- Get creative with reseller incentives. Instead of rewarding based soley on volume, consider rewards based on sales gains. For example, if a reseller increased sales over a period by 20%, supply them with in-store sales fixtues or advertising dollars that will help them sustain their new sales level.

Get creative and try to avoid playing the discount game. If your customer can buy your product from various stores, all for the same price, the decision will be made more on the support of the sale and of the product. This benefits you as you are more likely to have more satisfied customers, assuming the product still has value under these circumstances.

Good luck.

Apr 11, 2003, 01:51 PM
Registered User
I agree with Ben. The LHS margin has to be large enough for the owner to make a living, or, after a short time, he won't be there. The real emphasis should be placed on support for the local dealer -ie- local advertising, building seminars, flight training, etc.
Help them build a strong business selling GWS products. There will always be those who want to buy everything at "wholesale", but the average modeler will pay the price if there is a strong service/support organization behind it. There seems to be a tradition among some of the kit mfgrs to reward supporters with free kits for "beta" testing. No discounts, just the opportunity to be one of the first to have a new model. Perhaps the dealers who are doing a good job for you get the newest products first, but no extra discount? There lots of ways to provide incentives without getting into the lowest-price-wins game.

Apr 12, 2003, 01:23 PM
Houng-wen Lin
GWS4CEO's Avatar
In Taiwan, GWS pay shipping to every where in this country. The 30% is profit exactly for GWS dealer.

Beside of the 30% standard discount, GWS always has extra discount according to the dealer's purchasing amount get more % of credit.

GWS run all the promotion and advertisement. GWS introduce new customers to GWS dealers after they learned how to fly from our tranning center.

If you can read Chinese, you may go to GWS froum to see more detail about what's happening here in Taiwan that GWS did.
Apr 12, 2003, 02:14 PM
Registered User
Mr Lin,
This sounds like an excellent program. Why not set up a similar program in the US? (city of your choice) If you could make it work here, it would then be a pilot (no pun intended) program from which dealers all over the country could learn the best ways to promote GWS products and the hobby in general. Perhaps Horizon could initiate such a program?

Apr 12, 2003, 04:01 PM
Houng-wen Lin
GWS4CEO's Avatar
Since the great value of cost-performance of my GWS airplane, we sold them very well all around the world.

We wish that we can spend my effert on design and production. But things happend in Taiwan as I stated on above. We started some experiment of retail sales and tranning programs.

While USA is a huge market, we respect the current distributors. GWS do not have enough man-power to handle that.

For example: Taiwan population only 23,000,000. Income $12,000/year. ME109 in the first 3 days at Taiwan LHS, 200 kits spred and dispeared! But for USA that you have nearly 12 times population and twice income, that is a 24 times economics scale to Taiwan! But Horizon just order first shipment of ME109 in qty less than 2,000 kits. While the second shipment will follow by one month later!

In USA, you have more space to fly GWS airplanes. But Taiwan government had many restriction on RC....Yet very few space. Taiwanese parents do not spend too much buget on RC, since our food and housing always costy!

So the market ratio in USA just not right!

Maybe can try at great LAX or California? But this need to discuss with Horizon first. I do feel the situation of GWS airplanes qty sold in the USA by far less than the market size should take!
Apr 13, 2003, 03:20 PM
Registered User
Mr. Lin,
I can certainly see that the scale of economics between Taiwan and the U.S. would demand a different kind of program. I still think that appropriate incentives for dealers could encourage both education and, ultimately, sales. The idea of a "flight school" for those who are new to the hobby is a marvelous idea. Because of the lack of restrictions and more places to fly, too many people who are new to the hobby end up with inappropriate beginner planes and equipment, are unaware of flight safety considerations, and because of lack of experience, end up having a negative experience with RC. Perhaps some special form of discount for LHS's on planes and equipment used in providing a "flight school", help with local advertising in connection with the flight school, and something to offer to experienced "trainers" who help with the school? How about a vest and baseball cap emblazoned with GWS TRAINER on it.? There are many ways to help promote the education process, which, long term, would translate into more sales for the LHS.....and GWS.

Apr 13, 2003, 08:13 PM
Senior Member
Geography is one problem here, Mr. Lin. Your products are best sold in a hobby shop... a specialty retail store. America is very large, so that population density is low, especially in the west. While hobby shops were common thirty years ago, in some places they are now scarce. Much GWS merchandise is sold via mail order in this country, and the success rate is lower as a result.
I'd guess that most Taiwanese live within a two hour train ride of your store.
Your idea of LAX may be sound... if you can take southern California then the rest of the US will slavishly follow.

Quick Reply

Thread Tools