Economic Theories on YoYo Pricing

General Yo-Yo
21

Thanks, well, the cereal stuff was more hypothetical :smiley: I buy my share of Kellogg’s, Post and General Mills. I’m a breakfast cereal fanatic. They all get my money! ;D

So, yeah, while on the subject of prices and business expenses that relate to them, I’d love to ask anyone a question. What do you think an owner of a small yo-yo company should pay themselves (as a salary)? A company that has released ten or more throws, and is a popular high end brand? The figure that popped into my head was at least $75,000. So, that $75,000 per year is factored into the prices you see. I, personally, would not make yo-yos full time for less than six figures. It seems like a lot of money, but many of these people have families to support, and they deserve to pay themselves a good wage.

Thoughts?

1 Like
22

They absolutely deserve to pay themselves a good wage but there is also absolutely no way that these guys and these companies are making anywhere near six figure take home profits. Chris from CLYW has on numerous occasions spoken about how difficult it is to make a living in yoyos. How he didn’t (maybe still doesn’t?) even have a car. This is not a job you do to get rich, but honestly very few jobs are. Whether you’re making yoyos, fixing cars, flipping burgers, we are blessed if we find employment that we are good at and actually enjoy doing. I am a nurse. I work in a neonatal intensive care unit at a hospital. I am a nurse because I love taking care of babies. Sick babies. I work nightshift because someone has to stay up all night taking care of those kids while the rest of the world sleeps. I have three bachelors degrees that took me seven years to earn. I don’t make six figures and I probably never will but I chose this job because I have a gift for it and I love it. I definitely don’t do this job thinking that it’s going to make me a millionaire. I take care of babies that belong to millionaires and babies that belong to homeless crack addicts. I do it because I care.

Other people care about other things. I imagine people like Chris (CLYW), the One Drop crew, YYJ, YYF, everyone in this business that is actually full time in this business, they care about the science and the physics of throws as well as making their products aesthetically beautiful. They care about being an artist by creating something that spins on the end of a string. Through that creation they allow other artists to make art by throwing said yoyo around and doing the amazing things we do with these spinning toys. These companies and creators aren’t in it to gouge us or rob us or make us broke. They’re just scraping to get by while doing what they love, the rest of us should be so lucky. Thankfully, I believe that I am.

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I think the above makes sense. What they deserve to be paid, and what they probably actually pay themselves, is entirely different. But, some people think these yo-yo prices are way too high. Many of these owners have advanced degrees in some fields where they could make a better wage, but instead, they choose to make yo-yos for us to enjoy. It is a job they must be passionate about. I, personally, would not make that sacrifice, but many of them have. I always think whatever the price is, if it is a good product, we should pay and not worry about the rest too much. There are too many overhead costs in what they do. If what N8 says is true, that these guys are barely scraping by…should we be willing to pay a bit more even?

If they don’t reap some benefits eventually, they may decide to give up and work elsewhere instead. That may be the reason many small companies go under and never make it to their next release. Are we paying enough then?

Thoughts?

24

I haven’t read every reply, but I am surprised how often the Rally is being compared to Surges and Classics. It has a metal weight ring, and as such it shouldn’t be considered an all plastic in my opinion. The Rally is a competitor to the Trigger yes, the Surge no. I have high hopes for this throw! If I remember correctly the Rally is supposed to sell for $45, and it will be competing with $30-$35 models from other larger companies (YoYoJam & YoYoFactory). A +/-50% price premium for a higher end boutique product isn’t that steep of an increase and is typical of boutique pricing in my experience.

Regarding the Yeti as far as I know that is an all plastic, but it is an unusual plastic and might very well cost considerably more to make. But I am not privy to material costs for the Yeti. The Yeti though is in the same category as the Surge, for it’s price it had better perform better than the Surge or there will be a lot of disappointed owners. :smiley: We’re all willing to deal with a lot of vibe on a $16 throw, a $40 throw not so much. At +/-250% price premium we’re getting into Gucci territory. Since it doesn’t scream style, its performance had better make up for it.

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Here are my thoughts, long post incoming:

Owning a business is not like choosing your salary and having it fixed for the rest of your life, depending on season, competition, market, economic situation and whatnot, you make more or less profit, and therefore can take less or more money to your pocket. If you don’t profit, you don’t get paid. Also, if you make a lot of profit, but don’t make smart business decisions and reinvest the money on improving, maintaining and growing the business, one day the competition will pass you by.

