Today we have changed the packaging of our very popular soil mixes. Before I launch into a history lesson let me explain. For reasons I will explain we can no longer ship products NOT in neat cardboard cartons. Sadly that means an end to our infinitely popular 50l soil sack packages. I have been working on this for months now, how to package soil in a box that will get delivered in one piece, retain the great value the sacks provided and still keep the margin we need to make the whole endeavour worthwhile. I am sure that sounds simple enough but trust me, I have dozens of pages of workings out, we have had to re-formulate the soils for consistent weigh to volume ratios. We have done dozens of tests with various packaging options and purchased pallets of all sizes of cartons. In short this has been the subject of my waking hours for over three months now.
So we have replaced our 14L and 50L packages with a single 17L boxed product nicely contained within a re-used cardboard carton, lined with a thin plastic sack, perfect for the carriers. The price of the delivered product has had to rise slightly due to the cost of packaging and processing time. Rather than buying a 50L sack we have a special discount price for 3x17L cartons (51L). For a dumbass who flunked maths at school this simple thing is a significant triumph.
So, what caused this change? What bought us to this? For the two people that might actually be interested or care let me explain I need the catharsis….. Nobody cares about delivery until it goes wrong. At that point, for some you would think their whole family burned to death in a car if judged by their extraordinary overblown angry reaction. Let’s face it, we do bonsai stuff, what exactly happens in a hurry? Still, it’s a symptom of our over privileged first world life that we are (at least in our own minds) entirely justified in hurling scathing abuse at business owners, operators and staff along with hard working delivery drivers. Just like a baby throwing all it’s toys out of the pram, British people have become so self centred, self obsessed and self important that they will LITERALLY say anything to get their own way. Well…. around here abuse is not tolerated, I will not take it and neither will I let my folk suffer at the hands of dummy spitting babies. Try it on me and I will tell you to F**** right off, it’s happened a lot. Folk threaten to sue me because a parcel is late. Try it, i’ll burn everything I own to the ground before you get a penny even IF I were liable. The shit we get here over delivery from otherwise right minded people has literally left my beautiful wife in floods of tears. Thankfully I know a guy.
Back in 2004 when we started this whole Kaizen Bonsai malarkey there was no web site (writing that makes my heart miss a beat, what a wonderful time) just a paper catalogue. Yesterday I looked up a copy. Back then, 16 years for the numerically challenged, delivery cost £9.50 with up to 21 day turn around and everyone was grateful we provided the service and saved them the trouble of dragging their ass all around the country looking for stuff they needed. Back then few people ran mail order businesses. It cost a lot to compile, print and mail a catalogue even if you had the requisite skills and that’s not to mention the money you needed for stock to back up your offering. For the price of mailing two thousand catalogues you could go to a wholesaler, buy a few bonsai, some tools and a bit of soil and set up a backyard bonsai nursery and sell at your local club. That’s what we all did. But, some folk don’t do clubs and the like and so Colin Lewis saw the need for a mail order business which in time became mine.
It was fairly obvious to me right at the outset we would need a web site, quite an insight for Mr Stoneage here. Soon after, the Post Office decided they didn’t really want to deliver mail any more and increased their prices to the point where it cost over twice as much to deliver a catalogue than it did to print the thing. Finally, come the shenanigans of 2008 and the ‘financial crash’ it became impossible to fix prices for a year because of wildly fluctuating exchange rates, besides the fact so many businesses were going to the wall and supply of products became impossible to secure. All those factors combined finally nailed the lid shut on the coffin of our wonderful paper catalogue.
Around that time we saw a literal explosion of small web sites and Ebay shops selling bonsai stuff. Much like the little backyard bonsai nursery of yore, a quick trip to a wholesaler and a grand later you were ‘in business’. Perfect for those working full time and looking to make beer money. Not so good for larger businesses and bona fide traditional nurseries with real overheads and wages to pay. Those of us with a large business literally got our heads kicked in by insane cost cutting. I remember visiting with a tree importer of the time and asking why I was paying so much for little cork bark elms which were listed on Ebay for £1.50 below the Ex VAT wholesale price. He told me the guy in question was paying £2 more per unit than I was and chose to sell them at a loss. That sort of behaviour rocked our world. Remember Akadama was £16 a bag in 1995 before dropping to £5 in the mid 2000s. All the folk doing those stupid things have gone now (for now) having gone bust or come to the realisation that being king of the CHEAP hill was a stupid life goal and the paper crown made you look like a gormless t**t.
There is a simple way to build a business and fill your order books, just be cheaper than everyone else. Whilst that may work for Tesco, Argos or Amazon it won’t work for a little specialist retail concern. Large retailers do not make their money from selling products. I was told that Tesco typically make a couple of quid on a hundred pound grocery spend. Modern mass retail by PLCs does not make money from selling actual product, they can sell product at a loss but still make a profit. I’m way too bone idle to explain how that works, go figure.
