p.2 #1 · Is the profit margin for retailers on Canon lenses really so low?
CanadaMark wrote:
There are typically multiple things that determine the actual store's cost. First, the store buys at X dollars. Then, often based on volume or promotions, they get kickbacks or other incentives from the manufacturer which effectively lower the cost much further, but if you were to just look at a cost invoice or in the computer you would just see "X".
I used to sell commercial building supplies (Not a direct comparison I know, but electronics sales work similarly) and this was exactly how it worked. We wouldn't discount certain items, not let contractors use their discount accounts on them, or we would sell them "below cost" as a "loss leader", and that's what we told customers. Then, at the end of the year, we got enormous kickbacks that far offset any "losses" we had on those items. Car dealerships work almost exactly the same way too....Show more →
This is how it works with the company I work for as well. We are given prices that are often higher than what I can buy for locally. (national contracts) BUT, at the end of the year when they see that you spent $3 million with their company, you would get a "rebate" for all the purchases you have made, making the final price much cheaper than originally quoted. This is tough for those of us who are told to save money because we really never know how much we are saving.
Anyway, the guy at Best Buy really had no clue what BB pays for the lens. If BB bought one all year, that would be the price, but with volume discounts and rebates, that price may have been $700. Most people will never know though because the retailer isn't going to change the buy price with ever $2 discount they get.
p.2 #2 · Is the profit margin for retailers on Canon lenses really so low?
Jeff Donald wrote:
Close, I've been in retail management for multiple camera retailers and Apple computer, since the late '70's (off and on). The book cost on that lens is probably about $1029. However, the manufacturers, offer discounts for prompt payment and also co-op dollars and other incentives that in reality lower the dealer cost on that lens by an additional $100 to $200.
The clerks have no clue on the real cost of the products they are selling.
This is pretty much my experience from working in photo retail for a family owned business. There were all sorts of early payment discounts, spiffs, co-op ad dollars, etc... plus, a cozy relationship with the sales rep of a major brand could provide other benefits. We worked non-commission and supposedly the spiffs intended to go to staff as gear sales commissions was pooled for an annual party, though suspect only a fraction of that ever was required to pay for said party... We often sold gear for around 10% over 'book net' pricing, so in that respect, yeah, the margins looked very slim.
Another variable, at least here in Canada, was Canon's CPS pro-shop program, which provided the retailer additional discount on gear. The CPS program here traditionally worked in a manner in which the CPS member would buy gear at 'book net' pricing, and the shop would get a 10% discount from that, though there were often other incentives that resulted in additional discounts. There wasn't really anything preventing the sale of said gear to regular Joes at street prices, netting the shop at least 10% more. The discount was an incentive for the shop to stock harder to find, expensive gear for potential customers to see/try and hopefully buy.
With the demise of B&M 'pro shops' all of the major manufacturers have lost valuable sales partners for promoting their higher-end (and higher profit) products. This development at Best Buy doesn't surprise me, as it's about the most straightforward way for a company like Canon, Nikon, etc. to easily organize a coherent way to promote their products without having to deal with tens or hundreds of unique locations across the country. With it being a big-box retailer, I'd imagine this is all managed centrally and is easier for the manufacturers to participate. As a result, they likely offer incentives to Best Buy for stocking all that inventory upfront.
p.2 #3 · Is the profit margin for retailers on Canon lenses really so low?
Jeff Donald wrote:
If the stores follow all the manufacturers promotions and financing options they could get 25% or even more at times.
As an example manufacturers will offer discounts for prompt payment of invoices. Lets say on January 2 you place an order for $100,000 of camera bodies, lenses and kits. If you pay the bill by the due date February 10, you'll receive a discount of between 10 and 15%. The discount is usually in the form of merchandise credit, so in affect you get $10,000 of free goods. In some cases you just take the discount right off the payment.
There are also co-op dollars available to promote and advertise the specific products, kits etc. Co-op dollars can be a profit center for retailers that work it right....Show more →
It's been about 5 years since I managed a store (I'm a full-time photographer now), but we never saw a discount for prompt payment that was close to the 10% to 15% you mention. The typical discounts for prompt payment was in the 2% to 4% range for cameras & lenses.
And to answer the OP's question, yes the margins are incredibly low on the big ticket items such as DSLRs and lenses. Margins are much better on accessories, especially filters, and third party batteries.
p.2 #4 · Is the profit margin for retailers on Canon lenses really so low?
