explain the price differential

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loneranger
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Re: explain the price differential

Post by loneranger » Thu May 12, 2011 4:43 pm

"Globalization"... its a b*tch!

Same happened in the cycling industry, prices sky rocketed. So we imported! The shops and importers went balistic at every mention of the dreaded "imported" parts. People were advised against it with the same "support local" arguments and the whole "europe has lots more volume" and the "were do you get service" arguments. But still more and more people were importing spare parts! Why?? Becuase money talk! With savings of between 40 - 60% on parts (that is after shipping and VAT) its a no brainer what you do when you break your expensive derailieur that costs localy R1800! Some shops even resorted to buying from the same europe based suppliers we (the cyclists) imported our goods to cut out the main stream importers. Most shops refused to fit "privately imported" parts in the hope that people will stop! The result: More and more people serviced their own bikes!

Today: The main stream importers realized they are doing something wrong and they fixed it! Prices dropped to within acceptable margins and local is lekker again!!

Bottom line: You will not stop people from importing goods privately with sarcasm, they will only teach themselves to service/repair it themselves. Rather find the problem and fix it. Lubags is probably on to something..
R300 more to buy something in the local shop, I wil buy with a smile! R1500 more in the local shop.. I can import two!!

DarrenLeishman
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Gear prices

Post by DarrenLeishman » Sun Jun 26, 2011 8:46 pm

So I have been looking online at gear prices. Why is it that a R150 quick draw in SA is only $10.95 in the USA?

Surely we don't have import duties on climbing gear?

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BrendonSalzer
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Re: Gear prices

Post by BrendonSalzer » Sun Jun 26, 2011 8:50 pm

I think its the cost of transport..
remember the days when sex was safe and climbing was dangerous

Oakley
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Re: Gear prices

Post by Oakley » Mon Jun 27, 2011 6:58 am

You still need to add 14% SA Vat to the converted $$$ price.

Not everything is cheaper to import, but there is certain items(like MSR) that is worth importing rather than buying local.

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Baldrick
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Re: Gear prices

Post by Baldrick » Mon Jun 27, 2011 8:51 am

As Oakley correctly mentions, you have to add VAT and transport costs to the landed cost and in order to maintain a business, we add a margin as well. Certain goods have applicable customs duties, such as harnesses, slings, ropes, etc.

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Re: Gear prices

Post by shorti » Mon Jun 27, 2011 8:53 am


Oakley
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Re: Gear prices

Post by Oakley » Mon Jun 27, 2011 8:56 am

@Baldrick there is no duties on sporting goods

swissphotography
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Re: Gear prices

Post by swissphotography » Mon Jun 27, 2011 9:40 am

As Shorti mentioned, this topic goes on and on. Climbers must be the tightest people in the world (and I am a climber).

Lets have a look at this, this item (quickdraw in this case) is manufactured in the USA and priced for the largest consumer market in the world (at $10 odd). It then has to be transported accross the world to a market of a few thousand climbers (if that) with capital outlay, shipping costs and VAT etc paid up front from the importing company, a retail store has to then purchase it (also outlaying capital for gear that might sit for months because the market is so small) and then sells locally for R150. And people complain?? For prices to equal our US counterparts we would need a few hundred thousand climbers to be buying gear. Not going to happen in a hurry.

This is not a critisism at questining prices, just a reality check on our market.

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Re: Gear prices

Post by Chris » Mon Jun 27, 2011 10:38 am

feels like this has been debated at length already. Just out of curiosity was the price listed a special or sale price? What is the recommended retail price for that item in the USA.

Also it is not true that sporting goods do not carry a import duty, most items do. Many climbing items don't (mostly the hardware), but if it is used for rope access it does have a import duty.

Items like packs, socks, shoes (climbing, running and hiking), clothing, tents etc. carries a import duty of between 30-45% depending on it's origin. These are among the highest import duties in the world so certainly not realistically possible to compete with these items. These duties will also apply if you bring these items in yourself, legally that is.

DarrenLeishman
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Re: Gear prices

Post by DarrenLeishman » Tue Jun 28, 2011 11:09 am

Thanks for the responses. looks like I opened a can of worms.

Some points I need to clarify:

I have no issue paying a fair price for a service for convenience.

If the importer adds value by offering warranty and support on products then they need to make a margin that is substantial

The price was the standard retail price on the Black Diamond web site - no special offer.