So in the battle for market share product prices fell and fell. Since the day I was born in 1964 prices for retail goods have been falling. Literally everything is a lot cheaper today than it was previously. The pound more or less halves in value every fifteen years but a lot of the items we sell are literally lower priced than they were thirty years ago. In know folk will say that just proves how much everyone was making back in the day but that’s not true. Cost savings at every turn have largely made this possible along with cheaper transport and bulk buying. I remember back when I started carving bonsai trees there were not many options for buying cutters so I went to the local family owned hardware store and bought a dovetail router bit. That cost me £21. Today that same router bit can be bought on Ebay for £3.90 including VAT and delivery. So, let’s break that down…
£3.90 less 20% VAT leaves £3.12 less 8% Ebay commission (the rate for larger sellers) which gives us £2.87 less 70p for postage leaves £2.17 from which we need to buy a paddy bag, print a packing slip and shipping label, a conservative estimate would be 15p so £2.02 Next we have to cover someone pick and pack the order. From experience this would take 10-15 minutes but lets say 5 minutes at minimum wage so 68p giving us a balance of £1.34. Out of that we have to pay all our overheads, heat, light, Paypal/bank fees, computers, printers, vehicles, insurance, accountancy and a million other costs. For most businesses that could be 40% of gross profit so lets assume this seller works on a 100% margin. A half of £1.34 is 67p so 40% overhead allowance from that gives us 40p net margin and leaves 67p for the cutter to be manufactured in China and shipped to the UK. The manufacturer has all the same overheads as do the shippers and the importer has to deal with the meddling government and their sticky fingers. Our retailer would have to sell and ship ten of these to buy a pint in a pub. The manufacturer would probably have to sell a hundred pieces to do the same. Ebay and Paypal and the treasury make the lions share and everyone else makes f-all. It’s not until you sit down in your accountants office to go over your year ends figures you realise just what a waste of time it all was. Sure if you sold a million pieces at 2p profit you could say you were a success but in reality it does not work like that unless you are a PLC. Finally of course all the above only works if the retailer buys his product direct from the factory gate. If you buy through an intermediary it’s all for nought.
Our carriers rep’ tells me his drivers do between eighty and a hundred and twenty drops per day but even so every van on deliveries loses about £75 per day. However if those same vans can make collections as well from the likes of us there is a chance of a profit assuming the van arrives back at the depot with enough parcels in it. Many drivers are self employed and rent their van from the company they contract their time to. Drivers can be paid as little as 50p a drop which does not include re-delivery attempts. They don’t get paid holiday and often have to work twelve or more hours a day. One of our drivers was in this situation, he worked from 6am to 7pm Monday to Friday and did Saturday 6am to 1pm. This guy was the best driver we ever had, an utterly brilliant lad who could not do enough for us. At the end of the year he cleared less that twelve grand. That’s the net result of mail order customers wanting cheap or free delivery AND low prices. You can’t have it all and even if you get it I can guarantee that provider will not survive.
Buying mail order is a privilege. You get what you want at a competitive price in a relatively short period of time without leaving your house whilst someone else does all the work. I suggest we all be grateful for the service we get because the writing is on the wall and this is not going to carry on like it currently does, change is coming my friends.
P.S As I was writing this I got notification that if as a company I sell products to customers in New Zealand I now have to register as a tax collector for the NZ government and collect GST (goods and services tax) direct from my customer at the rate of 15%. I love NZ and the people there, my grandfather (Nelson) was born there but the New Zealand government can go f*** themselves if they think I am going to do that. It’s just a matter of time before mail order becomes the expensive option and it will, once again, be cheaper to hit the road and go buy what we need face to face.
A very good read Graham, In my job I frequently have to remind people that they can’t have Good, Fast and Cheap. You can only have 2 out of the 3. The world has become obsessed with having what they want, when they want it and for as cheap as possible. It’s the throw away society that wants instant results.
I prefer to buy products that have been made very well, good quality products. Now, as you know this isn’t cheap but you get what you pay for. It will last a lifetime. Same with quality bonsai, it’s not cheap. You can take cheap and make it better for sure but it’s not fast.
Instant bonsai? good quality? not cheap.
Instant delivery, good quality? not cheap..
To be honest Graham I think you balance the juggle very well and prices are very good for the products you sell. Large sacks or cardboard boxes make no difference to me it’s about the quality of what’s in the boxes that counts.
Interesting breakdown of all the costs, it might help in a small way with customers who want and expect everything tomorrow.
As far as I’m concerned if you’re buying a bonsai tree, you are investing in something that has already taken a number of years to get where it is today. Another week for delivery is really not going to make any diffference.
Surely the most important thing is the beauty and quality of the tree you are buying – and that will always come at a cost.
I would hope that bonsai enthusiasts in general have a slightly more laid back attitude to life, and I know from bitter experience when I first started buying ‘Starter trees’ you really do get what you pay for.
Kaizen has a reputation second to none for every single aspect of its operation, I want customers buying and using your supplies long after you and I are gone.
Just need to find somebody to buy the business 😉