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How much is profit, how much is quality (1 Viewer)

newfie ghost

Well-known member
How much is profit, how much is quality?

People balk at the thought of a Surefire flashlight. I mean who would pay over $100 for a small light.

How about $1000 for binoculars, $2000 or even $2600? There are no expensive electronics or carbon fiber, so why the insane price?

Quality just costs money, or is there a big fat profit margin?

Last year the SWARO 8x32 El was about $1929 while this year they were sold for as low as $1500 at many stores in light of the new SV models. Did they do us a favor or take the hit? You know they didn't take the hit and they still made $$$ at the lower price.
 
A big junk of that change is the warranty. Up until last year I was totally unaware of how much warranty adds to the price of a product. One product in particular regularly sells for around $900 and $300 of that was warranty. If that type of price ratio holds true then $800 of a $2400 binocular is warranty coverage. I am sure it isn't that cut and dry but it might give you some idea.

As for how much of the rest of it is profit...well, I would expect a max 30% markup on the manufacturer's price. So if $2400 is the base price around $1850. $800 of that may go towards warranty coverage. That leaves $1050. Not sure how much of that $1050 is profit but I would expect about half.

All guesses of course. ;)
 
So happen I know about Surefire and binos....some things are just overpriced, simple as that, good news is that Surefire has been getting more affordable, binos not so much for the high cost of European labor. Maybe good news on binos, they have been getting better over time with new manufacturers entering the market and ED glass can had for around $500. The Internet is filled with such posts, there must be millions of such topics why is Rolex so expensive, etc. Of course the Swiss will give you a story on how this master craftsmen has taken a FULL YEAR to put together your Swiss swatch in the Swiss Alps. What a bunch of lies, I was born and raised in Europe there is no such thing. The bottom line is that there are MANY people that can afford this things, many more than we think. To them $2000 binos is like $2 to me. You know there is a saying: "If you have to ask you can't afford it"
 
I think the key to looking at this, at least re optical goods, is to start with the market position of the brand. Is it in a competitive brand in sports and recreation, (mass market) or positioned as a luxury good which has a very positive price elasticity of demand ratio?
The so-called alpha brands (assuming we are talking about the Teutonic Trinity) belong to a luxury brand holding company/family, or are in the luxury department of their corporation. Nikon's "high-end" price-wise glass may follow the same metrics as the intentional luxury brand.
Anyway, the luxury brand margin, be it optics, jewelry, leather or whatever, fluxuates around 40% to 50% profit margin for manufactuer/owner of that brand.
So, consider a retail price of $2300.
I assume the retail price will have a margin of 15%-25%.
So, wholesale price would be say $1725.
Assuming the brand's margin is 50%, then their cost would be $862.50.

On the other end, lets consider a sale price retail of $700 in a sports/rec market.
Probably:
Brand's margin = 10-15%, so lets say the retailer pays $595. Retailer gets 5-10%, so the cost would be $535.50.

That difference ($862 vs $535) can make a big difference in manufacturing quality. Even if the brand's country of origin allows assembly say, to qualify as made in X, and the parts come from the Rim, that still may mean less of an assembly line type assembly and testing, closer alighment tolerances, etc.
 
Hi

How much profit and where is it made?

Selling own made product
Much depends on corporate decisions about corporate tax rates in different countries but in total the profit will be made up of the following at least:

At the factory, when selling to the local subsidiary in the market (you didn't think the factory gives the product to the local office did you?) they will have to cover not only production costs (labour, raw materials and power) but increases in them over the years. Some of these increases will be due to demand and supply balance and some to exchange rate fluctuations. On top of this the factory needs a 'profit' to invest in R&D, new machinery etc.

At the local subsidiary office (for example Zeiss UK) they need to cover exchange rate fluctuations when buying from the factory. These can be significant for example exchange rate shifts between the GB£ and the Euro have put nearly £200 on the cost of an 8x42 FL to Zeiss UK since 2004 when FLs were introduced. They also need to cover all of their local costs including marketing (ads and shows etc) and return a profit.

If you look at what demand from China has done to some raw materials prices and think about how the cost of energy (electricity etc) keeps rising its no wonder that top flight bins cost so much. The production of top quality glass with zero defects isn't cheap on power with extreme control of the temperatures involved being required. As I understand it, when you buy optical quality glass you pay more the fewer internal defects you can accept. If you want the best you have to pay the highest prices.

Selling bought-in product.

I obtained quite by accident a price list at which a UK importer sells bought-in Chinese-made bins to local dealers and these would give dealers a 70% mark-up if they sold at the recommended retail price. Of course they sell at a discount to this, and one nationwide dealer is selling a typical 8x43 at a 40% markup. From this they have to cover staff, power, rents, taxes etc.


