What's the Margin like for Leica?

[cmogi10]

After spending some time in retail I know think in terms of Margins and Profit and I was wondering if anyone knew what kind of margin there was in Leica cameras. I know expensive things don't always make the most money but I can't help but be curious everytime I hand my credit card over. (This isn't just a camera thing, every store I go to I wonder, and I don't have time to work for every store to find out so I was wondering if anyone had any idea)

Also, does Leica set there prices in stone for the dealers or are they allowed wiggle room?

[ferider]

This is easy:

- take the price of the latest 24/2.8 Elmarit
- subtract the price of the ZM 25/2.8 minus 30% Zeiss margin.

There you go: Leitz Margin

But wait a minute .... Japanese salaries are so much lower than Germans..... Also,
German quality control is much better .... Right.

Roland.

[cmogi10]

Haha, I just know after I worked in music retail I got a kick out of a lot of the prices I see on the big retailers sites. Take Gretsch for example, Huge margins most of the time where some other brands the dealer really doesn't make much at all.

[-kk-]

interesting about the gretsch, ive always wanted one. maybe its time to flex them bargaining skills?

[BSchall]

I know when I worked in a camera store 9 years ago, I made more commission on a $190 P&S than I made on a $2000 Nikon F5. When I worked at a Sears store 20 years ago, the big ticket sections, applicances and home entertainment, just barely covered their overhead, while the store profit was made on clothes. The $60 dress marked down to $40 cost the store $4.

[Xmas]

Originally Posted by ferider

This is easy:

- take the price of the latest 24/2.8 Elmarit
- subtract the price of the ZM 25/2.8 minus 30% Zeiss margin.

There you go: Leitz Margin

But wait a minute .... Japanese salaries are so much lower than Germans..... Also,
German quality control is much better .... Right.

Roland.

30% Zeiss margin? The dealer might get that?

Noel

[spyder2000]

When I worked in a photo store, Leica did not have an agreement in place to enforce a 'minimum' sales price on any of their goods. That has been a while so it may have changed. That said, we sold Leica gear for cost plus 4% to 10%. We did the same for the other brands too and still had a time competing with the big box stores. People wouldn't even try us even though our cameras cost within $10, and we gave advice, test film, etc.

The softer goods like filters, bags, tripods, and photofinishing paid the rent. We didn't work on commission but for most part enjoyed the atmosphere. Film SLR's were taking off because the AE-1 had been introduced.

[Finder]

What's the Margin like for Leica?

Probably the same as it is for everyone else - about a half an inch of blank paper all the way around the outside.

[Marc-A.]

Originally Posted by ferider

But wait a minute .... Japanese salaries are so much lower than Germans..... Also, German quality control is much better .... Right.

Roland,
That's a joke, right?
Best,
Marc

[rolo]

I suspect that Leica are not making anything on the M8. The warranty charges must be horrendous and the R&D costs for the quick fixes must be equally disappointing. Those costs cannot have been known and must be absorbing all anticipated profit.

The recent price increase will be be keeping them in the game until the product finally is free of warranty expense.

Alternatively, the price is being hiked so that when the M9 is announced, it's at the same price as the M8. Those that bought the M8 at the launch price will think they got a good deal and those buying the M9 will justify the expense for the 17mb sensor and the battery saving manual wind, praising themselves for waiting. Second hand prices will be protected.

Rolo

[thomasw_]

Originally Posted by ferider

This is easy:

- take the price of the latest 24/2.8 Elmarit
- subtract the price of the ZM 25/2.8 minus 30% Zeiss margin.

There you go: Leitz Margin

But wait a minute .... Japanese salaries are so much lower than Germans..... Also,
German quality control is much better .... Right.

Roland.

Roflmao...Roland, you should be paid for your wit! That's similar to the way the idea of german engineering is used to sell products, especially cars, over here in north america. i mean what is so german about the principles of engineering...aren't they a bit more universal than that? But the concept does sell.

[cmogi10]

This is all very interesting, thanks everyone!

