Thoughts on Price of OMD :)

[cichlid]

That's why i always have (may be naive) thoughts of doing retail business here since the mark ups are so high, hehe

 

[Anthony Lee]

Funny, during my time, US corporations prefered to buy US made products here and ship back to US for better pricing. Looks like the world has turned upside down. So, to us, we have to pay the price for being a first world nation where cost of living will naturally be higher, like owning cars, properties and cameras.

 

[keiser]

Singapore as a market has always been screwed over. From overpriced clothes (branded goods like Gap get at least 20% mark up), to overpriced electronics, it has always been bad. Makes me laugh when someone describes Singapore as a shopper's paradise. It does not help that there is an oligarchy of sorts going on. Don't get me started on labor costs. Labour is dirt cheap compared to the US.

Sounds like a paradise for retailers ...kekeke..

 

[keiser]

Funny, during my time, US corporations prefered to buy US made products here and ship back to US for better pricing. Looks like the world has turned upside down. So, to us, we have to pay the price for being a first world nation where cost of living will naturally be higher, like owning cars, properties and cameras.

Didn't realize this was the case (buying here and shipping back to the US in the past) .... wah ... so you must be getting first world nation salary then :bigeyes:

 

[keiser]

It's the same with Apple isn't it? iPhone and iPad costs less in USA than in Asia too rite? It's even more ironic that in Shenzhen, where the Apple products are made, it's more expensive than in USA, HK etc, so that pple smuggle iphones from HK to Shenzhen to make a profit.

USA is the largest economy in the world, so whenever any electronic product is created, made, and meant to be sold, USA is considered the primary market. Even if Olympus is not as well known there, I believe their sales will still beat Asia. Usually when launching a global product, the largest markets are USA, Japan, EU, then rest of the world (Asia-Pacific and SEA).

I do agree that even so, there is no real reason why they can't price the products the same everywhere. We do know that for the corporations, they prefer to have price discrimination and market control over different territories (think DVD Codes) to get the best profits/market control. But perhaps with more and more information through the Internet, ease of shipping and lowering of freight, Asian consumers will have more and more power, so as to force down our regional prices (slowly).

Hi, Good analysis. However, ultimately, it boils down to whether the consumer is willing to make the purchases or accept the pricing / offer rite? What do you think?

 

[ziggy]

Sounds like a paradise for retailers ...kekeke..

Unfortunately no. Rental of a typical boutique is about 20% - 25% of sales. A good retailer typically needs 45% - 50% margin to breakeven in Singapore. And that is after taking into account discounts, promotions, unsold stocks, etc resulting in high original retail price. Another high cost is advertising. Our print ads rates are very high compared to other countries because of little competition. HK is cheaper. All these in a relatively small market.

If any market is too cheap, there is a risk of parallel imports into other countries.

And designer goods are typically 15% - 20% cheaper in Europe than in Asia, even including a 20% VAT. Because we can afford it.

 

[fengwei]

Since people discussing about the price disparity of Oly product between Asia and USA, and the fact that SEA region must pay a higher price and without full accessories option. I also a bit curious why for product that sold globally with international warranty can not have the same price and bonus? Why Oly can't have the same price policy as Apple do with their product? I don't buy the reason that USA market is that big so that they deserve to have more competitive product and bonus...while I have taste that price when buying EPL-1 with added bonus when in N.Y couple of years ago. I see the fact that Oly less popular in USA thus Olympus sold unit should be less than Asia...Oly consumer should asking this price policy to Oly sales manager when they have chance to interview....

If you know the profit margins our local camera shops on Oly stuff, you'd know why it's more expensive than those from the US.

As far as I know, Pentax cameras here in Singapore are cheaper than in the US, or anywhere else if that matters The reason? Pentax distributor and retailers aren't asking for as high profit margin as those other brands...

 

[zan82]

It's the same with Apple isn't it? iPhone and iPad costs less in USA than in Asia too rite? It's even more ironic that in Shenzhen, where the Apple products are made, it's more expensive than in USA, HK etc, so that pple smuggle iphones from HK to Shenzhen to make a profit.

USA is the largest economy in the world, so whenever any electronic product is created, made, and meant to be sold, USA is considered the primary market. Even if Olympus is not as well known there, I believe their sales will still beat Asia. Usually when launching a global product, the largest markets are USA, Japan, EU, then rest of the world (Asia-Pacific and SEA).

