Lens Price Increases!

Nobody is buying cars, that's the problem.

There are plenty of people wanting to buy cameras and lenses. If we all bought the Pentax stuff we wanted, wouldn't SRS do well?

Same is true in Japan, which is also in recession

I was in Yodobashi-Umeda Camera store in Osaka last week and you won't believe that UK prices are better than those in Japan, since we have been protected by the high pound until recently. I bought my FA 77 in Tokyo as it was a pristine used sample and cheaper than buying one in the UK, but the FA 31Ltd was cheaper at SRS....

Funnily enough I have been tracking the price of the Nikon D700 and 24-70 AF-G, which has increased in price by approx 20%, Canon haven't increased their prices yet(!), but Nikon's market share has suffered as a result....

(and I am glad that I have the Pentax lenses I have wanted:wink

It's called "Recessionary Marketing".

It happened recently in Canada. Pentax prices were increased 50% or more on many items, there was a rush to buy before they hit and obviously there was a period of stagnation afterwards. The prices then fell by around 25% afterwards and people started buying again. The result? A net increase in profits.

i.e. Sell 1000 units at -10% profit, result, a £10,000 loss.

Or sell 200 units at 15% profit, result, a £3000 profit. Okay, less unit sales means increased overheads per unit, so reduce overheads/manufacturing capability to suit demand.

The maths is fairly straightforward.

As Pentax seem to have under capacity (look how long it took the 60-250 to reach the market), plus they have the K-7 and the new WP kit lenses and a rumoured (but 99.9% expected) body between K-m and K-7 due in a few months to keep things rolling along. They are clearly aiming at profitability, not an increase in unit sales (not usually available during recessions!)

I also think it's fairly easy to see their strategy and planned market price positioning, i.e. slightly below Nikon and above Canon. Olympus don't seem to have much of a problem pricing their decent glass at high prices either. I don't think we shall see much reduction until Nikon reduce prices and that's going to happen? I think not, (They also have June price increases).

You also have to factor in the currency fluctuations as well.

Let's face it, we have to learn to live with the fact that this hobby (obsession :wink is going to be much more expensive in the future.

That's all right in theory Richard, In practice it just drives people away. Only the die-hards will rush out and buy now because of a rumored price increase. It also puts off any new customers who are deciding between A and B or don't bother at all. It also persuades some people to look back at the SH market and see if they can adapt older stuff to their needs.

I've just bought a new GX-20 because of all the dithering over the price of the K-7 and it came along at a good price. All we hear is rumors of the RRP which in practice gets discounted by up to 40%. I've also bought a SH 400mm lens because of the high prices of new stuff.

All the talk about sub standard Video is making me think I should buy a proper HD Camcorder.

shim

Out of curiosity Shim; what would you expect to pay for a decent second hand 400mm lens?

I suppose SH about £150, but there aren't many about. I've just bought a cheap 1970's pre-set Photax Paragon 400mm f/6.3 re-brand for £50 plus postage. They are supposed to be quite good, but I'm really getting it to see if I can get any more light through it than I'm getting with my 55-300mm + 1.4x TC = 420mm. I'm shooting in bright sunlight at 400 ISO and only getting f/6.7 at 1/180 sec. It should be f/11 at 1/400 th sec ? = f/8 at 1/800th.

There's one on ebay ends 12th June here

Look at this for an impressive ebay presentation of the 500mm version. The photos don't look sharp on this though.

shim

Unfortunately you have managed to muck this up because solving the differential equation for selling price/unit gives identical pricing at volume of 1,000 and 200 units respectively; clearly not what you intended to show.

Further, while your example may at first glance sound superficially plausible its simply doesn't hold water on even cursory inspection.

As regards camera bodies, the vast majority of direct costs are from outsourced components (eg sensor, electronics, plastics etc) that you simply have no control over.

For camera lenses, the direct variable costs are negligible; some glass, plastics and a little metal. The difference up to final selling price is likely largely made up of depreciation of capital equipment (including testing and measurement) and margin, of which the former is most certainly a substantial component. Therefore there is in fact likely to be a significant increase in per unit cost/decrease in margin at reduced volumes where capacity is not fully utilised.