The VAT consideration is critical, with VAT included that takes the converted price to R86.13

The mass market issue is void because the products are not made specifically for our market, this price quoted is per unit not for a mass purchase price. In fact if you by more than $50 they ship it free. This shows that additional margin exists in the price point.

The way I work it out the actual cost is under R100 per unit including VAT which means the retailer is making at least 50% mark up if import duties don't apply.

Now I'm not trying to put retailers out of business but for products like this I don't need a store display or instant delivery. I'm prepared to wait and even to collect from a central point.

I understand that the market is small but group buying is a growing industry.

Why cant an innovative importer take pre orders and payment and then bring the products in as a single shipment at ultra competitive prices?

Oakley
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Re: Gear prices

Post by Oakley » Tue Jun 28, 2011 11:43 am

Free shipping within the USA or maybe UK. Dont get caught buy this.
Also a lot[most] of retailers dont ship certain brands outside of the USA.
Shipping is expensive.

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gripit
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Re: Gear prices

Post by gripit » Tue Jun 28, 2011 11:52 am

@DarrenLeishman Well if it as you say!!! Start importing gear at 1/3 of the price and make a furniture by sell it. But i think that when you start doing the Math it will be easier to just pay the price that the guys are asking locally

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proze
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Re: Gear prices

Post by proze » Tue Jun 28, 2011 12:18 pm

DarrenLeishman wrote:Why cant an innovative importer take pre orders and payment and then bring the products in as a single shipment at ultra competitive prices?
An innovative importer can. But someone has to be that innovative importer. Realistically our community is too small to support the manufacturer->local agent->retailer model that is so pervasive in SA, so your model makes sense. But then people would have to understand that warranties/recalls/etc would be on them. In our sport that might not be a problem as warranty claims, I'd imagine, would not be prolific. Another option is the retailer doing the importing directly: I think CityRock directly imports Bluewater and Evolv. The retailer is the local agent and their pricing is pretty good.

What you describe has happened in other local sports/communities and has really shaken things up. A good example would be the motorcycle trade... parallel importers started bringing bikes in from Japan or the USA directly at substantially lower prices. The "official" importers bitched a lot for a while but dropped their markups in the end.

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Turtle
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Re: Gear prices

Post by Turtle » Tue Jun 28, 2011 12:45 pm

to the death...

What swissphotography said.

Climbing gear, as far as I'm aware, is never sold at inflated prices. Its becoming more and more competitive as we go along.

j

Chris
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Re: Gear prices

Post by Chris » Tue Jun 28, 2011 4:31 pm

Hi Darren

I’m an importer, but I do not import climbing hardware so I cannot claim to be an expert on the mark-ups etc with this. I also risk opening myself up for abuse in posting here (it tends to happen, so if anyone do not agree with me refrain from making personal attacks, rather point out inconsistencies), but I will try and give you an honest straight forward answer to some of your questions.

As you have already pointed out you have to include VAT, in the USA (unlike South Africa) tax is not included in the advertised price, because tax is different in every state.

The mass market issue is actually not void. Shipping in the USA is easy and cheap, regardless of the product/industry you work with. In comparison prices in South Africa is much more expensive. The USA will bring in i.e. 20 000 quick draws from China in each of their shipments, and due to the fact that most containers in the world goes to the USA, ocean and air freight to the USA is much cheaper than what you see in the rest of the world. It is certainly more expensive to ship a container to South Africa than say New York. I have no idea how many items the local suppliers bring in, but it might be 100 units at a time. So you might find that Black Diamond USA shipping cost is R1/unit and for SA it will be R6/unit (don’t quote me on number because I do not know what the actual numbers are). Bottomline you cannot ship a 100 units for the same per unit price as 20000 units.

In the case of Black Diamond, they are an American company and therefore do not need a distributor and sell directly to the retailers in the USA market. Most other countries in the world need to work with distributors and it adds an additional link to the chain so you will see in pretty much all countries outside of USA prices will be higher (do a comparison with France, UK, Australia etc). So yes we will get product cheaper if Black Diamond opens a office here, but our market is not big enough. Do a comparison with other brands based on the countries they are based in, the country of origin is almost always cheaper and unless the brand as a subsidiary in other countries they will be more expensive if they use a distributor. This is clear when you look at european brands in the USA (do note that some of the european brands open offices in the USA and do not have distributors, it's the benefit of being the world's largest market).