Eric Mastilak wrote:
I remember when Cord Camera was still in business toward the end of their life they stopped carrying Canon gear. The manager told me the profit margin on Canon gear was so low it really did not make sense for them to carry their gear anymore. He said if you buy a Rebel kit and do not buy any high mark up accessories they actually lose money when you factor in all of the overhead.
I had a former camera store owner on here PM me those exact facts.
p.2 #5 · Is the profit margin for retailers on Canon lenses really so low?
Here in the NL the profit for resellers on camera's is pretty low. They make their profit largely by selling cards, bags, filters and such - along with the camera.
p.2 #6 · Is the profit margin for retailers on Canon lenses really so low?
Canon was (don't know if this is currently the case) about the only manufacturer that didn't spiff the sales people. Many store owners were upset about that because the stores Kept the spiffs intended for the employee and used the spiffs as part of the profits.
I think Canon's reasoning was the amount of advertising and sponsorships they did was way beyond what any other camera mfg. was doing at the time. For every 1 person that came in and asked for a Nikon, there were 8 or 9 that asked for a Canon. It was an easy sale and easy to add on other items (batteries, filters, bags, tripods etc) that had a spiff.
But in the end Cords made some bad business decisions buying small, local chains of stores (Petes Photoworld, Click Camera to name a few) and it cost them their business.
p.2 #7 · Is the profit margin for retailers on Canon lenses really so low?
No, it was through the store. I know what you're talking about though. You were able to buy from the manufacturers direct and they'd (at least with us) ship directly to the store. I think the program was called accommodations or something like that. I picked up a pair of Infinity tower speakers, $500 each retail, for $175 each. Still have them and this was about 15 years ago.
Jeff Donald wrote:
You may have purchased that under the manufacturers "personal purchase program" that allows store personnel to purchase limited equipment direct from camera manufacturers at lower prices than the dealer can purchase at. The typical discount was around 15 to 25% below the best dealer cost (not counting incentives). This encourages store employees to purchase cameras and lenses and then in turn that employee is more likely to sell the products for the manufacture they shoot with.
I remember back in the late '70's i purchased a bunch of Olympus gear under the personal purchase plan and the bodies came engraved with my name in them. The really reduced the incentive to buy gear and turn around and try to flip it. To the best of my knowledge manufacturers no longer engrave bodies etc. but the warranty is automatically registered to in the employees name....Show more →
p.2 #8 · Is the profit margin for retailers on Canon lenses really so low?
Margins need to be much larger than most of the people think or are being told. Here is something that was not mentioned yet: BH offers 4% reward (in store credit) for the said lens, 16-35mm f/4L IS. When bought via affiliate's link, BH is loosing at least another 2%. Right there there is a 6% cut on the lens price that the store is not getting and I bet BH is not paying out of its pocket...
p.2 #10 · Is the profit margin for retailers on Canon lenses really so low?
The local camera store I deal with says their profit is about 7% for Canon high end equipment. He is very unhappy with Nikon because he makes about 5% profit.
25% profit is totally ludicrous, for any electronics, even 15% is high.
Money is made in selling accessories which do have high markups.
That does not mean that quarterly bonuses might not be handed out for meeting or exceeding sales goals, but I have zero information about that.
Also beware of sellers talking about profit or cost. Profit is made after paying the rent salaries advertising, etc. Its different from markup. All those factors are often added into the acquisition price, so they buy a lens for $900, add $75 in store costs, sell it for $1000 and say they only make $25. Sometimes that's just creative book keeping to keep salesmen ignorant of the actual cost.
p.2 #11 · Is the profit margin for retailers on Canon lenses really so low?
ShutterbugJ wrote:
I'm friends with a couple of people who own camera stores, and the margins they've told me about are far below 25%. In the case of the 50/1.8 STM, their vendor cost is $120, and MSRP is $125.
Where did you get the information saying 25% margins? We wouldn't see camera stores failing at such a rate if they had 25% margins.
Nor can they stay in business with the margin you are suggesting above. They need to make at least 25% if they carry the paper on the inventory sitting on their floor....add in rent, employees, social security, unemployment insurance, accountant, etc.....they really need more than 25% to have a chance at keeping their doors open.
p.2 #12 · Is the profit margin for retailers on Canon lenses really so low?
There is profit, that would be after all bills are paid including overhead.....and there is markup, before bills are paid.
Does anyone that is making these comments ever run a business? Responsible for a P&L? If not that would explain the comments and lack of understanding what it takes to run a business and keep the doors open.....never mind run a business as part of a publicly traded corporation where the shareholders expect increased returns year after year and your job is to make that happen at the same time you are keeping your employees happy with raises etc......it isn't easy!
p.2 #13 · Is the profit margin for retailers on Canon lenses really so low?
