Why is everything on a boat so expensive?

[weavis]

Originally Posted by cgilley

Umm, <blush>. You commented on something by coastal explorer (alleging I was not serious - I am) and I tossed you under the bus. Apologies to you and the bus.

S'ok.... we have all ridden on that bus.

[leftbrainstuff]

Originally Posted by cgilley

So I'm a lurker on here. Someday, I'll try a fresh water cruiser for the experience, but I really want to get near the ocean. That said, why is everything so expensive to refit on a boat? I've seen estimates in the threads to spend 10s of thousands of dollars rebuilding engines... small diesel engines. What gives?

I readily admit to being ignorant, and if some other ignorant person has asked this question, please direct me to the post.

Thanks

Sea water is an excellent galvanic and corrosive media.

Quality, or fitness for purpose, is always a tradeoff between performance, durability and cost.

If you minimize one then you have to increase the other two parameters. For blue water equipment we choose to maximize performance and durability. Therefore we pay a premium.

As for marine engines they're a little like weddings. Expensive. It's just supply and demand.

Most in the business can more reliably make a profit from selling a new engine than rebuilding one. Therefore it makes sense to price a rebuild close to a replacement.

Sent from my SM-N900T using Cruisers Sailing Forum mobile app

[thomm225]

Originally Posted by leftbrainstuff

Sea water is an excellent galvanic and corrosive media.

Quality, or fitness for purpose, is always a tradeoff between performance, durability and cost.

If you minimize one then you have to increase the other two parameters. For blue water equipment we choose to maximize performance and durability. Therefore we pay a premium.

As for marine engines they're a little like weddings. Expensive. It's just supply and demand.

Most in the business can more reliably make a profit from selling a new engine than rebuilding one. Therefore it makes sense to price a rebuild close to a replacement.

Sent from my SM-N900T using Cruisers Sailing Forum mobile app

Or you can buy a boat 28' or less and an outboard for $500-$1600. It's not that expensive, and they have come quite a ways with outboards over the past 40 years.

Learning to sail is the key I'm thinking. Many cruisers it appears come into sailing on monohulls with engines and become quite dependent on them.

I came in with a boating background growing up near the water then racing unpowered catamarans for 15 years in races up to 100 miles.

That teaches you that engines simply are not that important but nice to have. I considered getting a 2 hp Honda to get my boat out of the slip but went with a larger 5 hp 4 stroke to push my 6600 lb Bristol 27 because I have to get back at times for work and I needed the extra horsepower.

Also, when you learn sailing on a small, fast boat you learn a lot quickly. In this video, the crew is handling the main sheet, main traveler, mainsail downhaul, mast rotator, jib sheet, jib traveler, spinnaker halyard, spinnaker sheet, and he has to be in the correct position for the boat to go fast as in being on the leeward side on the downwind leg. (and he's probably also calling the tacks as well)

Compare that to crewing on a slow monohull. You simply do not learn a lot which is why many are always worried about engines......

Learn on a small, fast boat first. You do not have to wait to be near the ocean. I actually saw a Hobie 16 sailing in a place north of Yuma, AZ!

https://www.youtube.com/watch?v=Puatf60EI74

And if you have kids a Hobie 16 is all you need to learn, have fun, and get the kids involved.

https://www.youtube.com/watch?v=39YCsV1o49o

[mstrebe]

Originally Posted by Cheechako

The thing I never understood about small volume production vs large (and I should understand, as I used the numbers a lot in my job) Is:
Let's say you build a million cars and the tooling to produce them is a million $. That's $1 per vehicle.
Let's say you produce 100,000 marine engines. And the tooling is $100,000. That's $1 per engine? Heck, let's say it costs $1 million... still only $10 per engine.
Does it really matter either way when it comes to the price for the end item? not really... it's insignificant.
I suspect it's more of a "what is it worth for us to make these? How much profit for our trouble?"
Then there's the concept of producing 100,000 at a time vs 10000 at a time. Setup cost is involved here, but again... is it significant? Let's say it costs you $50,000 in setup costs to prepare the computer programs and machines to make the specific item.
For 100,000 items the cost is $2 per item. For 10,000 items the cost is only $10 per item. Still doesnt jive with asking $300 for a water pump.
Carry this concept further: Stainless steel vs steel. SS maybe 6 times the cost per pound of Steel. If a widget weighs 5 lbs. The cost difference is minimal.