Ultimately if you add on all the factors you will see that distributors and retailers locally work on some of the lowest margins in the world. I can tell you as a fact that specialist retailers in the USA/Europe in the majority of their products have a mark-up often double as high as local retailers. The same goes for distributors elsewhere.

There actually already are many innovative importers in South Africa, the sheer variety of product you can get here is testament to this. I know people get angry when this get said, but there are actually single retailers in the USA who has higher annual sales than our entire industry (admittedly they might be based at Smith Rock or Yosemite), but the point I’m trying to make is there are many people who actually do a pretty good job to make sure you have a variety of product to choose from.

Also remember problems with pricing do not always lie with the importer (although some people will take the piss if they can as in any other industry). Our ability to sell product on cheaply is very much determined by the price we can buy product for. Some suppliers are very good and allow for competitive pricing, others are less competitive. You can often see this if you look at local distributors. I’ve seen debates here where products from the same distributor (but different suppliers) are quoted as both examples of excessive profit taking and responsible distribution. One would assume that a distributor will be consistent and if some of the their products are affordable and others are not it is probably a function of what he is able to do. I can guarantee you that ALL of us want to get product to market as cheap as possible, because then surely we will sell more...

It’s a complicated issue and no doubt people will continue to get upset when they see something advertised in the USA for more than it sells for locally. I’m lucky that I have to travel often to the USA and Europe and I will often do my shopping for say Apple, Levi’s or any other small item while I’m over there, that the benefit of living in the largest consumer market in the world, consumer products are cheaper.

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gripit
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Re: Gear prices

Post by gripit » Tue Jun 28, 2011 4:40 pm

Well said Chris i agree on most of the things that you have said . There are many factor that you don’t see until you try to run a business.

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Re: Gear prices

Post by pierre.joubert » Tue Jun 28, 2011 5:12 pm

Shipping is only expensive if you use a courier (UPS/Fedex). To get stuff here from the US, send it with plain old United States Postal Service. Pick it up from your local post office. I've shipped a lot of gear and never lost an item, it seems the guys that steal packages at the SA Post Office don't climb trad that much.

@Chris - regarding sales tax
Chris wrote:in the USA (unlike South Africa) tax is not included in the advertised price, because tax is different in every state.
Last time I was over stateside, I ordered stuff from backcountry.com, physically based in Salt Lake City, Utah. Utah has a 4.7% state sales tax, and I shipped it to Connecticut, that has a 6% sales tax. I didn't pay any tax on that order, or anything apart from the advertised price for that matter. Where is the tax then? Notice free shipping, inside the US (because the order was over $50). This from the invoice they emailed me:

QTY ITEM NO. ITEM DESCRIPTION EACH TOTAL
1 MHW1508 Mountain Hardwear Typhoon Jacket - Men's Blue, M $169.96 $169.96

Subtotal: $169.96
Tax: $0.00
Shipping: $0.00
Total: $169.96
SA's leading online retailer: R2808 = $412 -> there's something not right here...
Chris wrote:Ultimately if you add on all the factors you will see that distributors and retailers locally work on some of the lowest margins in the world. I can tell you as a fact that specialist retailers in the USA/Europe in the majority of their products have a mark-up often double as high as local retailers. The same goes for distributors elsewhere.
While your suggestion that foreign retailers have higher markups than local retailers is interesting, it is a moot point. That they might add a hypothetical 30% markup vs our local hypothetical 10% markup does not change the price I pay at the counter. Actually, how can they have a supposed higher markup (as you point out as fact?) and still much lower retail prices?

I think we might be getting better prices buying single units on US websites than our importers/distributors get on entire import orders.

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Turtle
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Re: Gear prices

Post by Turtle » Tue Jun 28, 2011 5:15 pm

:cheers: Chris!

Chris
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Re: Gear prices

Post by Chris » Tue Jun 28, 2011 5:59 pm

haha, I did open myself up for this, once every couple of years I step into the trap/

@pierre joubert

I'll try and give a reply, but I won't stick around too long, no doubt the mud-slinging will soon follow and i’m not really interested to get involved in that. Firstly just to show I’m not hiding behind an alias, I’m the owner of Adventure Inc the company that does import Mountain Hardwear.

