moondigger
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 p.5 #8 · New Chuck Westfall Comments | |
tuantran wrote:
Are the following items 400% markup?
1. Hard Drives
2. PS3, XBox360
3. DVD Players
4. LCD monitors
5. Compact Flash Cards
6. Plasma TV, LCD TV
7. Laptops, Desktops
Many of them, yes. The component items (hard drives, RAM) don't tend to be marked up as much. However remember that I said 400% over the cost of building a given device, not 400% over what it can profitably be sold for.
Remember how much DVD players cost in the late 90s? I don't mean when they first came out, when they were $700 and up. I mean after they had been established and people were really getting interested in them. Prices for a name-brand DVD player like a Sony or Panasonic were around $300. People felt like they got a great deal if they found one on sale for $250. Does anybody think it actually cost any more than $50 to build one? I can assure you it didn't. In fact I'd be surprised if it ever cost Sony more than $30 to build a DVD player -- parts and labor included.
Now I believe the cost of building a camera body is much higher than a DVD player. It wouldn't surprise me if the cost of building a single 5D is in the low hundreds of dollars. But that's a far cry from $4500.
I live in Silicon Valley and have friends who can get me some of the above products (HP, Microsoft, Samsung, Panasonic, Western Digital, Lexar, Sandisk and Sony) direct from the manufacturers and most of the time, I get like 10% off the retail price and those are employee discount.
Companies aren't in the business of providing super amazing discounts to their employees. If employee discounts were as significant as you think they should be, there would be too much incentive for employees to buy tons of stuff and sell it at a profit. Invariably when a company provides its employees with really significant discounts, there's a limit on the amount they can get. I once qualified for a huge discount on Apple Macintosh computers, but I was limited to one at the special price per year. Even so, one of my coworkers bought the most expensive Mac at the time (a II fx) and sold it at a profit to a mutual acquaintance. Imagine if those prices were available with no limit...
The point I'm trying to make is that I sometimes see comments from people, usually when the Dell stackable discounts happen at the same time as double or triple rebates, that they can't understand how Dell or Canon could make a profit with such steep discounts and rebates. The answer is deceptively simple -- the cameras and lenses actually cost much less to build and distribute than the MSRP.
Here's a different example. Canon sells three 50mm lenses at three very different price points. 1.8 for $70, 1.4 for $300, and 1.2 for $1500. Anybody think the 50/1.4 actually costs 4 times the 50/1.8 to build? Anybody think the 50/1.2 actually costs 21 times as much as the 50/1.8 to build?
I have no doubt that the 50/1.2 costs more to build than either of the other lenses, especially if you consider the recent design/development costs that they have to make up. But they're all just so much glass, plastic, and metal. They're not paying the line workers who build 50/1.2s more than they're paying those that build 50/1.4s or 50/1.8s. In fact they're probably the exact same workers. They're not paying more for polycarbonates to use in one lens than any other. Grinding special elements costs more, and fluorite costs more than glass for lenses that have it, but there's just not enough of a difference to account for the pricing difference.
Successful companies charge what the market will bear. It might cost them $90 to build a 50/1.2 (just a wild guess, don't quote me) -- but if people will pay $1500 for it because it's an L and for the improvements in the focus motor and a half stop of light, that's what Canon will charge.
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