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Archive 2008 · dealer costs

Red Grainger
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p.3 #1 · dealer costs

Lars Johnsson wrote:
No I'm not doing that. Discrepancies in exchange rate can do $100 and mostly $200. (I also wrote in the post "give or take $200 up or down from that price because of the exchange rate) But it will not do $ 1600.

Lars is quite right. It costs Canon the same thing to produce a camera body sold in Thailand as in Germany, Sweeden, Australia, or the United States. The Corporate margin of profit per unit remains the same regardless to which country or continent they export to. Retail cost can vary depending upon customary profit margins within that particular country and the cost of doing business and the VAT or equivalent tax. Also a large volume dealer such as B & H is going to get a volume discount unavailable to smaller Mom and Pop camera stores. Occasionaly Canon (and other manufacturers) give volume discounts to smaller merchants in order to move merchandise (e.g. the Canon 40D and 5D rebates). Nobody gives stuff away for 5%-10% margins. They could never sell enough ancillary merchandise to keep the lights on. By the way, the oldest line in retailing is "I'm selling it for less than I paid to buy it"

Red

Jun 15, 2008 at 02:38 PM

Mariner
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p.3 #2 · dealer costs

Red, All good points. I have some first hand experience with similar imports and you are right on.
John

Jun 15, 2008 at 02:47 PM

Esquire08
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p.3 #3 · dealer costs

Red Grainger wrote:
Lars is quite right. It costs Canon the same thing to produce a camera body sold in Thailand as in Germany, Sweeden, Australia, or the United States. The Corporate margin of profit per unit remains the same regardless to which country or continent they export to. Retail cost can vary depending upon customary profit margins within that particular country and the cost of doing business and the VAT or equivalent tax. Also a large volume dealer such as B & H is going to get a volume discount unavailable to smaller Mom and Pop camera stores. Occasionaly Canon (and...Show more →

This is simply incorrect.

The PS3, XBOX360, and other similar systems lose money on their consoles, but make it up on accessories and games. People are hesitant to upgrade from one system to another, and the manufacturers have to provide incentive to do so. Initially, they make very little margin. Once technology progresses and the production costs begin to decline, the prices of the cameras decline as well. The margin increases, but not significantly.

It takes a LOT of R&D to produce these cameras. So while the actual materials might not add up to $2000 for a 5D body, the R&D certainly takes a big chunk out of the margin between retail and materials.

Not too many people have multiple bodies, but how many lenses does the average photographer have? Two? Three? What about accessories? You need batteries, some people love grips, focusing screens, a flash, remote triggers, etc...

Every manufacturer (and reseller) makes their biggest margins on the accessories not included with the camera. Period.

Jun 15, 2008 at 02:52 PM

Mariner
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p.3 #4 · dealer costs

Esquire08 wrote:
This is simply incorrect.

The PS3, XBOX360, and other similar systems lose money on their consoles, but make it up on accessories and games. People are hesitant to upgrade from one system to another, and the manufacturers have to provide incentive to do so. Initially, they make very little margin. Once technology progresses and the production costs begin to decline, the prices of the cameras decline as well. The margin increases, but not significantly.

It takes a LOT of R&D to produce these cameras. So while the actual materials might not add up to $2000 for a 5D body, the R&D certainly...Show more →

Sorry but you are really confused. We are not concerned here with whether or not Canon makes a "given" profit on each unit sold, just that that profit (or loss) is the same irregardless of the country to which it is sold. Certainly one would expect most SLR manufacturers who also have a line of lenses to recoup and actually derive profit from the sale of lens. Another reason that lens prices usually remain constant. Once they get you to buy their paltform (SLR), you are potentially goint to purchase a lot more gear. You really need to understand the issue before posting. Sorry to sound harsh but Geeez.
John

Jun 15, 2008 at 03:03 PM

Red Grainger
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p.3 #5 · dealer costs

What John said.
Red

Jun 15, 2008 at 03:09 PM

Mike Hoe
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p.3 #6 · dealer costs

Like they say, opinions are like anuses, Everybody has one. Just buy the best Canon gear you can afford and take more photos. Enjoy your gear and leave the speculation to the pundits.

Jun 15, 2008 at 03:39 PM

RCicala
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p.3 #7 · dealer costs

I can't say what the big boys do, and can't comment on brands other than Canon but this is interesting, a little.
A few months ago I sat down with the owner of a local camera shop who had a simple proposition: my business buys more Canon equipment a month than he sells in a year. He would sell to me exactly at his cost so that he could increase his business enough to get some spiffs and better rates from Canon. He showed me his books, he showed me his invoices, and the simple reality was his actual cost was about the same as what I pay at a couple of large retailers who give me a small discount. Basically I would save shipping, but because of order lag time (I need what I need right damn now) it wouldn't work.
I'm sure the huge places get better prices, kickbacks, whatever, but reality for the small shops is there's no money in the sale of cameras and lenses once you count the overhead. There's good money in accessories, and decent money in 3rd party lenses, but not in Canon lenses and bodies.