Pierre I’m not an expert on how Tax works if you ship between states, it might be that it only applies if you ship to the same state. I can guarantee that Tax is not included in the price advertised and if you walk into a retailer and buy the item the tax will be added. I think anyone on this forum that has been to the states will attest to this. Tax to my knowledge in the USA is between 4-10%.

The $169 you paid for the typhoon jacket is a pretty good price and also a special. Prices for this item has been coming down, but current recommended retail is around $200 in the USA it has been higher in the past (the newest version of this jacket no longer uses Gore-tex but MHW own waterproof laminate, they managed to get the price down this way, our stock still includes the gore-tex for now). The code you use MHW 1508 is also a pretty old code, this is a version of the jacket that goes back some years. Generally what happens in the USA with website like backcountry.com is they use it to get rid of stock that is 1,2, 3 or even more season old. It is essentially a online access park for clearing old stock. You will be hard pressed to walk into a retailer and get the current season item for the same price anywhere in the USA. Clothing and gore-tex items are among those items in South Africa that carries a 45% import duty. As a distributor I cannot get away from it and it does add to the price. MHW is also a USA based brand so they do not have a distributor there, price in i.e. UK for instance will be higher than USA. I ship typhoon jackets from a single factory in china, other products in the MHW range come from other factories so those are the only items I can ship from this location, the shipping is high (because I will ship 100 or less jackets at a time) and I cannot afford to use USPS or any other postal service, firstly because I won’t be allowed to by the supplier and secondly I need a reliable timely delivery service. For most brands I will lower my shipping cost by shipping all the products for that brand in the same container, it is not possible in this case. I cannot comment on backcountry policy of delivering free of charge for orders over $50, Kalahari does the same locally, it is the business model these guys work on, high turn-over low margins, no store front, no stock holding. Mountain Hardwear products are expensive, but so are Columbia, Salomon, Adidas, Puma, Lacoste or pretty much any other international clothing brand brought into south Africa. Do comparisons and see, go further and compare footwear prices with international pricing. Footwear carries a 30% import duty, no footwear brand locally can consistently compete with international pricing, even the brands that have subsidiaries in South Africa.

We also do other brands, i.e. Buff Headwear where in spite of the import duty we are generally at the same price the rest of the world is. We spend 8 years building the brand up, all of the product come from one location in Spain and we can do bigger shipments. We also get good support from the supplier.

If I can I would love to be able to match the price MHW sells for in the USA, it will mean MHW will be the most competitive brand in South Africa, we will be cheaper than local brands like First Ascent and Capestorm. We will be much cheaper than the other imported products and I will be making money hand over fist regardless of the mark-up I have on the product because we will be doing volumes.

Right now we do MHW because no-one else do any of the specialist clothing brands, I promise you it is hard. It won’t be appropriate for me to give you all the numbers involved, but as I mentioned in the post above look at all of Adventure Inc products. In some products our prices are pretty comparative to what you will pay elsewhere in the world, in others it is much higher, so surely there will be a reason for it. I promise you that when I look at a typhoon jacket we do not sit around a table and say why sell it for R1600 if we can sell it for R2800.

The fact that we take lower margins might be a moot point as you mentioned. I just wanted to illustrate that we often do take lower margins to at least make it possible to sell MHW and similar brands locally. If we took full margins it will be impossibly expensive.

I know it is frustrating to pay more for product, this is what I deal with every season and every season we fight for better pricing and try and become more efficient so that we can give better pricing. All I can say is we share in the frustration and we fight for lower import duties, we work hard to get volumes up in order to give better pricing, but we will fall short in many areas.
Last edited by Chris on Tue Jun 28, 2011 6:18 pm, edited 2 times in total.

pierre.joubert
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Re: Gear prices

Post by pierre.joubert » Tue Jun 28, 2011 6:12 pm

Chris, thank you for the very informative reply - I appreciate it.

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Comparative pricing

Post by Larry Thomas » Fri May 18, 2012 4:25 am

I know I am going to receive a lot of hate mail for this one, but I am traveling in the USA currently and have been looking at climbing gear prices. I realise that there are volume factors at play, transport costs etc, but even so the difference in price is hard to swallow.

Some examples of gear I use so I compared the prices:

BD quickwire QD
R180 in SA
$12 in USA

BD Positron carabiner
R110 in SA
$7 in USA

pierre.joubert
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Re: Comparative pricing

Post by pierre.joubert » Fri May 18, 2012 7:10 am

Bladdy AGENT!