Nowhere above have I mentioned warranty costs as I know little about this subject but it has got to be covered somewhere.

In my view there is a lot going on behind the in-the-store prices that is easy to overlook or forget about, and it is easy to think manufacturers are making vast profits. They need to make good profits to survive and they need big profits to support R&D.

Lee
 

I guess that's a very important factor. R&D costs for new roof bins or top scopes are probably quite substantial and need to be recovered in the few years before the next version is due.

This also explains why Nikon can sell their Porros at a cheap price and still make profit. Investment costs have long been recovered and they don't need to invest in new versions, as nobody else does.
 
A big junk of that change is the warranty. Up until last year I was totally unaware of how much warranty adds to the price of a product. One product in particular regularly sells for around $900 and $300 of that was warranty. If that type of price ratio holds true then $800 of a $2400 binocular is warranty coverage. I am sure it isn't that cut and dry but it might give you some idea.

As for how much of the rest of it is profit...well, I would expect a max 30% markup on the manufacturer's price. So if $2400 is the base price around $1850. $800 of that may go towards warranty coverage. That leaves $1050. Not sure how much of that $1050 is profit but I would expect about half.

All guesses of course. ;)

Depending on how a product is distributed, and how many times it is sold through the supply chain, it is generally marked up at least twice: once by the manufacturer, who sets the "cost" of the product, and once by the distributer, who marks up to the retail "price" we would pay.

If, let's say, a certain European manufacturer sets their US manufactured cost at $1176, and mark-up is 30%, then US distributors buy it at $1680 to then mark up another 30% at $2400. Built into that manufactured cost, however, is not only the materials and labor but the overhead associated with marketing and expected long-term service costs for that product (which for the premium manufacturers includes cheerful replacement or extensive upgrades, which in turn strengthen the brand when reported on BF). The manufacturer can make internal adjustments to their "cost" to lower or raise the retail price, but generally retailers have contracts governing their mark-ups and protecting their profit margins.

So when Cameraland NY says that, say, Nikon objects to a 10% "gone fishing" sale, it means Nikon isn't offering them any discount; the retailer has to take a cut in their margin. Too many discounts and a retailer loses its distribution rights. Generally, though, these "specials" and "discounts" are part of structured pricing plans offered by the manufacturer (say, SONA or Zeiss Sport Optics North America).

If Zeiss is ramping up to introduce new product, they will adjust the "value" of current product to create market value for a new product at a certain price point. Sometimes, as in the ill-fated debut of the EDG I in America, this strategy has lasting consequences (e.g. many who saw the deals on the EDG I 8x32 will never pay retail for the EDG II).

Anyway, it is not smoke and mirrors! It just feels that way.

David

The many importers/branders of Chinese optics
 
How much is labour costs ?, judging by promotional video, companies like Zeiss or Leica use highly skilled technicians with many years experience in making high end optics, I`m sure the Chinese made bins have nothing like the skilled operatives putting them together.

I firmly believe its longevity that costs.
 
"What the market will bear" is the mantra of consumer capitalism. You look around and see what other companies are charging, and if you have a product that is of similar quality, you can charge in that price range, maybe a bit more and try to push the envelope.

The reverse could happen where your costs of production have become higher than "what the market will bear" so you have to lower your cost of production by finding a cheaper source of labor and perhaps less expensive materials. Eastern Europe and Asia are awaiting with open arms.

Although there are formulas for mark-ups in every industry, companies will push the envelope until its full to the brim with cash. Shareholders demand it.

Sometimes it's just plain old greed. I once worked for a highway robber who owned several stationary stores in Manhattan (Port Authority Bus Terminal and Grand Central Station). One of my jobs was to mark up the price 30% and then mark it down 20% so it looked like the price had been reduced.

One day an Asian customer who spoke little English came into the store and asked for a roll of film. My classmate who also worked at the store, was about to check him out when "Fat Rock the Highway Robber" spotted him and took the roll of film and said he would have to check on the pricing since it recently changed.

He went into the back room and marked up the price by $3. The Asian protested (couldn't tell what he saying but his body language looked like he was not happy). He bought the film since there was no point in having his camera dangling from his neck if he didn't have film to take photos of NYC.

I think that scenario would have gone very differently today for whatever item it might be, because the Japanese and the Chinese are great hagglers. They even haggle with me over items marked over a dollar in yard sales.

One Japanese customer wanted to buy a barely used Japanese-made Panasonic phone answering machine for $10. He insisted that his wife go home and call my number with the answering machine hooked up so he knew it was working. Cost me $30 and was better than the digital answering machine that replaced it. He haggled me down to $5, because there was some small scratches on the plastic. A very cautious and penny-pinching consumer.

