The Value of Koi - Part 3
The components of cost
Many skilled hands and resources add up to determine the price of the nishikigoi as displayed in the tanks of the dealer. The costs starts accumulating from the point the fish is selected on the Japanese farm and never ceases to add up towards the final retail price you pay. What are these costs?
Let’s assume the case of the “middleman” who ventures out to Japan to select fish for the trade. He knows the industry sufficiently and is brave enough to move around in a foreign country locating these sources of product. He invests considerable capital in the hope of making a return. It starts with opportunity costs, like buying a ticket to fly out to Japan, support you for two, three weeks in an atypical, foreign country while traveling around visiting various koi farms. Appreciate that some of these farms are far apart and you can clock a thousand or so kilometers in doing so. That is the base price you have to recover in order to “break even”.
So, let us list all the costs involved in
- Opportunity cost. To set up the opportunity to buy the fish in Japan. Obviously he has to have the market and buy sufficient numbers to justify the expense in the first place.
- Breeders farm price. The breeder pegs the price according to quality grade, sizes and expectations to develop. He removes beforehand all fish he intends to grow for another sales period.
- Agent commission - subliminal. Normally included in the farm price. Breeders are quite loyal to their selected agents who ensure their market with a confidential agreement. The system of agents varies greatly from farm to farm. Independent marketers get commission for bringing business to the farm on a season or individual basis. On some farms employees and part-timers earn substantial commission from the sale of “their” fish under their care.
- Agent commission – handling. Paid to the agent or entity that collates the purchases from different farms and organizes transport to a holding facility near an international airport. It is his duty to obtain health certificate according to the country’s need, prepare export documentation, and ensure export permit documentation is obtained and correct, and finally the flight planning, booking, packing and dispatch. The specific route depends on location of the farm and agent, size of order, etc. but involves the input from various sub-agents, needs strict time management and accurate planning and execution to ensure the correct fish from different farms in different boxes arrives on a predictable time at the correct airport somewhere in the world. Something the Japanese are good at doing.
- Freight costs to an international airport that allows live cargo.
- Local clearing costs. A clearing agent is needed to ensure your speedy completion of import formalities with the correct documentation. Being live fish, the importer cannot afford any mishaps and delays.
- Local duties and taxes demanded by authorities.
- Cargo handling levies
- Permit costs. Don't forget the cost if DAFF import permit and the Provincial Nature permit
- Cost for port health inspection
- Transport costs to base.
- Cost of quarantining for a few weeks. Facilities, health checks and laboratory virus tests
- Packing material, packing and transport to airport or local destination
- Air freight costs to local locations as needed.
- Importer’s margin to sell fish to the dealer (and remember the opportunity cost)
- Costs of the dealer who must care for the fish until sold to end user. Facilities and equipment with quality water is needed, sufficient food not to lose condition, electricity and other resources.
- Cost of credit card transaction.
- Cost of delivery. The box, bags, packing, oxygenation and travelling to take the koi on his final trip to the client. This might include a trip to the nearest airport which could be two hours away.
- Dealer’s margin
- Final price
In establishing the final price the dealer must build in a contingency for fish losses that can affect his profitability. These will all depend on how good his staff can care for the fish. Health issues, stolen fish and escapees due to poor protection are typically related to poor management.
And do not forget that in the end the customers will demand a discount!
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