The Fungus is Amung us! An intresting read written by; Tony Castronovo

[Tony Castronovo]

Everytime I turn around these days there's another copy-cat selling products from the Orient. For the past few years I just blew this off, but as each day goes by I see more and more of these dealers poping up. What is happening? It's simple... We as American manufactures are no longer buying the way we did the past few years. God knows we are not making either. I spent many years going to Asia; Korea, Tiawan, Japan, and of coures China.

During these past ten years I have whitnessed Asian manufacturing growth beyond belief. Manufacture after manufacture opening up on a hourly basis, one copying the other and shoving most all of the goods our way until... Our economy went South. During this time we lost a record amount of hobby stores in the US, well over 1000! One time in the late 90's we did a study and were pretty sure there were less than 2500 stores in the entire country that sold any form of RC. Talk about a small and delicate industry.

Today we are not sure, maybe 1000-1500 left, or less? I do know that there were not enough left to continue what I spent 25 years developing, and that was a viable dealer market. At one time WHH had over 200 active dealers, that's a Hell of allot of stores for a 18 employee company to service on an anual basis.

I saw this coming and I was forced to become part of it as the system started to break down. I dragged my feet for over ten years before actually going abroad to have some molds and parts made. It was the hardest thing I ever had to do, and I always though the hardest would be the day where I would have to write to my long time hobby shops and tell them I sold the company, or worse started selling factory direct. The fuuny thing is, when the day came to make the dreaded anouncement, not one of the dealers we had left made any real stink about it...Why?

It's simple they had already surcome to purchasing RTR boats from the import / diestributors. These are dealers whom would call and tell us how great it was to be able to take an Enforcer out of the box, sell it, and when the customer came back into the store, it was to tell them how much they liked their new boat. I to this day can not understand why someone knowingly would sell something that was lesser of a product, and for a lesser profit? I guess it was easier to deal with only one distributer, or maybe the deleyed payment terms, who knows? I for one have never sold out my customers for a convienent extended payment plan, in turn for products that were not up to par with what I would consider acceptable for my own use. Poor products that were so much the norm when I got into this business three decades ago is one of the main reasons I have strived for the quality that we have always prided ourselves with. Back then there was an acceptable excuse for ailing products, and that was infant techknowledgy and lack of industry to support finances and growth.

Today there is no excuse. A quality dealer should be responsible for sourcing good working products to offer his and her customer base, not sit behind a screen and click away from a single source because it's easier. I at one time owned two hobby stores, and I would play with most if not all of the products I sold first, and then decided on making the purchase, depending on how the products performed, and also how the manufacture and or distributers handled support parts. If I wanted big ticket items but could not afford to put them in stock, I at least did my due dillagence on the product and would educate the customer on it and order it specific until my stores were able to stock such items.

Bottom line, Bad-dealer...There is no excuse today! We are now paying the price.

Anyway we made the decision to go back to the way we did business in the early / mid 80's. Now don't get me wrong I have never been happier, and I have less daily pressures. Like I said I saw this coming over 20 years ago , and Pam and I preparred for what so many did not. There was one thing we didn't prepare for, and that was that our two boys would actually want to be part or own of WHH. We educated them, sent them away, and Damn if they didn't come back!

I am writting this to you because yesterday my oldest son Tony asked me if we were going to be able to compete against all of the smaller garage companies. I said Tony, they are the least of our problems, it's the direct Asian invaision that is growing and going to become a problem for many US businesses, unless we can convince our country to change and buy from American manufactures to become strong again. He had no idea of what I was talking about so I said take so and so for instance, a local guy in the RC boat business, he knows of that sells products for unrealistic low profits only to steel the business from others in the industry. That's not the way to do business and sooner or later the game gets old because you are not able to sustain. See he is on the same playing field as we are, only we have a higher overhead so we have to charge a little more. Our over head enables us to manufacture many products which controls our destiny. The difference though is you have a viable company with assets and a bank account at your disposal which gives you the ability to grow and prosper into the future. I said I have seen guys like him come and go and not only in the hobby business. Business can be fun, but it's not a game. The fun is when your product is received well and you also make a profit.

It is a totally different situation when it comes to direct sales from abroad, it is completely distructive to our businesses and our country and enables potentially thousands of manufactures abroad to make the same products and sell based only on price point. Think about someone in my position whom has brought countless innovations to the industry. On my level this is an exciting prospect, I enjoy making things better there is a thrill that goes along with the process, but with that thrill there also has to be the potential for reward. These days I still have many ideas but many may die with me. I mean why would I invest considerable amount of time and subject myself to the failures of R&D only to have my new innovation or product or its likeness copied and sold back to us before I can recoupe the costs. This is not just me guys, I know many others in my position that are just hanging on for as long as the ride lasts, when they themselves were the very reason for many great innovations and products both in and out of the hobby industry.

Back to my main point. We slowed up the buying machine, and they didn't, and they can't without bigger problems on their end.. What's the alternative? Unlike the greatest country in the world, the one we live in...Asia begins to do like us in the mail order and ship products to private customers, being you and me in the US, Europem and so on. But what makes it worse their EMS postal system (and probably their government, one that knows the consequences of total business failures) enables them to ship a package from Hong Kong to California for less than it costs us by US Mail, from Florida to California. How can this be? This is UNFAIR trade at it's best. Not only do thier workers work for $6-8 US dollars per day, thier export shipping has no duty or transport cost barriers to the US. Don't think for a minute that there are Asian customers that don't want our products, because they do, we sell a few that can aford them. That same package sent to me for $6.00, cost them $50.00, then they have taxes and duties applied. It can cost as much as 10 times more to receive an American made product in just shipping only.

I know... You haven't seen this on your local television news shows? Just think that we are in the hobby industry with this going on, in an industry so tiny it doesn't even have an Workmans Comp number issued for it. Can you imagine the real scheme of this on the level it is now on and growing in almost every fascet of product line daily? You should of seen the look on Tony's face, and I didn't know what to say to give him hope for the future. All I could say is learn everything I can teach you and become better than me, take more chances, and most important share what you know to help your customers like I have done since day one, that's the only real edge you can have. I told him giving away your inventory to gain customers and to do battle with small garage shops just insures that you will too loose sooner or later as well.

What can we do as Americans? It's simple really... If you don't buy from us buy from someone else in this country. That's it people, the whole fix in a nut shell.

What about us WHH? Well, I became so disgusted with the whole off shore thing that I only continue to produce our injection molded parts overseas since that is where the molds are, and went back to manufacturing 80% of our products in the US. This was four years ago, and we are still here, so it can be done. I tell my sons that we are going to maintain or quality and most important our pride. They can make it in this business, but they can not surcome to the "Erchant Merchant" mentality. A good company must be able to pay it's debt and most important it's qualified people. In the past few years how many companies have you seen adjust their staff to lower wage personel in order to maintain existance? This is more than evident these days, I almost can't stand large chain stores and fast food joints, because I know going in how dissatisfied I am going to be trying to get educated help if I need it, or even the right fricken hamburger I ordered.

This letter is being written to open the eyes of those who don't see this or understand what is going on. It's all too real I have been part of it, and I have seen the machine when it ran on only one cylinder, and today there are thousands of engines at full throttle poised to run us all over, only we can pull the plugs.

Tony Castronovo,

President, Warehouse Hobbies Inc.

P.S.- Please feel free to voice your opinons on this subject, only we as a team can save ourselves, and in this case our company, and your hobby.