I do agree that even so, there is no real reason why they can't price the products the same everywhere. We do know that for the corporations, they prefer to have price discrimination and market control over different territories (think DVD Codes) to get the best profits/market control. But perhaps with more and more information through the Internet, ease of shipping and lowering of freight, Asian consumers will have more and more power, so as to force down our regional prices (slowly).

Well you missed out on this, for most brands:

Brand -> Local Distributor -> Retailers -> Consumers

Try working out the math and you should understand more about the supply chain equation

 

[keiser]

Well you missed out on this, for most brands:

Brand -> Local Distributor -> Retailers -> Consumers

Try working out the math and you should understand more about the supply chain equation

Hi, don't quite get it. Can elaborate a bit? Thks

 

[fengwei]

Hi, don't quite get it. Can elaborate a bit? Thks

From brand (the manufacturer) to us consumers, somewhere in the supply chain the prices got hiked up, that's why the higher price.

 

[zan82]

From brand (the manufacturer) to us consumers, somewhere in the supply chain the prices got hiked up, that's why the higher price.

On top of that, the demand-supply equation works on each part of the value chain, not simply just what consumers perceive, brand (supply) - consumer (demand).

It gets worse when there are third parties involved in each part of the chain.

In summary, it's not as simple as we all perceive wahhahahha...

 

[geikou]

Well you missed out on this, for most brands:

Brand -> Local Distributor -> Retailers -> Consumers

Try working out the math and you should understand more about the supply chain equation

If we use this model, shouldn't the case be the same in the US?

US Brand owner -> US local distributor -> US retailers -> US consumers

Or you're saying in USA there is one less step in that chain compared to Asia, because Olympus USA (or Apple USA, etc) is the brand owner, while Olympus Singapore is not?

 

[Atarandas]

If we use this model, shouldn't the case be the same in the US?

US Brand owner -> US local distributor -> US retailers -> US consumers

Or you're saying in USA there is one less step in that chain compared to Asia, because Olympus USA (or Apple USA, etc) is the brand owner, while Olympus Singapore is not?

This is all about transfer pricing strategy ........

 

[geikou]

Hi, Good analysis. However, ultimately, it boils down to whether the consumer is willing to make the purchases or accept the pricing / offer rite? What do you think?

The consumer doesn't have absolute replaceable alternatives. The consumer can buy from the local shops at the local RRP, or he can buy online from USA store if he chooses. But buying online has extra freight costs, risks of loss in the mail, whether there is international warranty, etc. Whereas if he buys from a local store, he can test and feel the product, and be sure of getting the product with local warranty. So the choice is still not without other considerations.

But if the freight, risks of loss, etc are reduced, then the consumer will have more choice and power.

 

[zan82]

If we use this model, shouldn't the case be the same in the US?

US Brand owner -> US local distributor -> US retailers -> US consumers

Or you're saying in USA there is one less step in that chain compared to Asia, because Olympus USA (or Apple USA, etc) is the brand owner, while Olympus Singapore is not?

I'm not saying anything here, you can speculate what's in between. The 4 components are just basic, not forgetting country of production etc.

Just think of it this way:

Assuming Singapore 500 sets a month, US 5000 sets a month. If you're the brand owner, taking into consideration the profit you need to maintain and the costs, and I'm the US distributor, how will I negotiate with you? Assuming Fengwei is the retailer, how would he negotiate with me?

It's not just basic demand and supply here, but also taxes, insurance, warehousing, export cost, attached premium cost, human relations, (yes it matters if local distributor does have good ties with brand) etc etc...

Also, it's only Singapore and a few Asian countries that require SD card and case to be bundled together as standard premiums. Europe, Japan, US does not come with such premiums, and of course, these are added into the equation rather than thinking they are bundled free.

Don't think in terms of Asia. Just Singapore. And it's a chicken and egg problem as well.

Singapore pricing high -> Buy from B&H -> US price gets cheaper with inflated demand and Singapore demand fall -> New product cost for Singapore high -> Consumers buy from B&H...

If you're really curious about the exact reasons why the disparity on pricing, you can email Olympus Singapore to find out more on this, ha...

 

[zan82]

That's why i always have (may be naive) thoughts of doing retail business here since the mark ups are so high, hehe

HAHAHAHHAHAH...me too! Then again, retail business is bad these days...it's better to own the shop and rent it out collecting rents instead!

 

[geikou]

I'm not saying anything here, you can speculate what's in between. The 4 components are just basic, not forgetting country of production etc.

Just think of it this way:

Assuming Singapore 500 sets a month, US 5000 sets a month. If you're the brand owner, taking into consideration the profit you need to maintain and the costs, and I'm the US distributor, how will I negotiate with you? Assuming Fengwei is the retailer, how would he negotiate with me?

