Subscriber Discussion

Should The USA Impose A Tariff On Chinese Video Surveillence Imports?

TC
Trisha (Chris' wife) Dearing
Mar 14, 2018
IPVMU Certified

Trump has asked his advisors for a tariff package against China in retaliation for intellectual property theft.

Do you support such a tariff on video surveillance products?

UM
Undisclosed Manufacturer #2
Mar 14, 2018

Yes.  However, tariff's still won't offset the subsidies (fake loans) provided by the Chinese government to flood and devalue markets.

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JH
John Honovich
Mar 14, 2018
IPVM

Note: I added a poll to the original discussion.

Avatar
Sean Nelson
Mar 14, 2018
Nelly's Security

Why would you vote yes? Do you enjoy prices going up? 

You may as well add this scenario to this commercial:

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JH
John Honovich
Mar 14, 2018
IPVM
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U
Undisclosed #1
Mar 14, 2018
IPVMU Certified

Do you enjoy prices going up?

No, I don’t.  

Especially if it means my dealer might be able to make a decent living ;)

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JH
John Honovich
Mar 15, 2018
IPVM

Good new article: Reuters Factbox: Barrier to entry - China's restrictions on U.S. imports, details various unfair practices China imposes on foreign companies.

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UI
Undisclosed Integrator #3
Mar 16, 2018

Everyone counts on margin, but nobody remembers that it still takes the same resources to mount, configure and train for a device. When prices drop to two jelly beans and a rock, how much margin do you need to run to make the same dollars on the same device count? How many devices do you need to install now to keep all those families fed? Each tech can only install so many devices, and last i checked, fuel, insurance, tools and labor costs arent dropping to make up for that. So yes, i wouldnt mind some prices going up a bit for everyone. Im voting yes.

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Avatar
Jon Dillabaugh
Mar 16, 2018
Pro Focus LLC

And contrary to that, how many more clients are there to service when the price point drops to a point where the entry cost is low enough for wide adoption? We haven’t reduced our labor rates as product prices have dropped. We are busier than ever. Your problem is that you are making your profit on product margin. We make our living on service labor. So, keeping equipment pricing down opens the market to more potential clients. More clients with existing systems means more service calls. You have to adjust to the times. 

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JH
John Honovich
Mar 16, 2018
IPVM

So, keeping equipment pricing down opens the market to more potential clients. More clients with existing systems means more service calls. You have to adjust to the times.

JD, I am curious. No doubt, lower prices mean more customers (at least in the short run). But with these newer customers, what is their propensity to pay for services and how much will they pay?

As an example, someone who pays $1,000 per camera on average is surely willing to spend $200 per camera to install it, since it's a relatively small extra but if someone is paying $50 per camera (like kits now), how much are they willing to spend for install? Your thoughts?

Avatar
Jon Dillabaugh
Mar 16, 2018
Pro Focus LLC

We generally add 30% of markup to every product we sell. We also charge $75/man hour. These rates have kept us more than busy. We are looking at at least eight months of work ahead of us on the books for this year. I really can’t take on any more large commitments this calendar year. 

The answer to this usually is add staff, but I’m not in this to get rich, and equally, I’m not in this to manage people. I’m here to make an honest living doing honest work. I can survive just fine on these rates.

JH, we have no problems getting work, so I’m unsure if each client will or won’t pay a proportionate amount for labor. Our projects, in general, end up being about 50% materials, 50% gross margin when all said and done.

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JH
John Honovich
Mar 16, 2018
IPVM

JD, good feedback.

In terms of adding staff, how easy or difficult are you finding that? I ask because one important constraint is being able to compete financially for staff vs other technical fields. Lower labor price to customers is attractive to them but can make it more challenging for paying techs.

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Jon Dillabaugh
Mar 16, 2018
Pro Focus LLC

Like I had said, I’m not into managing people, so I don’t have employees. I have a business partner and between the two of us, we handle all of our projects ourselves.

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UI
Undisclosed Integrator #3
Mar 16, 2018

First, nothing but love for you Jon. I know you have a great reputation. 

I must differentiate between a couple of guys doing their own work and a company that has a full support and service structure. With no overhead I could probably survive at $75/hr and minimal parts margin. I cant support a staff at that, and honestly, I think its underselling the value of the solutions.

Are you counting your own labor costs into that 50% margin? Something is off if youre marking up parts 30% (23% margin) and still able to get to 50% gross. Using a sample 10 hour project with your numbers your labor costs would need to be $17/hour loaded. Is that accurate?

In my eyes growing isnt only about "getting rich"... Its about providing a full solution, employing people and providing them value as well as the clients.

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UI
Undisclosed Integrator #3
Mar 16, 2018

My experience is that the lower the project cost the more hesitant customers are to pay for future service (and the higher the chance of them having unreasonable expectations). Ive also noticed a similar correlation when providing service agreements.

