Stupid NZ Fixed Costs

By Eric Crampton 23/10/2012

Tyler Cowen warned me that New Zealand would teach me about fixed costs.

Today’s lessons: pens. Consequent to the new environment of heightened fiscal restraint at Canterbury, I have found that the Uniball Signo 207 pens I’ve preferred are $5 each via the University’s preferred supplier.*

The same pens at Amazon are US$12.59 for a dozen with free shipping within the US. That’s about $1.31 per pen. The cheapest online NZ price I’ve been able to find is $3. Freight brings it up to $3.50 – I’ll leave GST off because Amazon doesn’t charge it and because the University doesn’t pay GST on business inputs. A $2.19 per pen NZ premium.

Prezoom charges $19.50 to on-ship a 500 gram package from the US. The pen weighs 10 grams, so a dozen comes in well under the 500 gram limit. So a dozen pens, that go from Amazon to Prezoom then on to me in NZ across the ocean arrives at my desk for $35.25; the same dozen shipped from New Zealand is $42. The hassles and delays are not worth $7. If I needed 50 pens, the most that would fit in the 500 gram pack, I’d save $90. But who needs 50 pens? And how many pens’ weight would be in the packaging? Finally, the transactions costs of trying to convince University admin that it’s worthwhile ordering case lots of pens in from the States seem insurmountable, especially if they already make it a hassle to try and use anybody other than the preferred supplier within NZ. [see update, below]

New Zealand… it’s the little things that irritate. I’m not saying that NZ retailers are earning any kind of excess profit here: warehousing and logistics in a small country are just more expensive, and keeping any kind of inventory in a small market also just kills. It’s simply an irritating fact of the world. It’s one of the facts of the world that will eventually kill off most book retailing in New Zealand: the BookDepository is a far cheaper way of getting books for anybody who isn’t in a hurry.

I’ll tell you one thing though… next request to borrow a pen gets met with harsh words.

* UPDATE: that’s the catalogue price. The departmental administrator tells me the University gets a pretty substantial discount against that price. It’s still reasonably above the US price even counting shipping from the US, but below the cheapest online price. It’s still cheaper to get a 50 pen lot shipped here from the States than to buy them from the University’s preferred supplier, but not by enough to be worth the hassle. That looks like a limit price – charge just enough that nobody can be bothered to ship things in from the US. But it’s more likely reflecting the higher costs of doing things in small markets. Note also that EBay has plenty of options that include pretty cheap international shipping.