So yes, the shared "overhead costs" are far more significant than you would imagine. It's not just the tooling that's shared on a per-part basis, it's the entire cost of running the business (or division). The management, the marketing & sales organization, the distribution channel, and tech support. None of those operations scale linearly per-part. In smaller operations, they cost far more than the "bill of material" or "cost of goods sold".

Case in point:

I was recently involved in product development for a small-market consumer product which cost $25 to produce, but with high MOQ (minimum order quantities) of 100K units from the MFR. With lower MOQs, the price went up dramatically. It was critically hard to price it, because we had to really understand the customer and the price point. With some math and market research, we determined that if we sold them for $150, we would sell only 500K units, but make 5X on each unit. if we sold them for $50 we might be able to sell 5M units--10X as many--but at only 1X per unit (gross margin, not profit).

Essentially this mean that we were doubling earnings, but at 10X the risk of sales with a far higher chance that we would be stuck with unsold inventory.

The higher price-point would yield half the overall profit, but at 10% of the risk of failure (far less unsold inventory if it doesn't work at all). We went to market at the $150 price point, sold 50% of what we'd estimated, then dropped the price and sold the remainder of our inventory. Overall we wound up right at 2X--but had we started the pricing at 2X ($75) we likely would have sold what our pricing model indicated (rather than less at the price point we chose). This is where guessing meets reality in pricing.

This is how most pricing works. As the market gets smaller, the price has to go up dramatically to cover the cost of operations and create a profit that is worth the inherent risk of failure when risk is correctly priced in.

And that's why boat parts cost so much.

[jimbunyard]

Originally Posted by mstrebe

So yes, the shared "overhead costs" are far more significant than you would imagine. It's not just the tooling that's shared on a per-part basis, it's the entire cost of running the business (or division). The management, the marketing & sales organization, the distribution channel, and tech support. None of those operations scale linearly per-part. In smaller operations, they cost far more than the "bill of material" or "cost of goods sold".

Case in point:

I was recently involved in product development for a small-market consumer product which cost $25 to produce, but with high MOQ (minimum order quantities) of 100K units from the MFR. With lower MOQs, the price went up dramatically. It was critically hard to price it, because we had to really understand the customer and the price point. With some math and market research, we determined that if we sold them for $150, we would sell only 500K units, but make 5X on each unit. if we sold them for $50 we might be able to sell 5M units--10X as many--but at only 1X per unit (gross margin, not profit).

Essentially this mean that we were doubling earnings, but at 10X the risk of sales with a far higher chance that we would be stuck with unsold inventory.

The higher price-point would yield half the overall profit, but at 10% of the risk of failure (far less unsold inventory if it doesn't work at all). We went to market at the $150 price point, sold 50% of what we'd estimated, then dropped the price and sold the remainder of our inventory. Overall we wound up right at 2X--but had we started the pricing at 2X ($75) we likely would have sold what our pricing model indicated (rather than less at the price point we chose). This is where guessing meets reality in pricing.

This is how most pricing works. As the market gets smaller, the price has to go up dramatically to cover the cost of operations and create a profit that is worth the inherent risk of failure when risk is correctly priced in.

And that's why boat parts cost so much.

In other words (not to re-hijack the thread), capitalism. And I don't mean that in a derogatory manner...

[weavis]

Originally Posted by jimbunyard

In other words (not to re-hijack the thread), capitalism. And I don't mean that in a derogatory manner...

Its not an ism. Its about an individual or company making a product that allows a profit to fund the project and to feed the kids at home.

I make medical software. We have 3000 hours in development costs and engineer time in it. $450K. We need to return that money and also make a profit on investment. The first release was $1200 per program. We sold 200 in the first year. So half the costs were covered. No profit.

We dropped the price to $799 and sold 450 units the next year. So all our development costs have now been covered, but still no profit in real terms because of the sales staff and support and online costs involved in selling the product. We also are 50% of the cost of our the former market leader because we felt their product was over priced.

We now have sold considerably more of the program and have made a profit overall. It has taken 7 years to return a steady, but diminishing profit due to changing market trends in the medical world. We now have to invest again in engineering time to change the product to accommodate the changes.