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UI
Undisclosed Integrator #3
Mar 16, 2018

We make it on both, and have to at the rate we are growing and hiring. Making money on parts isn't a problem, Jon. It requires capital to buy, therefore should be profitable in a healthy business. If anything, I should ask why you feel you shouldn't make money on half of your offering.

U
Undisclosed #4
Mar 16, 2018

"If anything, I should ask why you feel you shouldn't make money on half of your offering."

I don't think he's saying he shouldn't make money on margins - but instead, that the race to the bottom has hollowed out these margins and he has adjusted his biz plan accordingly to focus on the area where he can differentiate and make a living wage that is not impacted by falling hardware margins:  service. 

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UI
Undisclosed Integrator #3
Mar 16, 2018

I agree with that change, weve done the same thing. Our labor rate has gone up more than usual over the last couple of years.

 

What I'm saying is that while responding in that way is logical and necessary, it doesnt dismiss the fact that if we are selling parts, we should be making money on those parts. If parts cost less, then margin must go up. Alot of people dont understand that and are driving total cost down and risking their businesses. Levelling (or starting to) the playing field would still be a good thing in my opinion.

UI
Undisclosed Integrator #5
Mar 16, 2018

I agree with undisclosed Integrator #3!!

For us who are trying to grow our business (EVERY DAY) and are "NOT" 2 men and a truck... I think it would be great to see fair trade! We have 100 plus employees and are slammed as well but it is from becoming versatile and not stuck with the "just enough for me" mentality! In our opinion, if you are not growing your business.... you are a sub contractor and not an integrator. I promise that whole "I will just do it" thinking will only last as long as the new shinny tool you just bought... Or maybe you are that shinny tool and Bless You for it?!?!?

The same process and the same result equals a FLAT LINE! If you are out for "Just You" you better pray the economy doesn't crap out again... We learned from that...correct?

Nothing wrong with being the labor guy but as for fair trade, we can NOT afford to just be in this for US when we need to be in this for all of USA!

Fair trade can ONLY help us in the long run and it is bigger than a local mentality!

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Avatar
Jon Dillabaugh
Mar 16, 2018
Pro Focus LLC

I beat guys like you out for jobs every week. I don't need overhead. I don't need a fleet of vehicles. I don't need a large crew of people to manage. I don't need the bulk to slow me down. I get in there and get the job done. Sure, I might not be able to, or even want to, handle the largest projects. I wouldn't have any fun doing an install where I am following someone else's blueprint designs saying put this camera x here.

I am in it for much more than that. And I'm not in the business to grow and get wealthy. To each his own. I cannot find anywhere where it tells me I MUST take on debt, overhead, employees, etc. You want that risk/burden, go ahead and take it on. I would much rather plug along on my own with my independence. I get to design systems in which I feel they should be designed, installed to my standards, and have a one on one relationship with my clients. The vast majority value that. My clients aren't just a number.

And I have to ask, if you have so many employees and they are all so busy, why aren't you making enough? How does scaling up to make more money, yet you don't make more seem like a good idea? Shouldn't that be a very good reason why I should stay small? You seem to be making my case for me....

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UI
Undisclosed Integrator #3
Mar 16, 2018

No need to get upset.(though its hard to tell if thats actually the case) Im sure we lose to small operations, just as Im sure we beat them out. When it was me and one other guy I used to love it when we would beat out a national.

Im out for a better understanding. I still would like to know the answers to my questions above regarding margin and your numbers, not to berate or judge, but because I want to understand. If I can find a way to get to 50% gross margin with a 23% margin on parts at $75/hr.... I'm in. It just doesn't make sense to me.

I once was a two man operation. I have friends who have one or two man operations. Its not what I want, but I have no problem with them doing it, and they do it well, and have good reputations just like you. Of course, the people I know charge a markup on parts as well as a good labor rate. No question, my stress level is higher now. Absolutely, and we sometimes have to do jobs that arent our ideal to get the hours in for the month. But at the end of the day, I'm building something that will hopefully outlast me, and to me, thats very important. 

I'd still like to see a leveling of the playing field tho.

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U
Undisclosed #4
Mar 16, 2018

I respect both positions and I see no 'best/worst' way to operate as long as you are aware of the fundamentals of business (mentioned and argued by both sides above).

Question:  While the  '2 guys partnering for a living wage for both' certainly works and has been deployed by a myriad of integrators just starting out, how can this model scale?

i.e. what happens if you or your partner are laid up for any period of time for whatever reason?

Those 8-month-out jobs have no choice but to be pushed to 10, 12 and more-month-out jobs.  There is no deviation from the norm that works effectively.

Conversely, growing the company to encompass more employees - where the success of the business is not tied directly to any one or two people - sounds like a safer plan of action if I were an odds maker betting on long term success of any establishment.

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U
Undisclosed #1
Mar 18, 2018
IPVMU Certified

 I would much rather plug along on my own with my independence.

