An Idea for IROCCers ...

[RC51]

I have an idea to run by IROCCers.

In operating as an online retailer for the past few years, I have had many occasions to see the challenges and opportunities inherent in the RC Car industry. Operating a niche retail unit (limited brands, application, and market) online is not profitable in the traditional sense of serving disparate retail customer sales without significant product line and brand expansion and increased exposure to risk. Although T-Bang had enjoyed rapid growth of its customer base and acceptance internationally as a racer-focused provider, it's time to think differently and to develop a new manifesto: to take back the standards, pricing, and quality we all deserve as enthusiasts and consumers.

When I first became interested in doing this and was getting to know more about the industry, my personal interest was in having access to high quality racing merchandise at the lowest possible price and to spread the opportunity to IROCC and other clubs/racers while ensuring the operation was sustainable and not necessarily profitable. Over time, however, I have come to feel that the current supply chain is fundamentally flawed and the racer as consumer ultimately suffers. I believe we can change that.

The RC Car and Accessories industry has become massively out of control and unsustainable. Its structure of relationships is fundamentally flawed, and pricing is unnecessarily high not only due to the cost of merchandise, but also to the expectations of racers. Global financial circumstances have placed unprecedented pressures on manufacturing, shipping, marketing, and quality control concerns on the entire supply chain from concept to consumer. Distributors have moved to selling directly to customers (sometimes at a premium, most often not), which directly undercuts their retail partners and puts them in a conflict of interest which they unanimously ignore. Racers worry about retailers, retailers worry about margin, manufacturers worry about volume and profit, and racers are inherently and justifiably fickle. Governing bodies are simultaneously scapegoated and exalted. It's maddening and only getting worse. It gets in the way of the reason we started into the hobby in the first place let alone why we invest so much of our hard earned money in making our cars drive better and faster.

I am of the opinion that a different model is in order: one that focuses on what racers need at the quality, speed and price that they deserve as owners of the hobby. What I am wondering about is whether or not you think a Victoria-based IROCC co-op hobby venture would be a good idea or not. My thought is that we can keep open lines of communications and good merchant accounts with major suppliers on a legitimate basis thereby giving us all access to the best possible pricing as a club. Without such a venture we'll do fine, I'm sure. However, we burn through a huge amount of consumables and we're always looking for great buys. With the collective skill and intelligence in the club, we could do a great job.

What do you think? Never mind the financial side. Conceptually is this a good idea or not? If not, why not? If so, what would you see happening? Thoughts welcome.

Phil

[Tom]

I believe one of the things that has made IROCC the great club that it is has been the absence of a commercial venture behind the club.  For a long time some have been somewhat resentful that we have not had a local hobby shop that was willing to pitch in and support the club through our lean times.

However, I believe this was a blessing in disguise.  Having seen the troubles Vancouver has had sustaining a great racing scene in modern times has me feeling the financial interest of a commercial enterprise behind a track can pose challenges in membership as commercial interests clash with the policies that encourage budget racing.

A Co-op approach may very well be enough of a compromise so that the club can continue to encourage low-cost racing as well as provide members with good priced gear without the inevitable conflict of interest that a purely commercial venture would have.

If such a thing were to go forward, there would have to be a lot of thinking along these lines to ensure the continued long-term success of both the club and the Co-op.

[jarrodH]

i think it could work if done right, if its truly what im reading.. aslong as the club makes only a few percent or something(say 15% or in that area) on the products so prices stay low, and the money goes back into the club(not peoples pockets) towards a permenant track, new boards or what have you, then im all for it.. and to keep out the riff-raff, you have to have paid your membership fees up to date to take advantage of the prices.

just my .02..

id rather buy from the club, or another racer than go to shaver when possible..if prices are low and we have access to repudable products, count me in...

[RC51]

I hear the cautionary tale, Tom. My thought is that he whole purpose of the co-op would be first and foremost to serve its membership by keeping the costs as low as feasible. It would be owned by everyone as opposed to any given individual.