Edited by RCicala on Jun 15, 2008 at 02:59 PM GMT

Edited on Jun 15, 2008 at 03:59 PM

Jun 15, 2008 at 03:56 PM

pixelman
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p.3 #8 · dealer costs

It's not so much everyone has one it's that some are so cynical that they refuse to believe that some goods are sold for almost no margin to the retailer to work with. Tis true, life is imperfect. The original poster just wondered aloud if retailers were making out like bandits. Answer no, manufacturer does fine. Smart retailers can survive.

Red you are incorrect on the 5-10% thing for the lenses. I'm cps here in Canada, the owner and managers are pals not just lying merchants with gold toothy smiles and a tale of woe. They really do sell some things for virtually nothing, just spinning volumes for small discounts and stuff. Ultimately like Mike says buy stuff and use it. In the long run your dead go do something with it. I'm off for pizza

Edited by pixelman on Jun 15, 2008 at 08:00 PM GMT

Edited on Jun 15, 2008 at 08:00 PM

Jun 15, 2008 at 03:58 PM

Mariner
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p.3 #9 · dealer costs

pixelman wrote:
It's not so much everyone has one it's that some are so cynical that they refuse to believe that some goods are sold for almost no margin to the retailer. Tis true, life is imperfect. The original poster just wondered aloud if retailers were making out like bandits. Answer no, manufacturer does fine. Smart retailers can survive.

Red you are incorrect on the 5-10% thing for the lenses. I'm cps here in Canada, the owner and managers are pals not just lying merchants with gold toothy smiles and a tale of woe. They really do sell some things for virtually...Show more →
WOW: Now I uderstand why so many people have trouble reading and understanding their user manuals

John

Edited on Jun 15, 2008 at 05:00 PM

Jun 15, 2008 at 04:59 PM

jamesf99
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p.3 #10 · dealer costs

John Black wrote:
Ever heard the term "loss leader"?

Not in the case of a 1Ds3.. Not going to happen. As in Never. Not in this universe....

Loss leader pricing is used on popular items that many can afford and will buy. The intended result is additional sales on "non sale" or regular priced items.

Edited on Jun 15, 2008 at 07:01 PM

Jun 15, 2008 at 07:00 PM

jamesf99
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p.3 #11 · dealer costs

Ben Horne wrote:
.................. Cost for small shops is over 7k.

That's obscene. Especially for a $5k camera.....

Jun 15, 2008 at 07:11 PM

pixelman
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p.3 #12 · dealer costs

John I don't make any sense of your comment. Insult me in a clearer manor plz

Canon makes money, retailers don't have much to play with easy concept here. Maybe were stumbling over text here while a good old barbershop style chat it woulda alll make sense...

Edited on Jun 15, 2008 at 07:58 PM

Jun 15, 2008 at 07:54 PM

jlc61
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p.3 #13 · dealer costs

Mariner wrote:
Sorry but you are really confused. We are not concerned here with whether or not Canon makes a "given" profit on each unit sold, just that that profit (or loss) is the same irregardless of the country to which it is sold. Certainly one would expect most SLR manufacturers who also have a line of lenses to recoup and actually derive profit from the sale of lens. Another reason that lens prices usually remain constant. Once they get you to buy their paltform (SLR), you are potentially goint to purchase a lot more gear. You really need to understand the...Show more →

Not necessarily - the profit is effected by variables in each market - warranty costs; shipping costs, import duties, reseller arrangements, etc - so Canon may very well not make the same profit on a camera whereever it may be sold.

Jun 15, 2008 at 08:37 PM

Mariner
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p.3 #14 · dealer costs

Actually jlc, the variables you mention account for the variation in retail selling prices on the international market. Canon will make its predetermined margin, per each unit sold, irregardless of the country or union to or in which it is sold. The cost of doing business varies around the world and those differences account for the variation in selling price. Canon does not say to itself that it wants to make more in Europe than in the U.S.. Selling goods in the EU is a mine field of hidden costs (i.e., tax and duties). These costs are absent, reduced, or non existant in Asia and the U.S.. That's exactly why I agreed with Red, he hit it right on.
John

Edited by Mariner on Jun 16, 2008 at 09:30 PM GMT

Edited on Jun 16, 2008 at 12:30 PM

Jun 16, 2008 at 09:20 AM

Gerry Szarek
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p.3 #15 · dealer costs

jamesf99 wrote:
You're right Lars. There's far more profit in these than some people think, but the real profit is in the over priced accessories (lenses, hoods, remotes, etc.). The belief that a store makes less profit on a lens than it does on a filter is simply not correct . Lenses have tremendous mark ups, and that's increasing with every new lens offered (e.g. 200mm f/2, 85L, 50L, etc.). There's less profit in the small P&S cameras that sell for a couple of hundred dollars, but there's still enough profit for the mfg, the distributor, and the retailer....