Do you hold your own ladder? ;)

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SE
Sam Eskew
Mar 20, 2018

I'd rather just ban them. 

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Avatar
Jon Jones
Mar 21, 2018

Many cameras are made and many manufacturers produce cameras in China or have parts that were made in China and assembled in other countries.  It is clear from the posts here that someone at IPVM is anti Hik.  We get it.  You don’t like Hi.  I don’t know if you were up for a job and didn’t get it or if you think this is 1986, but give it a rest already.  

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JH
John Honovich
Mar 21, 2018
IPVM

Jonathan, great first comment! Coming out swinging, I like it!

I agree with you that many cameras are made in China. What I'd like you to consider is why. Yes, cheap labor is one reason.

But a very important issue is the trade barriers that China has erected against foreign manufacturers. Consider China effectively forces all foreign manufacturers to make their cameras inside of China if they want to sell them in China (e.g., Axis here). Foreign manufacturers also need to submit to security checks, special firmware, etc. And even if they do that, for 'security' reasons, most large China entities will not buy foreign products.

All of this is made by how big the Chinese market has now gotten. So effectively foreign companies are blocked out of the biggest market, which gives protected Chinese companies major advantages to grow and expand outside of China, given their protected home market.

Tariffs or other measures would simply be counters to the unfair practices that China (PRC) has employed for years.

Jonathan, what are your thoughts on that reasoning?

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Avatar
Jon Jones
Mar 21, 2018

You win.  You are right.  I am wrong.  Please call me Jon.  I signed up for the calculator and a little bit of news.  I will stick to that.  It's just every day, almost every email update, Hik stinks. Hik is bad.  Hik is out to get you.  It just gets old. 

 

But I will leave you with this parting thought.  Are you using an iPhone made in Kentucky or is you Android made in Texas?

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JH
John Honovich
Mar 21, 2018
IPVM

Jon, I am not doubting that many things are made in China but the point about tariffs is that China is fundamentally unfair and protectionistic in their trade practices. Do you disagree with that or think that's irrelevant? I am genuinely trying to engage you in a reasonable discussion.

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Avatar
Jon Jones
Mar 21, 2018

John you are not.  It is the flavor of the week with you. 

First it was Security, Hik made a bunch of changes... 

Then it was their new analytics, Hik released new firmware…

Now it is a trade imbalance, so if you get your tariffs, they will lower their prices or add value another way…

And then it will be the next thing…  I mean it is to the point that you should almost start labeling posts and articles “Reason #37 Why I hate Hik…” “Reason #38 Why I hate Hik…” so on and so forth.

I went to Hik because my customers drove me there.  I am a big fan of Panasonic and was selling them for years.  Then I started losing deal after deal.  So I went to five manufactures including Hik and we ordered comparable cameras to our 5 most popular Panasonic cameras.  We did testing and shoot outs.  We were shocked to learn the Hik cameras were on par with what we had been selling and a fraction of the cost.  We added Hik to the line up and “boom” commercial sells took off again.

So don’t blame China.  Don’t blame Hik.  Blame the end user that demanded a higher quality lower price solution.

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JH
John Honovich
Mar 21, 2018
IPVM

Jon, I appreciate your feedback. I can understand why you went with Hikvision.

We were shocked to learn the Hik cameras

I am not sure why you are shocked. IPVM has been testing their image quality for years and long reported that.

The analytics still have problems, even with the new firmware. We are waiting for the next new firmware before republishing to give them some time.

You are taking the stance that we simply hate them and I think if you look more thoroughly at what we report, we are tough on all sorts of manufacturers for issues, e.g., just yesterday with Axis. Hikvision, because of super aggressiveness, has more problems than more conservative providers.

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U
Undisclosed #1
Mar 21, 2018
IPVMU Certified

Now it is a trade imbalance, so if you get your tariffs, they will lower their prices or add value another way…

Excuse me, but I created this discussion.  Trump had just announced steel/alum tariffs and was threatening tariffs on unspecified Chinese products, so it seemed relevant. 

I’m undecided on the issue of tariffs in general, and less soured on Hik than most others...

UI
Undisclosed Integrator #6
Mar 21, 2018

Hell no.

I don't think people realize just how much they own/use actually comes from China. Western society relies largely on cheap Chinese products and labor to feed our opulent, consumption-driven society. This goes far beyond security cameras.

You really want to pay $3,000 for that iPhone or $5,000 for that computer you're currently reading this on?

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UI
Undisclosed Integrator #8
Apr 03, 2018

You really want to pay $3,000 for that iPhone or $5,000 for that computer you're currently reading this on?

I think you're overstating the tariff percentage just a bit.

UE
Undisclosed End User #7
Apr 03, 2018

Yes, why does the U.S. allow a government owned company like Hikvision to compete with a tariff?  We need to move away from China.

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