I don't necessarily know about the IROCC as a club owning it, though. I haven't thought my way through it. I mean, it would certainly be possible but we wouldn't necessarily want to put everyone in a position of having to buy in. So, to speak to Jarrod's point, if the money went to buying club track items, offsetting costs here and there, then co-op non-members would benefit from the members which really wouldn't be fair. Not to mention the carnage that would ensue if members signed up from outside the club.

I could envision maybe a three tier pricing structure: one for co-op members, one for club members who choose not to be co-op members, and one for the general public if there is motivation to also add an online retail component. In the alternative there could simply be member and non-member pricing which would be simpler and likely be most fair. There would need to be some degree of that since distributors, suppliers and manufacturers insist on that for the most part unless the membership is sufficiently large enough to warrant economy of scale and not to do harm to other retailers. I have first hand knowledge of this.  I've done some financial modeling and I have a sense of markup required to keep it reasonable and feasible (legal and administrative costs, dollar cost averaging, collaterals and marketing etc) and I think it would work. What do others think?

Phil

[Falcon]

Heres my thought as a seller of parts. I think that this could work if there are a few checks in place. I would like to see a small group of members(4) who order, sell and are contacts for the club. Also the people who were selling before would sell all parts to the club. Members would be obligated to purchase all parts from the club only as it is a co op and it would be in there best interest. This also would mean the exec would have to put there foot down and let us all know what we are allowed to use.
I think that this would work very well for the  club and it's members.

[RC51]

Thanks, John.

From what I have learned, there are a few things (likely more!) to consider here:

1. Having single points of contact for brands is a good idea. But this may not necessarily be related to brand. It could also be related to distributors who sell multiple brands. For example, Horizon's MRA account, High Performance, Canwest, and so on. Others are pretty straight forward, particularly if they are tied to manufacturing such as TEKIN, TRINTY, CRC, Serpent and similar wholesalers. This also saves administrative nightmares. There absolutely needs to be consultation before purchase are made or some form of guidelines in place. I was also thinking that for member special orders over a certain amount, that there would need to be a deposit.

2. I would see a need to separate a co-op form the club unless there is a formal desire to merge the two. This is key particularly if there is interest in membership outside of Victoria. Obliging anyone to purchase from anywhere is not a great idea due to the inherent resentment associated with it. If the prices are the best they can be, then naturally it would be in the person's best interest to buy from the co-op. There are exceptions, though, and if it makes sense for a person to buy elsewhere because of a particular item they carry that the co-op doesn't, then it's the member's call. In my mind anyway.

3. It is not possible to have distribution or MRA accounts from every source, particularly without a storefront. Some simply do not entertain the idea. I can think of three key sources that come to mind immediately. That would need to be through through.

4. Buying up a seller's stock is a junk ball. The key to retail in this business is churn rate, not margin, and holding as little inventory as possible while having drop shipping arrangements with suppliers where possible or JIT shipping and parts ordering. So if the seller is holding items that are not selling, would the members support immediately absorbing that financial liability? Likely not. If, however, there are consumables that we know would be sold in a 90 day period, then it may make sense. The transfer of stock would likely also need to be at or below the price available through distributors and importers directly, otherwise, the members would not get the best possible price. I know this is contentious, but those types of decisions would need to be considered by a board or exec or something to that effect, with a view to maximizing member benefit and thinking in terms of what is best for the collective membership (or quorum) at large.

Just my two bits. Others may have different thoughts.

Phil

[Falcon]

I think that if we are thinking about doing this, it should start with four people willing to put a great effort in and get together with the exec soon. We have to start somewhere.

I'm in and willing to help. It's all about the club and it's members.

[RC51]

Excellent, John. I am in and a couple of others have also expressed interest.

I think there is a window of opportunity open here that we should be aware of. As T-bang transitions out of the business and begins to close our accounts it is by far easier to position a new entity and keep the accounts open with different admin and financial details than it is to go about it from ground zero. There are several more doors that would open as well, so as I have been holding off as long as possible just to see if there is a co-op possibility.