That said, I do not think that yoyos are expensive at all. The best yoyo in the world is not more than $500 dollars. Do you know how much the best bicycle in the world is? The best roller-skate? The best fishing pole? The best golf club? The best running shoes?
The expensive yoyos are highly precision made and the difference between a $50 yoyo and a $200 one, in terms of performance, is negligible to 99.9% of the people. Most people still buy the $200 one though, as the difference exists and it only costs $150 dollars, not much at all in everyday life. Now let’s make the same comparison with a bicycle. A good bicycle costs around $600 dollars. A competition grade bike costs $5,000-10,000, the step is way much larger than with yoyos.

The complaining I see about prices of yoyos seem to be mostly due to 2 factors:
-Most yoyo players are kids, who don’t have a job and cry when their allowance is less than the new yoyo release;
-Most people collect yoyos, one is not enough for them, since they’re small and cheap, why not have a bunch of them? So they complain that their hobby could be on the cheaper side, as we have 4-5 yoyo releases a month, amounting to 500$ to a true collector.

Now let’s talk numbers. Let’s say a manufacturer sells all it’s yoyos at $150. Let’s say the retail shops make a 50% profit and that the manufacture costs are %50 of the price. That means that the company earns $37.5 per yoyo. In order to achieve 100,000 (early 6 figures) of income, the company needs to sell at least 2666 yoyos.

As you guys were talking CLYW, how many yoyos do you think they sell in a month? What about in a year?

How much do you think are the costs of maintaining an office (rent) and paying employees?

I believe that the money of yoyo making is in selling in bulk, not in making expensive high end yoyos. And that’s why that I believe that OD and CLYW are moving towards plastics, higher initial investment, has 97.5% of the performance of an aluminum one, but is cheaper, will sell more and will give out higher profits on the long run.

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Good point in that a good year for a business owner, means he takes home more, but a bad year means he takes home less. I suppose the cost of running a business varies from business to business as they all are set up differently. Some are one owner with no staff, others have a few staff up to many. But, it would be interesting to know what the average take home is for the owner of a small yet well established business. But, in terms of prices, if I were making the decisions about how to set a price, I would definitely consider the profit margin, as well as some other factors, because the profits would help determine my own personal take home.

Good question about CLYW. I have no way to estimate how many throws they might sell per year, but based on this discussion, yo-yo seems a tough business, without a doubt. I am pretty sympathetic to the costs of running a business. Even if they were selling the 2666 figure you posted, costs have to be deducted from that too.

I think when people discuss prices, they don’t really consider that. Especially as it relates to people making yo-yos full time. I think it is much easier for a person working in yo-yo part time. These businesses are competing with the trade part of the industry too. Yo-yos are frequently traded, and these companies get no share of what is made on the BST market. You mentioned that a lot of buyers are kids, who do not usually have a lot of money, so many of them who own high end yo-yos acquired them from the BST.

As a budding collector, I find that in yo-yo it is important to specialize your collection to some degree, so that you don’t have to keep up with every single new release. If you only collect nickel yo-yos, it means you only buy those releases, which minimizes spending. I have determined that it is best to specialize in a few areas to prevent overspending.

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I am both a regular full time worker with a graduate degree, and a small business owner on the side. I’m lucky in that I’m doing well at both right now, and it is quite possible that some of these yoyo company owners are doing both as well.

Owning a business is not always a full time job. I don’t know how these businesses are set up, but it very well could be a kind of business that is like mine. There are periods of high demand for your time, and periods where they are lower. I don’t know how many of these companies are running their own machine shops. I can’t imagine any of them are. If they are, they are not keeping the VERY expensive machines busy full time producing yoyos, as the production would outpace the demand. I bet it takes at most one week per year to run a year’s worth of any single model of yoyo. If you’r company has 10 models (which is more than many have), you are looking at 10 weeks of manufacturing time. THe rest of the time is design, marketing, etc. But we have already discussed, are they selling 5000 of each model per year? How much warehousing is needed? Probably none. Owners can use their houses if they need to keep over head down. Yoyos aren’t that big. A spare bedroom or a basement is probably adequate. Design time is not going to eat up a whole year of your time. Look at the documentary on a summit. They prototyped and designed the yoyo in a weekend, ran some, and then sent them off to the anodizer. It is very feasible that running a yoyo company can be done part time.