Jeff Donald wrote:
Canon was (don't know if this is currently the case) about the only manufacturer that didn't spiff the sales people. Many store owners were upset about that because the stores Kept the spiffs intended for the employee and used the spiffs as part of the profits.
I think Canon's reasoning was the amount of advertising and sponsorships they did was way beyond what any other camera mfg. was doing at the time. For every 1 person that came in and asked for a Nikon, there were 8 or 9 that asked for a Canon. It was an easy sale and easy to add on other items (batteries, filters, bags, tripods etc) that had a spiff.
But in the end Cords made some bad business decisions buying small, local chains of stores (Petes Photoworld, Click Camera to name a few) and it cost them their business. ...Show more →
Overhead would have eaten them alive......
p.2 #15 · Is the profit margin for retailers on Canon lenses really so low?
ShutterbugJ wrote:
I'm friends with a couple of people who own camera stores, and the margins they've told me about are far below 25%. In the case of the 50/1.8 STM, their vendor cost is $120, and MSRP is $125.
Where did you get the information saying 25% margins? We wouldn't see camera stores failing at such a rate if they had 25% margins.
I can't remember where I got the 25% number. memory could be corrupted, It is possible the gross profit is lower, but realize 25% gross margin is very low for a brick and mortar retail store. Also I would call out any camera store claiming they were buying and stocking a lens for $120.00 and selling it at $125.00.
Prompt payment discounts are no where near 10% more like 2% net 10.
I had a specialty auto parts store in the 70's and my cost was about 22% of gross sales, not counting taxes. I can't imagine costs have gone down. So in the above 50/1.8 example it would have cost me $27.50 to sell that item. No store I know of would have carried that item, unless that is a one off exception and a requirement for carrying the entire product line.
While some may think 25% is a lot. Buy a $1000.00 lens for $750.00 and make a fast $250.00.
Unless you have large volumes It ain't!
Sam
Apr 27, 2016 at 10:37 AM
AmbientMike Offline • • • • • • [X]
p.2 #16 · Is the profit margin for retailers on Canon lenses really so low?
I looked at camera sales at one point. I talked to the Canon rep, and it's been several years but I think the popular point&shoot was selling for $200, and you had to pay $180 for it. So you made $20. That's why they try to sell cards, batteries, etc.
Yes, margins are low.
I also get a trade publication from WYNIT, aimed at camera stores, at least partly, and it just looks like a really hard business
But they used to come in to look at cameras, and twice every time they processed film. Now, their camera is a phone, no sale there, and they print at home. Good luck staying afloat
p.2 #18 · Is the profit margin for retailers on Canon lenses really so low?
Herb wrote:
There is profit, that would be after all bills are paid including overhead.....and there is markup, before bills are paid.
Does anyone that is making these comments ever run a business? Responsible for a P&L? If not that would explain the comments and lack of understanding what it takes to run a business and keep the doors open.....never mind run a business as part of a publicly traded corporation where the shareholders expect increased returns year after year and your job is to make that happen at the same time you are keeping your employees happy with raises etc......it isn't easy!
Camera stores are not publicly traded, and they often go out of business. More so than most other businesses that I've seen. The thing is, you don't have to have margin on all items. I studied accounting, and used to work in the pet industry, and everything was marked up 25-100%. And when I did work in the food industry--in pricing strategy, actually--things were marked up ~5%-75%, and we were losing money on things like eggs and milk.
Camera stores make their money on accessories. I don't doubt that they make ~10% on most lenses, but they can't across the board. If you make a profit on every single item, you will make less money overall in most retail systems.
Apr 27, 2016 at 11:21 AM
AmbientMike Offline • • • • • • [X]
p.2 #19 · Is the profit margin for retailers on Canon lenses really so low?
Of the people who you do get to walk through your door, at a store, a lot are going to go home and buy it cheaper online. So if you're wondering why they are going out of business.......
p.2 #20 · Is the profit margin for retailers on Canon lenses really so low?
AmbientMike wrote:
Of the people who you do get to walk through your door, at a store, a lot are going to go home and buy it cheaper online. So if you're wondering why they are going out of business.......
There's even a name for it - showrooming. I think this was a big part of why BestBuy decided to start price-matching online prices a few years ago.
Archive 2016 · Is the profit margin for retailers on Canon lenses really so low?
It is possible the gross profit is lower, but realize 25% gross margin is very low for a brick and mortar retail store. Also I would call out any camera store claiming they were buying and stocking a lens for $120.00 and selling it at $125.00.