A good first meeting would be excellent. It would be awesome to scope out a mission and mandate as well as a set of guiding principles that are shared and supported.

P.

[haddow]

2. I would see a need to separate a co-op form the club
Phil

Kaif Halak

Sorry I dont have more time to add my thoughts but wanted to stress my opinion on one  point above...

Agreed the two entities should remain distictly separate. club dues, race fees and trophy race fees should be handled as they are now as should the current governing structure of the club based on the success of IROCC compared to most clubs I know of.

Ma'a salama

Jody

[Tom]

+1

[weekend camper]

Having thought about it, and talked about it a bit, I gotta ask "what is really wrong with the current system?".


The main points I keep coming back to are: having product/consumables available at the track, having choice in product/technology selection and having corporate sponsorship for our events.


I for one really like having some items available at the track for purchase.  Those hard to find items I can find at the LHS or tack onto someone's internet order.  Would the co-op have sufficient stock at the track?

Product selection is a more sensitive issue.  On the one hand, you've got people that want to run the latest and greatest, and the other group wants a spec racing series.  All I remember is the IB/SMC battery debacle and I have a really hard time being told to run product "x".  Conversely, how would the co-op be structured to absorb the cost of crappy product?

Corporate sponsorship is an interesting issue, because a low profit/non-profit entity by its nature can't throw money into prizes.  That entity may (or may not) curtail outside sponsorship of our club activities.  Can we fill the void?  Do we need to?

I think there is a window of opportunity open here that we should be aware of. As T-bang transitions out of the business and begins to close our accounts it is by far easier to position a new entity and keep the accounts open with different admin and financial details than it is to go about it from ground zero. There are several more doors that would open as well, so as I have been holding off as long as possible just to see if there is a co-op possibility.

Raising something from the ashes of T-Bang is a great idea.  As others have said, I would want it not to be tied into IROCC.

[RC51]

Hey, Bruce.

What is wrong with the current system? It's more expensive than it needs to be through most retail channels. Co-op would likely save at least 10-20% on most items. Warrantees and so on would be handled as they normally would with the manufacturer/source as appropriate.

Yes, it is important to separate this from the club in conceptualizing it. It has potential to be larger than Victoria and larger than RC car if thought is given to scalability. Insofar as parts at the track is concerned, that would need to be scoped out and discussed and would not necessarily be a Co-op obligation. First things first.

I have had a legal consult on the idea and done the research for administrative/legal startup etc. A "First Directors" meeting would need to occur at the beginning to spell out such guiding principles in a formal Memorandum prior to filing for incorporation.

I think there is lots of room for creative ideas around sponsorship and so on. For example, if any given club spends X$ in a calendar year, then they could (for illustration purposes only) be entitled to a percentage sponsorship. There are many ways to go about it. The feds do insist that it needs to be profitable in terms of sustainability, though, but that, too, is in the interest of the co-op membership since each person is an owner.

Product selection would need to be discussed in terms of how opening or accessing accounts with direct sources is consistent with the principles set out by the First Directors and agreed upon by the membership. Again, the point would be to have access to products at a more reasonable price than is currently the case. If something is cheaper somewhere else, then so be it. It wouldn't need to be a Co-op obligation to duplicate a product line at a higher price. Personally speaking, I have no interest in seeing the co-op as brand-specific, so loyalty isn't the issue - the price is.

It's like me driving by the co-op gas station daily and I am not a member. I know that members receive $.08 per litre rebate last year and I fill up at regular price because on occasion there are some things there that are cheaper than elsewhere, or more convenient at even a marginally higher price. I fill up elsewhere because of the points programs and I own stock in the other gas station. In the end, I do what is best for my circumstance and what the grand picture looks like in terms of how much money I want to save, and whether or not convenience or dollars are more important at the time - whatever brings the best value.

Just my $.02
P.