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  Reply # 1063566 11-Jun-2014 18:49
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Aredwood: This thread is an eye opener for me. Im a self employed plumber / gasfitter. Which means I install alot of things like hot water cylinders which are both expensive and which are expected to last a long time. The thought that someone could have a valid claim against me for the entire replacement cost of a 10 year old hot water cylinder is scary. Especially as alot of cylinders are only guaranteed for 5 years by the manufacturer. And that only covers the cylinder itself. The element and thermostat normally only have a 1 year guarantee.

I will now be charging a minimum 20% margin on all major items like hot water cylinders unless the customer is a business. And will be steering customers to Mitre 10, Bunnings ect to directly purchase things like hot water cylinders. So I won't have to cover the CGA risk on things I have no control over. Yet the silly part is if I were to copy property developers and regularly liquidate my company and setup another one. (once per year maybe) Then I won't have long term CGA risk.

I Wonder if more business will spring up that either only sell to other business's. Or will charge high retail prices and then offer free accounts with big discounts to other business's. (2 tier pricing).

The CGA should be changed so Sellers / Manufacturers have to specify the "Half life" of the item they are selling. (Age where they expect that 50% of their product would have suffered a fault that the manufacturer doesn't intend to be repairable) And then require that should an item Suffer an unrepairable fault before it's half life. The seller will only be liable to cover a % of it's value based on how much longer until it's half life. (An item with a 10 year half life fails in year 5 - 50% of it's value is payable. Same item fails at year 9 - 10% of it's value is payable.) I think this will be far better than simply saying items must last a reasonable amount of time. As it makes it clear exactly how much of a guarantee must be offered, Will be an in your face way of telling people that the cheap item they are buying is exactly that - cheap. And will make it easier for manufacturers / sellers to encourage people to buy better quality products. The biggest problem with the current system is that almost every dispute over age of produce can only be settled by litigation.



To be honest if you're not making a 20% margin then your business isn't particularly sustainable or able to grow past a one man band. 20% is not a particularly high margin if you are shelling out for major plant.

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  Reply # 1063580 11-Jun-2014 19:11
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Handle9:

To be honest if you're not making a 20% margin then your business isn't particularly sustainable or able to grow past a one man band. 20% is not a particularly high margin if you are shelling out for major plant.


Margin depends on what you are selling. Also remember that tradies will get things at a wholesale price, so won't be paying retail. But they may charge the retail plus a percentage margin to a customer, which can make the overall margin a lot higher than it would first appear. I don't have any problem with reasonable margins on products, and it subsidize the hourly rate. If they aren't making margins on products, the hourly rate would probably need to go up to cover the loss of income. It does also give the customer a service where they don't have to go out themselves to get the part needed.

 
 
 
 


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  Reply # 1063968 12-Jun-2014 12:08
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KiwiNZ: I assume that if the customer buys the products themselves directly from the supplier you wont be charging an additional 20%, correct?


Definitely won't be adding any margin on products the customer buys themselves. (No idea how you would do that anyway when the customer is directly paying the supplier.)


NonprayingMantis:

i think this is a bit of an over-reaction.

by charging 20% more to cover CGA claims, you are basically saying that 1 in 5 of the hot water cylinders will have a CGA claim on it which you won't be able to claim back from the manufacturers.

That seems extremely high to me.

(remember that we're talking about claims, not actual failure rates.  Most consumers won't put a CGA claim on something more than a few years old, people won't keep receipts of who they got it from, and a lot of house will be bought and sold within the 10 years, so the new owners won't be able to make the claim either.

The simple question is:  
How many people currently make claims against you?  The CGA has been around for years so there is no reason to expect this to change materially in the future.


Problem is the cost to replace a hot water cylinder is far more than just the cost of the cylinder. Due to the time taken to drain, disconnect, remove, then reinstall the new cylinder. And if the exact model of cylinder is no longer available anymore. Then there is extra cost to modify the pipework to connect to the new cylinder. And worst case - you can't get a cylinder of suitable size to fit in the available space. So either a custom made cylinder or relocating the cylinder to a completely new location.

As for CGA claims. Haven't had any claims against me. And can't recall any against the previous company I worked at for 10 years. All Im doing is taking steps to manage long term business risk. (By means other than liquidating and setting up a new company every year, or trying to dodge it when it happens.) The end consumer will still have CGA cover but it will either be provided by a large retailer who will have far greater cashflow than I ever will. Or at least I would have made a bigger margin to cover my CGA risk / provide the mandatory extended warranty.

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  Reply # 1063975 12-Jun-2014 12:14
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Does anyone have a list of the length of time that the consumer watchdog deems is the "reasonable life" of particular items? 

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  Reply # 1063986 12-Jun-2014 12:24
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Have you actually had any HWCs fail prematurely. Under the CGA I believe consequential losses are also covered so you could claim those costs of reinstalling from the manufacturer too if it has failed due to a manufacturing defect. So the consumer shouldn't be charged for that nor should the installer be out pocket.

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