While I agree that one off products cost a bucket load, I also am of the opinion that boat owners are a captive market. You want it. you need it, you will have to pay for it. That is the way it is.

sucks sometimes.

[jimbunyard]

Originally Posted by weavis

Its not an ism. Its about an individual or company making a product that allows a profit to fund the project and to feed the kids at home.

I make medical software. We have 3000 hours in development costs and engineer time in it. $450K. We need to return that money and also make a profit on investment. The first release was $1200 per program. We sold 200 in the first year. So half the costs were covered. No profit.

We dropped the price to $799 and sold 450 units the next year. So all our development costs have now been covered, but still no profit in real terms because of the sales staff and support and online costs involved in selling the product. We also are 50% of the cost of our the former market leader because we felt their product was over priced.

We now have sold considerably more of the program and have made a profit overall. It has taken 7 years to return a steady, but diminishing profit due to changing market trends in the medical world. We now have to invest again in engineering time to change the product to accommodate the changes.

While I agree that one off products cost a bucket load, I also am of the opinion that boat owners are a captive market. You want it. you need it, you will have to pay for it. That is the way it is.

sucks sometimes.

I was mostly making a joke about a comment earlier complaining about the thread being hijacked by someone, Rustic Charm I think, bringing the dreaded 'C' word into a discussion about (of all things) perceptions of the cost of goods.

But since you bring it up, I don't see how the first line of your post differs substantially from the initial definition offered by googling 'capitalism'.

Capitalism is an economic system in which trade, industry, and the means of production are privately owned and operated via profit and loss calculation (price signals) through the price system.

I personally have nothing against capitalism until it becomes a dogma and excuse for unrestricted gluttony and greed. Without capitalistic motives, modern life as we know it would be impossible (I'll leave to another discussion if that is good or bad), but (and I'm not saying that you're implying it) to imply that only a democratic republic has some sort monopoly on the 'capitalistic arts' can only be described as myopic and provincial. Just look at the 'communistic capitalism' of China or the 'socialistic capitalism' of Northern Europe...

[weavis]

Originally Posted by jimbunyard

I was mostly making a joke about a comment earlier complaining about the thread being hijacked by someone, Rustic Charm I think, bringing the dreaded 'C' word into a discussion about (of all things) perceptions of the cost of goods.

But since you bring it up, I don't see how the first line of your post differs substantially from the initial definition offered by googling 'capitalism'.

Capitalism is an economic system in which trade, industry, and the means of production are privately owned and operated via profit and loss calculation (price signals) through the price system.

I personally have nothing against capitalism until it becomes a dogma and excuse for unrestricted gluttony and greed. Without capitalistic motives, modern life as we know it would be impossible (I'll leave to another discussion if that is good or bad), but (and I'm not saying that you're implying it) to imply that only a democratic republic has some sort monopoly on the 'capitalistic arts' can only be described as myopic and provincial. Just look at the 'communistic capitalism' of China or the 'socialistic capitalism' of Northern Europe...

All the definitions per se are wishful thinking. Every transaction generally involves someone making a profit, even in a communist society.....

Democracy is the act of 6 people lording it over 4.

Its terminology that disguises the reality of transactions made for the ability to live whether its labour or goods.

It still Ts me off that boat stuff is overpriced in some sectors.

[jimbunyard]

Originally Posted by weavis

All the definitions per se are wishful thinking. Every transaction generally involves someone making a profit, even in a communist society.....

Democracy is the act of 6 people lording it over 4.

Its terminology that disguises the reality of transactions made for the ability to live whether its labour or goods.

It still Ts me off that boat stuff is overpriced in some sectors.

Well... definitions are pretty useful as long as everybody agrees what they mean. 'Should I meet you at the bar at the intersection of I10 and Gause, with the pretty bartender and cheap beer shortly after the sun goes down?'
Or 'I'll meet you at Charlie's at 6:30'?

Agree about the exorbitant pricing; the best protection is education and caveat emptor.

I've always thought the answer to the OPs' question was 'Because they cost a lot'.

[SimonV]

For better prices of some equipment try your local trawler supply stores.

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[Boatyarddog]

Cost is why a lot of folks DIY.
Material differences are mainly new verses used, and marine verses convention products.
Personally using marine products in the most important areas gives me piece of mind out on the water.


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