If your business is part time, how much do you need to make off it for it to be worth it? Well, if you are doing it for the love of the pursuit, not that much. If a company like CLYW or Onedrop made the owners $20k-$50k per year, I bet they would consider that a good year, at a guess. I bet they are not selling enough of these things to make a strong enough living to support themselves and a family off it, and if they are doing those things, they have a second job.

I don’t think the high end yoyo economy can be that strong. How many people actually want to buy a $100+ yoyo, whether or not they have any yoyos yet? Not enough to support a ton of manufacturers/designers making multiple models per year to make thousands of each model. Look how small the runs are on some of these models. If the market were huge, like for cheap duncans and yomegas, they could make a fortune, but as it stands, we should feel lucky these people want to do it at all. The market is just not that big. Look at every yoyo store you can find on-line, and tell me how many you can find a General-Yo M10 at? This is a popular throw that people really like. There are none, and it is not because General-Yo can’t keep up with demand, it is because there isn’t enough demand to keep making them year round. THis is a tough business, and I am thankful that there is so much diversity avaialalbe for such a high end niche product.

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Very well thought out post. I would agree that most of these small yo-yo business owners are probably working part time, not full time, and using yo-yo business as a hobby and supplemental income. It is not a primary source of income for most, and very few are in it full time. You have a good point there.

I think even as a second job, a considerable amount of work and cost goes into making yo-yos and promoting a business. I have had a few fulfilling hobbies over the years, and when you spend a lot of money on a hobby and turn it into a supplemental income, it might be even more important that it be worth your time. It is easy to lose a passion for something when it turns into “work,” or if you are giving up your free time, yet all you hear about is that no one is happy with the prices they pay for what you do. If someone is working full time elsewhere at a regular job, then coming home and doing yo-yo stuff in their spare time, it is almost like dedicating most of your “free” time to yo-yo stuff. That is a sacrifice, and I think they should definitely profit a good amount to make it worth the sacrifice. That may be why the prices are what they are.

Also, if these people do not feel appreciated enough, being supplemental income, it would be very easy for them to quit. Probably why a lot of new companies come and go. If they did quit, buying yo-yos would not be nearly as interesting for us as it has been. I am also grateful that so many people are interested in designing and selling yo-yos. I am almost always satisfied with the prices set where they are.

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One Drop has an actual factory with machines and does all the machining in house. All we make is yoyos.

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And ever-growing your business with more office space, more machines and new stuff. You guys are awesome!
Not to forget also the charity work ;D.

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You also have reasonably priced high end throws. You are one of the few companies making high end throws who also make mid priced stuff at high quality.

I’d guess DS, NSCo, GeneralYo, G2, MonkeyFinger don’t all have CNC lathes sitting around. Just a guess. Maybe they do. Like I said, I don’t understand the industry, but I do know it is possible to run a business part time that makes good money by outsourcing labor (like machining and anodizing) and focus on design, marketing and biz. dev. And this may be what some of the smaller companies are doing, and this kind of model would allow for a lower production company to exist, but may require higher prices.

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How about your warehousing? that’s been brought up as an expense here in the discussion. Does product storage set you guys back much?

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From seeing their videos, they have a somewhat large building for their factory. Clearly that has a cost, as it either costs rent, or even if they own the place, they could rent the place to some other business.

Honestly, please stop criticizing yoyo prices. Find them to be too expensive? Don’t buy them.

Complaining will not change any prices, it might make a few manufacturers sad seeing how low their profit already is, how hard they strive to make awesome yoyos, and see people still complaining.

Also, asking for business information such as how much is your warehouse rent or how much is your income won’t get you any answers. You wouldn’t post in this forum how much you make a year, how much do you spend living, how much you save per year and how much is your rent. And these are all personal questions, won’t affect any businesses, most people don’t even discuss this sort of personal things with their families. Let alone private business information which could affect their business.

I’m all up for doing math and figuring out how the yoyo market work, but complaining and asking questions that will not get answered ever, doesn’t help this cause, quite the contrary.

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Well, I think a lot of questions can be answered so that people might get the gist and further understand the magnitude of the costs. That does help discussion. If I were a company, I would answer, and maybe say, “Yes, storage costs a lot, or…no, it doesn’t matter much at all…because we push the products out as soon as we get them, so they don’t sit around long enough to be stored anyway.” So, that was a perfectly valid question he asked. In discussing income…no one asked specifically their income, just raised the point to get people thinking about the fact that the owners of these companies have to eat too, and make enough profit to make doing business worthwhile. Also, to find out what the average buyer thinks these owners bring home at the end of the day. Some buyers think they are rich. There may be some misunderstanding on those points, and his question. No one in here is expecting any company to answer those questions with specific facts and figures. No one even initially presumed a manufacturer was monitoring this thread in the first place. If they choose to participate or not, is up to them. Some people will answer, some not, but it is always okay to ask the questions, especially in a general manner as he did. A general answer from someone in the business might help put things in perspective. No harm can come from that.

