Procurement Intelligence Unit

Before moving to live in London, I called Perth, a city in Western Australia, home. My life in Perth was markedly different to my life in London. Where my free time is now spent in the galleries, markets and pubs of England's capital, it used to be spent on the golf courses, waves and pubs (old habits die hard) of Australia's south-west coast. Despite my change in lifestyle a few things have held steadfast - surfing and golf still hold a place close to my heart and aside from family and friends, they are the things I miss most dearly about the city I still call home. Much to the bemusement of my girlfriend I still religiously check the surf report in Margaret River everyday.

I still have a keen interest in the surfing and golfing industries; new designs and advances in technologies in these industries still fascinate me. I follow the trends, more now through the internet than a physical presence. I research companies to find out what is new and discuss with my peers to see how they feel about changes in these industries. For this reason I consider myself an engaged, knowledgeable buyer in this field. If I look at my surfboard and golf club knowledge from a business or procurement perspective, I believe, I know my market - I know who the potential suppliers are; I know what they are capable of; I know what they charge.

During this research and market intelligence gathering process I have uncovered an interesting anomaly that I feel maybe of some value to today's procurement community. Everything is cheaper in the US. Whether it is golf clubs, surfboards or guitars, it's cheaper to buy Stateside.

Let's take surfboards as an example. If I was to buy a surfboard from an online retailer in the States, I could expect to pay (for a good one) 600 bucks (US$). The same surfboard if bought in the UK costs around £700, which even at today's grim exchange rate is about US$1,100, representing a US$500 increase - almost a doubling in price.

I understand that for the surfboard to be shipped to the UK there is an associated cost, however, according to my internet research, most surfboards are now produced in factories in the developing world, namely China and Thailand. I can't imagine the cost of shipping a single item from China to the UK being anywhere near US$500 more than the cost to ship the same item to the US.

One of my purchasing peers offered a logical solution to this conundrum: "It's simple mate, economies of scale", he said. He highlighted that England is hardly a surfers Mecca - aside from small communities in the south-west of the country, demand for surfboards is low. Once I began thinking about things this way, his explanation began to make sense. US surf retailers expect to sell more boards - because of that they can order more boards, essentially allowing them to negotiate a lower price. US$500 lower though? I'm not so sure.

After a moment of temporary agreement I decided to leap into a rebuttal of my friend's argument, pointing out sarcastically that golf clubs and guitars are also much cheaper in the US, and as far I know people in the nation that invented golf and gave us guitar heroes such as Clapton and McCartney are rather fond of both guitars and golf clubs, suggesting that there is in fact a market for these products in the UK.

I am currently looking to buy a new guitar - a Cordoba classical guitar, manufactured by luthiers in Andalucia in Spain. The guitar in the UK costs £1,000 (US$1,500); however, if I was able to buy the same product in the States, it would cost US$1,000. Unfortunately, for reasons that confuse me, the US company does not ship internationally. But what I don't get is how a product that is made in Spain, a country relatively close to the UK, can cost so much more in the UK than it does in the US, a country relatively far away from Spain. My extensive internet research has shown that golf clubs follow a similar model.

So ... I ask all of you this - what exactly is going on here? Maybe there is a simple answer? (To be honest I hope there is.) But why are things so much cheaper in the US? The value of the pound has plummeted against the US dollar and this has actually closed the price gap in products across the Atlantic. If we took the same examples two years ago, the gaps would be much larger. Are UK buyers just bad at negotiating? I don't think they are, but I'm at a loss. Maybe there are taxes or legislation that I am not aware of that bump up the price of these goods when they hit UK ports?

If this is all down to economies of scale, which I doubt it is, then why don't US buying groups establish retail facilities in the UK and Europe, selling us cheaper guitars, golf clubs and surfboards, and in the process increasing their company profits? It doesn't need to be a big operation - an online store and distribution centre would do.

So. In case anyone cares, the surf in Margaret River today (a beach that is more than 9,000 miles from my office chair in Clapham) is 6ft and the wind is blowing from the East. For those of you that don't know, this is good, really good.