Large and small stores...Show more →

James, the cost of the camera unfortunately is not related to the sensor, its related to recovery of the NRE (Non Reoccurring Engineering costs ie design time, tooling, etc), and costs of the mechanical parts such as housing, mounting interfaces, prisms etc. The electronics outside of the sensor are cheap, assembling and aligning everything even with good tooling is where the time and money is spent.

The current 12 MP sensor in the XSI (or whatever its called) is 1/2 the size of the FF equivalent, the camera cost is ~600 or so, lets assume that the FF sensor is 8 times the cost of the APC one, and the APC sensor in the XSI is a third the cost of that camera, that will give us a cost of 600 / 3 * 8 or $1600 which is a worst case number, the camera sells for 8K leaving ~6K for mechanicals, electronics, assembly, NRE and PROFIT.

Having engineered large volume consumer products at one point in my career, you typically design stuff for 100K before you turn a profit, then its all gravy, I don't know where canon cuts it limit.

Gerry

Jun 16, 2008 at 11:14 AM

jlc61
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p.3 #16 · dealer costs

Mariner wrote:
Actually jlc, the variables you mention account for the variation in retail selling prices on the international market. Canon will make its predetermined margin, per each unit sold, irregardless of the country or union to or in which it is sold. The cost of doing business varies around the world and those differences account for the variation in selling price. Canon does not say to itself that it wants to make more in Europe than in the U.S.. Selling goods in the EU is a mine field of hidden costs (i.e., tax and duties). These costs are absent, reduced, or...Show more →

I guess this is where we start to split hairs (economist do that as much as photographers). If we assume the same margin then the profit varies, if we assume the same profit per unit the margin varies. For example, let's assume the camera costs $1000 to make and Asia adds $0, US $50 and the EU$100 per unit.

For the same 20% margin the profit would be $200 - $210 - $220 respectively.

Now, if I were Canon, I'd sell at the highest possible profit maximizing price in each country.

Cheers,

Jim

Edited by jlc61 on Jun 16, 2008 at 10:27 PM GMT

Edited on Jun 16, 2008 at 05:27 PM

Jun 16, 2008 at 12:41 PM

pascal03
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p.3 #17 · dealer costs

Speaking to a friend of mine (camera store owner) who is now on his way to getting a Canon dealership, it seems like you pay $35k to Canon for the "Authorized Dealer" Stamping and on top of that, you need to meet a minimum of $10k in sales every month. This is their lower tier program and as you get bigger as a store, the less you put down and balance it out with more sales.

The other thing he told me ... as to why it was worthwhile, is because you get to mark up the price. There is a markup of 30-40% on all items... including the camera's. The markup s even higher on the small $$ items like batteries, grips, lens caps, etc. The more you sell, the better the deal with Canon gets and the bigger your profit margins get to be. If you are in #1 spot ... like B&H, you are turning in around $300+ per 40D body. The cost for B&H is probably $650-$700 for the 40D which it sells for $1149.... or something around that.
Of course, there is no sure way to confirm any of this unless you are a dealer yourself. So take it for what its worth...

Jun 16, 2008 at 12:59 PM

BuLLets
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p.3 #18 · dealer costs

You need a new friend, one that doesn't pull it.

pascal03 wrote:
Speaking to a friend of mine (camera store owner) who is now on his way to getting a Canon dealership, it seems like you pay $35k to Canon for the "Authorized Dealer" Stamping and on top of that, you need to meet a minimum of $10k in sales every month. This is their lower tier program and as you get bigger as a store, the less you put down and balance it out with more sales.

The other thing he told me ... as to why it was worthwhile, is because you get to mark up the price. There is a...Show more →

Jun 16, 2008 at 10:28 PM

Ben Horne
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p.3 #19 · dealer costs

pascal03 wrote:
Speaking to a friend of mine (camera store owner) who is now on his way to getting a Canon dealership, it seems like you pay $35k to Canon for the "Authorized Dealer" Stamping and on top of that, you need to meet a minimum of $10k in sales every month. This is their lower tier program and as you get bigger as a store, the less you put down and balance it out with more sales.

The other thing he told me ... as to why it was worthwhile, is because you get to mark up the price. There is a...Show more →

Sorry, but that is just ridiculous. Either you're making it up and don't have a good feeling for how these things work, or your friend is just feeding you lines.

Jun 16, 2008 at 11:44 PM

JohnJ80
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p.3 #20 · dealer costs

jamesf99 wrote:
Why people want to believe that these cameras cost so much is beyond me. Perhaps that's the only way they can justify the purchase in their own head, but some day reality comes into play, like the "Fully Loaded" cost of a FF 1ds3 sensor is only a couple hundred dollars, not thousands like some maintain...

Edited by jamesf99 on Jun 15, 2008 at 07:26 AM GMT

Actually, of the cost of goods sold of the camera, the sensor comes to (on average) about 55% of the cost of the camera which means at 50% margin on dealer cost it is at least twice and closer to 4X that. I got that from an engineering manager that used to design the sensors for a major photo company. Knowing what I know about semiconductors, their size and manufacturing cost - I'd agree with his assessment.

J.

Jun 17, 2008 at 12:02 AM

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