But, I agree, that I think people can be a bit harsh when questioning the prices. This thread has covered more than previous ones on the subject, relative to the complete costs these businesses incur. This thread has been very friendly to the manufacturer…not the opposite. Unfortunately, there has not been as much activity in this thread as I might have expected. I think it is a shame, as it could be a more interesting discussion with more participation from a diverse group…or perhaps someone who might disagree.

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no one here seems to have a problem with prices and most, like me, have said that they are willing to pay the cost to get the yoyos that we want. I’m pretty sure we all have great thanks and respect for the companies we purchase from. were just having an intellectual discussion of yoyo economics. I think its interesting to discuss and provides a nice alternative to the more common “What yoyo should I buy next” posts.

I think yoyoing has an interesting market that is different in alot of ways from other markets. Its interesting to me to discuss the yoyo business model.
The economic principle of utility makes it so that no yoyo sold is ever overpriced from an economic perspective, but I think its a completely viable marketing strategy to increase prices on a product to create an illusion of added value. Lots of companies that are in other markets do it. As many others have stated there is alot of thought that goes into yoyo economics.

I think its cool.

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I agree. I was editing my post above yours as you wrote. But, I do wish this thread had more participation and kudos to you for raising the question in the first place. I just hope the subject did not go over a lot of people’s heads. It does take a lot of thought to even attempt an educated guess at the answer.

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I believe that on writing on a forum, you need strong opinions, otherwise you’re just adding more to the same. That’s why I always write the extremest point of view I can think of. I also tend to have a very short term memory and merge lot’s of threads and posts from all around the forum in my answers. I actually was not complaining that he asked, I just don’t believe it will be answered.

For the business, I would never discuss any specifics on how to run the business (including costs and price selection) with my costumers. That just open doors to problems and complaints. It also is some sort of trade secret. If you take a little time to get to know the companies around: CLYW, YYF, Yoyojam, OD, Duncan, you will notice that they each do their stuff their own way, from design to manufacture and marketing. The yoyo market is very competitive and crowded, and it also looks to be very small IMO.
Sharing this sort of thing is giving your competition more info than they should have. Sure they can figure out the competition costs by themselves, just like we can hint at it, but that’s still something you don’t want to share.

Anyway, you can discuss anything with me and it won’t affect me, so I think that other people will feel the same about it, after all I’m a just a stranger on the internetz, don’t mean any sort of disrespect on any of my posts.

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None of it was taken the wrong way Felipe, just was clearing up if there was any misunderstanding. I agree that a lot of what can be cleared up on the forum, in terms of answers to these questions, simply cannot be, due to the nature of businesses needing to keep things private from a business perspective. I’m sure a lot of businesses would have loved to post about the costs of doing business and how it relates to prices, but it would just encourage people to ask them specific questions that it would be inappropriate to answer about their business. You have a good point there. But, I think we have all done a good job of outlining “potential” costs related to a lot of businesses, and why prices are often set where they are. It gives some people perspective, if they are too young to ever have run their own business, and and might be unaware of the expenses. A lot of yo-yo customers are young people, who might not be aware of all the overhead costs.

No worries, your posts have been well done. :slight_smile:

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As far as I know, the only ones with their own machines are One Drop, YYF, Duncan, and SPYY. Not sure about General Yo and YYJ.

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I dont have any statistics to support it, but I think it makes sense that a newer company would need to charge more for a new release then an older one. Especially one releasing a new plastic. There are probably increased costs when breaking into the plastic market, that are reduced after you’ve got more practice/business connections/money, It will be interesting to see it the price for future OD/CLYW plastics. I’m going to guess that they will be lower as the costs of producing future plastic yoyo’s go down.

Although I think any future pricing would depend on how financially successful the current release is. If they sell out quickly and cant keep the yoyo in stock, then the price is probably going up on the next plastic. If they end up with a truckload left unsold in storage, then we will probably see a lower price on the next release.

Based off the reviews for OD and CLYW new plastic releases, I predict that we will probably see excellent sales, but probably not so much that it will increase prices for later plastic yoyo’s from these companies.