It's not just basic demand and supply here, but also taxes, insurance, warehousing, export cost, attached premium cost, human relations, (yes it matters if local distributor does have good ties with brand) etc etc...

Also, it's only Singapore and a few Asian countries that require SD card and case to be bundled together as standard premiums. Europe, Japan, US does not come with such premiums, and of course, these are added into the equation rather than thinking they are bundled free.

Don't think in terms of Asia. Just Singapore. And it's a chicken and egg problem as well.

Singapore pricing high -> Buy from B&H -> US price gets cheaper with inflated demand and Singapore demand fall -> New product cost for Singapore high -> Consumers buy from B&H...

If you're really curious about the exact reasons why the disparity on pricing, you can email Olympus Singapore to find out more on this, ha...

If it's about the volume and negotiation power, then we have already said this a few pages back, and very few pple are disputing this. Basically, buy more, so sell you cheaper.

If what you said about SD card and case is true, sure that adds to the costs. Again this is because the convention started somewhere so that now consumers expect this. Like you said, chicken and egg situation.

But the question why RRP is set higher in Asia than in USA is still not properly answered.

I doubt Olympus will answer us honestly. hah

 

[zan82]

If it's about the volume and negotiation power, then we have already said this a few pages back, and very few pple are disputing this. Basically, buy more, so sell you cheaper.

If what you said about SD card and case is true, sure that adds to the costs. Again this is because the convention started somewhere so that now consumers expect this. Like you said, chicken and egg situation.

But the question why RRP is set higher in Asia than in USA is still not properly answered.

I doubt Olympus will answer us honestly. hah

Erm, when cost is cheaper, you have cheaper RRP? When cost is higher, you get higher RRP? You just answered yourself.

1. Brand sets US RRP base on standard cost, higher sales volume to get their margins and brand sets SG RRP base on higher cost required in each chain, lower sales volume.
2. Brand sets developing countries RRP lower because they want to develop the market (look at how much cheaper Sony is selling NEX at some Middle East countries)

Some of the above are just fictional examples, but they're very close to the actual situation.

 

[geikou]

Erm, when cost is cheaper, you have cheaper RRP? When cost is higher, you get higher RRP? You just answered yourself.

1. Brand sets US RRP base on standard cost, higher sales volume to get their margins and brand sets SG RRP base on higher cost required in each chain, lower sales volume.
2. Brand sets developing countries RRP lower because they want to develop the market (look at how much cheaper Sony is selling NEX at some Middle East countries)

Some of the above are just fictional examples, but they're very close to the actual situation.

I didn't say the SD card and case were the only reasons why the RRP is higher in Asia. You were the one who brought it up, and I merely acknowledged it. Meaning if that is true, ok, that would add on to some costs. I didn't answer anything, certainly not to myself.

If going by your Point 1. Then that means there is some party in the value chain along the way that adds on the costs. If that's the case, we would have to assume that the problem lies in the structure of the supply chain.

I don't know about Middle East, but it seems all prices in SEA tend to be higher than in USA. I'm sure it's not because of the SD Card and Case.

 

[zan82]

I didn't say the SD card and case were the only reasons why the RRP is higher in Asia. You were the one who brought it up, and I merely acknowledged it. Meaning if that is true, ok, that would add on to some costs. I didn't answer anything, certainly not to myself.

If going by your Point 1. Then that means there is some party in the value chain along the way that adds on the costs. If that's the case, we would have to assume that the problem lies in the structure of the supply chain.

I don't know about Middle East, but it seems all prices in SEA tend to be higher than in USA. I'm sure it's not because of the SD Card and Case.

Argh! Ha, you're still not seeing it as a totality.

ALL the costs adds up, but you break it up into parts to digest. It's a combination of all the costings (taxes, shipping, insurance, warehousing, profit margin requirements, competitive benchmarking, sales volume, premiums etc) that determines pricing.

You did say "then we have already said this a few pages back, and very few pple are disputing this. Basically, buy more, so sell you cheaper."

And again, it's about Singapore only, going by demand and presence of distribution.

Hong Kong has better pricing than Singapore, comparable to US actually a lot of times. Hong Kong's demand is HUGE, and a lot of trading occurs there (re-export).

Malaysia, Thailand, Indonesia, their demand for OMD will not exceed that of Singapore, and the costs of selling in these countries tend to be higher, hence higher RRP.

If I'm not wrong, Taiwan does not have a local distributor for Olympus.