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Thursday, October 26, 2006

Lining the Pockets

A seasonal pic today! This is a very rough pencil sketch I did many years ago as the initial figure study for a painting. It was for a portfolio piece, pretty much a "generic vampire" illo, ergo the Bela Lugosi look ;)

But, I thought it tied in with this post's topic, which is the greedy bloodsucking of pipe distributors..... or is it?

I picked today's topic from a thread currently disintegrating on ASP. What started out as an inquiry thread about why a Pipe of the Year project wasn't going very well has turned into a rehash of some ridiculous nonsense from years back, largely due to one particular troll. For those who don't know the back story, it's pretty simple - in recent years, many regular folks (meaning, "not officially in the pipe business") discovered through the power of the internet that some brands of Italian pipes could be purchased much more cheaply direct from Italian dealers than they could in the US. Said fellows began to buy the pipes in bulk, tack tiny margins onto them, and resell them on ebay or direct, undercutting the prices of official channels by a fair margin.

Needless to say, official channels were not pleased.

Equally needless to say, the reactions of some of the folks profiting from this were of the immediate conspiracy variety - "They don't like us because they're making too much money and we're cutting into their fat margins!!" "If they didn't overcharge, this wouldn't be a problem!!" And so on, and so on....

The companies applied pressure on ebay and the result was the VERO conditions, which protect licensed distribution of marques in specific markets. This effectively translated to, "Grey-market import fifty Castellos to sell out of your closet, and ebay will shut your auctions down". Again, the reactions were volatile, with some going apoplectic about what they insisted on seeing as protection of price gouging.

The thing is, it isn't.

There were always two glaring differences that the "fair margins" champions missed - First was the difference between what a fellow earning a regular salary considers a fair margin on his part-time weekend hobby project, and the other (and even stickier) was the issue of service and warranty. The margin issue was really bad - Yes, someone with a paycheck and regular job might think a 5% margin ("Hey, that's $10 on a $200 pipe, just for posting a picture online!") was plenty, when it's quite a different situation if one must actually pay their bills out of these margins. Convincing people that it wasn't being "greedy" to try to make more than $50-100 per week just never seemed to penetrate in some cases, and there are still a few "mouths" who go on about this today.

The warranty problem was even worse. No one thought twice about buying their Ser Jacs on the grey market, where they were cheaper, yet when they burned them out, who do they go to? The closet dealers weren't replacing pipes, so naturally the guys were hauling these things to their local retailers and to the US distributors wanting warranties - not a good situation when said distributor made nothing on the pipe to start with, and is now expected to provide free labor for customer service to fix it.

Given these conditions, the VERO deal was a pretty reasonable fix, but there are still those who rage about it today. The biggest lesson that can be drawn from the whole sorry experience was that in the internet age, every manufacturer needs to think twice, and then five or six more times, about being sure their pricing is consistent across their markets.