And I am sorry to say that if you honestly believe your concept of "Recessionary Marketing" - where you jack up prices during a severe economic downturn - is somehow an exciting business innovation you are quite frankly delusional.

As for the wider question of lens price increases, the way multinationals without local manufacturing tend to work is that they agree budgets with foreign subsidiaries in local currencies and then hedge their net currency exposure at the HQ level, typically via instruments called currency swaps.

The quantity of hedging will fluctuate around 100% of budgeted exposure for the current financial year and then typically decline thereafter, with differences in actual strategies determined by the extent to which the finance director fancies himself as a currency trader.

And with the budget period tied to the reporting cycle, which in the case of Japanese companies invariably runs to the end of March, a delay in passing on the effect of currency movements should always be expected.

As regards the value of the yen, there are many fundamental factors that have an impact eg the carry trade (where speculators borrowed cheaply in yen to invest in anything that moved overseas only to see those leveraged investments collapse and their loans called), balance of payments, wild Japanese monetary expansion since the late 90s, and critically that Japan is the only G7 country with a significant pool of domestic savings.

However, these factors are insignificant in comparison to the astronomical flows attributable to speculative foreign exchange trading flows from banks, hedge funds, private traders, etc. Therefore with animal spirits running the show, exchange rates will invariably overshoot fundamental values; I'll personally be looking for a final high in the yen sometime next year, but don't forget that yen strength has not only been evident against the pound but also against euros and dollars.

I thought the reason Japanese company's moved manufacturing outside of Japan was so that overseas sales wouldn't be damaged by the high value of the Yen. I don't know much about the Vietnamese Dong but because it's weak, products manufactured in Vietnam should be cheaper. If Pentax UK bought lenses from Vietnam wouldn't they be able to REDUCE Prices?

shim

I thought they moved manufacturing outside Japan for the same reason UK/US/European companies moved theirs from their home bases - cheap labour and lower costs, nothing to do with protecting products from currency fluctuations.

Same thing really..... reduce production costs. In the case of the Japanese car industry they moved into the UK which isn't cheap labour, but with the current low value of the pound it's a cheap place to export from.

Personally I think it's all just an excuse to put up prices, Vietnam and probably the Philippines are cheap manufacturing countries. I Haven't heard of any Japanese car manufacturers putting up their prices by 25-50%.

shim

Shim, UK car plants belonging to Japanese manufacturers make cars; that is they make bodies, engines, maybe gearboxes, transmission systems, etc. Of course they buy many parts in but they make the big bits.

What is it you believe Pentax actually *manufacture* in Vietnam?

We know they don't make the sensor, but I would also be very surprised if the electronics don't come from contract manufacturers in Taiwan, and it would be madness to have small scale plastic facilities to make the bodies.

Maybe they make a few bits and bobs locally but the native Vietnamese cost component on the body side is *assembly* not *manufacture*; in other words we are talking the labour cost of putting it all together which has to be a relatively minor.

Regarding lens production I am far from sure they make these in Vietnam. In any case if you do a search on youtube you will see various vids on how this is done; this largely involves many heavily automated processes using different machines with very small actual labour input, and I think it is a safe assumption that precision engineering industrial equipment of that nature is not made by local Vietnamese companies.

In other words, hardly any costs are locally denominated in Vietnamese currency.

Ah ha! - Delusional eh? Great! - That's my problem solved!

Okay, then it must be down to sheer greed!

It beggars believe, these price increases are extortionate, not the recession, not the pound v the dollar, not the pound v the yen, just Pentax being greedy, just like our MP's. Just ordered a Pentax wide angle in time and that will be it for some time!!

I'm sorry to introduce facts into this.

A year ago, the pound was worth 215 yen. Now it's worth 157.

It IS primarily the pound versus the yen.

G

So all British goods sold in Japan have been
reduced by 27%.... I somehow doubt it

shim