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Re: Comparative pricing

Post by pierre.joubert » Fri May 18, 2012 7:10 am

Bladdy AGENT!

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Re: Comparative pricing

Post by mokganjetsi » Fri May 18, 2012 7:28 am

kindle reader $79 in the US
pay R1100 in SA.

unfortunately its the way it rolls; our shops are doing their best

Chris
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Re: Comparative pricing

Post by Chris » Fri May 18, 2012 8:02 am

this has been discussed at length, I recon you look up the old discussions for some of the explanations, but as Willem points out you will be hard pressed to buy anything in USA that cost the same in South Africa. If you want to really feel sick have a look at prices of cars over there compared to our market.

It's a bigger market, brands are generally based there so operate directly into the market without a distributor so one less link in the chain, and then we have those pesky import duties (as high as 45%) depending on the category. And also remember the prices you see in USA does not include VAT yet so first thing you should do is add 14%.

Also make sure the prices you comparing to are the recommended retail price, just as is the case in South Africa retailers often sell product at well below the RRP prices in order to try and do volume.

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Re: explain the price differential

Post by Justin » Fri May 18, 2012 8:52 am

I merged the threads regarding comparative pricing, overseas gear prices, etc into this post.
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Warren G
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Re: explain the price differential

Post by Warren G » Fri May 18, 2012 9:22 am

A little while ago I was looking through an Ozzie site, and their prices are more like ours, if not more expensive. I have friends that moved there for a few years, everytime they came home they'd shop here as gear is cheaper. The point I'm making is that it isn't that you are in South Africa, but that you aren't in the USA.

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Justin
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Re: Comparative pricing

Post by Justin » Fri May 18, 2012 9:52 am

Chris wrote:If you want to really feel sick have a look at prices of cars over there compared to our market.
e.g. two similar Toyota vehicles:
4x2 Tundra 4.0L V6
27,365.00 USD = 230,066.85 ZAR

3.0 D-4D Raised Body Raider Auto
R386 800.00

Thats a R156'733 difference... so if you want to get revved about something go lobby the relevant department about vehicle prices and then move onto outdoor gear :wink:
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simonL
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Re: explain the price differential

Post by simonL » Fri May 18, 2012 12:21 pm

Hi

as the Black Diamond representative in South Africa such discussions are always of interest.
Some of you met Dave Drulard - the BD international sales manager - at the tradathon. When he was here we had numerous discussions with retailers around this issue of comparitive pricing in different parts of the globe.

In short :
1. BD is aware of the issue and have considered working towards a "global price list" - however it is a very difficult thing to achieve for many reasons.
2. At times SA is more expensive than the USA - but we are by no means the most expensive market on the globe. Below is a comparison of the price of a Black Diamond AirLock screw gate from various sources around the globe.
I have converted the foreign cost to rands in two ways :
A = direct conversion at todays exchange rates (using Standard banks quoted rates) - this price is only really obtainable if you walk into the store in the country in question and buy the unit & bring it back to SA without declaring it at customs. (That asumes you have spent a fair wack getting there and back in the first place)
B = using the conversion factor that is usually applied to landing stock in that currency taking into consideration exchange rate, transport, clearing agent fees, customs duties etc. e.g at present $1 will land at approximately R11.5 via airfreight once all these costs are taken into account.

Looking at the table below you will notice that SA is certainly not out of line - if anything the USA is the odd one out.

What is not included in this direct comparison - and what you are getting when you buy local is :
1. direct, easy access to quality gear down the road at your local store
2. supporting a growing outdoor market which is contributing jobs etc. to keep our local economy growing & stable
3. supporting an outdoor market which gives back - local magazines, websites, climbing gyms, rock rallies, competitions, bolting replacement funds, sponsored athletes, SANCF. Without gear sales - none of this would be possible.

Hope this provides some of the answers your are looking for...... :thumright
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Tristan
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Re: explain the price differential

Post by Tristan » Fri May 18, 2012 12:32 pm

@ Justin. I believe that: The g.oh.v.eh.m.e.n.t impose a 45% import duty ON THE ZA VALUE OF THE vehicle...effectivle government is allowed to price-fix...in fact I believe that there is a clause in the recently implemented Consumer Act that excludes the Government from the act...impunity. Like they say, "history is written by the victors..."

<disclaimer: this is based on heresay with people more in the know than I, and I almost certainly have something slightly tainted>

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