[colinh]

Originally Posted by rolo

I suspect that Leica are not making anything on the M8. The warranty charges must be horrendous and the R&D costs for the quick fixes must be equally disappointing. Those costs cannot have been known and must be absorbing all anticipated profit.

The recent price increase will be be keeping them in the game until the product finally is free of warranty expense.

Alternatively, the price is being hiked so that when the M9 is announced, it's at the same price as the M8. Those that bought the M8 at the launch price will think they got a good deal and those buying the M9 will justify the expense for the 17mb sensor and the battery saving manual wind, praising themselves for waiting. Second hand prices will be protected.

Rolo

I would suspect that the US price increases have more to do with the dollar dropping from 1 EUR = 0.90 USD to 1 EUR = 1.37 USD.

So, for something costing 1800 USD, that used to be 2000 EUR and is now only 1300 EUR.

Leica still pay their employees in Euros and their other costs are mostly in Euros too.


Just because the costs of fixing the first few series was unknown, I don't think it follows that the cost of supplying the odd filter MUST be absorbing all anticipated profit.

colin

[matt fury]

Originally Posted by cmogi10

Haha, I just know after I worked in music retail I got a kick out of a lot of the prices I see on the big retailers sites. Take Gretsch for example, Huge margins most of the time where some other brands the dealer really doesn't make much at all.

Wow, that's very interesting to hear!! Gretsch is one of the few makers I always eye at the big box guitar stores. Most others I instantly think to go used, but I guess I should change that. I'd love to hear who others are mostly mark-up..

[David Murphy]

Originally Posted by cmogi10

After spending some time in retail I know think in terms of Margins and Profit and I was wondering if anyone knew what kind of margin there was in Leica cameras. I know expensive things don't always make the most money but I can't help but be curious everytime I hand my credit card over. (This isn't just a camera thing, every store I go to I wonder, and I don't have time to work for every store to find out so I was wondering if anyone had any idea)

Also, does Leica set there prices in stone for the dealers or are they allowed wiggle room?

I think they are a publicly traded company. The annual reports (usually available onlne) detail their overall profits and losses. If you are a shareholder you can call their shareholder relations office and sometimes get more detailed information like that (just buy some stock).

[rolo]

Originally Posted by colinh

I would suspect that the US price increases have more to do with the dollar dropping from 1 EUR = 0.90 USD to 1 EUR = 1.37 USD.

Just because the costs of fixing the first few series was unknown, I don't think it follows that the cost of supplying the odd filter MUST be absorbing all anticipated profit.

colin

Sorry to undermine your logic, but the price increase is not confined to the USA. The euro and the GB£ prices are being increased by 8%.

Thanks for the reminder about the filters. I was more thinking of the return of thiousands of camera bodies, batteries and back-focussing lenses to Solms for adjustment.

My local dealer tells me Leica have tried to offload the repaired items back onto dealers as new stock and have been rejected. You don't do that if there are only a couple of bodies on hand. Then of course there are the free filters you mention.

The M8 has the potential of being a fantastic product and Leica will get it right. Just needs a little time IMHO.

Rolo

[ChadHahn]

A lot of companies, Rolex coming to mind prices their products the same around the world. If the prices in other countries were pegged to their exchange rate, people could travel the globe, buying products and seling them where the price was more expensive.
The United States is the biggest market so prices are probably set world wide close to what we pay.

Chad

[Likaleica]

Just like our automobile industry in the US, German companies are weighed down by HUGE labor costs. That, in addition to Leica's legendary adherance to the highest standards of manufacture, drive their costs so high that I doubt if they have much margin at all. In fact, it would not surprise me if their other divisions carried the camera division. I toured the factory last year. They are all really great, dedicated people.

[CameraQuest]

It's not so easy to be sure about Leica's true profitabilty once you realize that many of the Leica owned national distributors are set up as separate companies, such as Leica USA.

The Leica factory takes a markup and sells at a profit to Leica USA. Leica USA as a separate company takes a markup and sells at a profit to the dealers.

So when we look at Leica's public annual reports, is the profit / loss from Leica owned national distributors combined with corporate Leica profit / loss -- or kept separate ??

I don't know the answer, but to me its an interesting question.

Stephen