On the other end of the spectrum you have the "cost is no object" deep-pocketed buyer. For him, the sky's the limit.

The day of the $3,000 8x and 10x42 and 8x and 10x32 alphas is drawing nigh. Within 5 years, $3,000 alphas will be commonplace. We are already seeing that price in rangefinders and larger formats.

However, as the Consumer Optics Index Poll showed, most people draw the line in the sand where "too much is too much". Alpha companies will keep pushing to find where that line is drawn. At some point they must control prices or face being a "specialty shop" that sells to a small, elite group of rich customers.

There's a market for high priced specialty products. I think about the Ferrari Enzo, which costs $1,000,000. Bet Jay Leno's got one. At a million bucks, how many do they need to sell to make a handsome profit?

However, to be a consumer optics company, you need lots of consumers. Price your product out of the range of most people, and you become a specialty shop. Leica is already there with their cameras.

From the poll, it would appear that $3,000 is the where most buyers draw the line.

But that's today. If the economy picks up and their pockets are jingling again, they might be willing to redraw that line a little farther out. Alpha companies are counting on it.

Some said they would pay whatever the cost, but the bin would have to be something significantly better and innovative to get them to pluck over more money.

Companies come up with something like "HT" glass or "nano-particle coated". Some will deem those innovations 'significant' enough, others will not. Those who simply must have "the best" will jump on them every time, regardless.

However, it seems that since I first broached this subject several years ago, more and more birders are coming to the conclusion that roof technology has hit its stride, and these incremental changes are not worth the increase in costs as per Holger's remarks at the end of his review of the 8x30 EII and 8x32 Meopta. So it will be interesting to see what happens over the next few years.

The problem right now is that these price hikes are ill timed. With the global economy still struggling in the aftermath of the worst downturn since the Great Depression, and cities and entire countries teetering on bankruptcy, IMO, these high prices are obscene.

Brock, member, Optics Price Obscenity Board
 
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Odd that Newf. Gh., in his current efflorescence, should post this topic today, minutes? after I had made the chart below, to guide in a possible purchase - and, as soon as I saw it whole, had wondered about the same thing! All data are from the Eagle Optics site (FOV and weight converted), selecting models acc. to the stated constraint (somewhat arbitrary) and only those with the best customer ratings. At least one set of figures (Bushn. Excursion) is not quite correct here or has been v. recently updated. PS1. I suspect Leica are conservative in their figure for FOV (as also eye relief) for some reason/s I don't understand. If so the cut-off is unfair to them as one or two of their models come very close. PS2. Noticed two interesting patterns in the figures and graphed them.
 

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People balk at the thought of a Surefire flashlight. I mean who would pay over $100 for a small light.

How about $1000 for binoculars, $2000 or even $2600? There are no expensive electronics or carbon fiber, so why the insane price?

Quality just costs money, or is there a big fat profit margin?

Last year the SWARO 8x32 El was about $1929 while this year they were sold for as low as $1500 at many stores in light of the new SV models. Did they do us a favor or take the hit? You know they didn't take the hit and they still made $$$ at the lower price.

You are either in the mass roughly 99ish % of the pleb market or you're a banker etc.

Thats my theory.

The aphas sell less (?) so need a huge price and maybe the prices have rocketed because the rich took all the money and so only they can afford them but its not a problem for them of course so the prices could be expected to rise further. Have you not noticed how much the prices have risen since the global downturn? I wondered about this and that's the only way I can explain it. Normally I would have thought prices would drop when most people had lessoning disposable income.

Thats why I currently own/buy Chinese. Still get a 10 year warranty and the optics aren't bad by any means.
 
Odd that Newf. Gh., in his current efflorescence, should post this topic today, minutes? after I had made the chart below, to guide in a possible purchase - and, as soon as I saw it whole, had wondered about the same thing! All data are from the Eagle Optics site (FOV and weight converted), selecting models acc. to the stated constraint (somewhat arbitrary) and only those with the best customer ratings. At least one set of figures (Bushn. Excursion) is not quite correct here or has been v. recently updated. PS. I suspect Leica are conservative in their figure for FOV (as also eye relief) for some reason/s I don't understand. If so the cut-off is unfair to them as one or two of their models come very close.

Yeah I am supposed to be away from BF, you caught me.

The topic came to me as I was looking into bright flashlights. The Colorado tragedy could have been impacted if someone had a bright flashlight to disorient the sicko for a few seconds. Surefire came up in the search and I thought they were pretty expensive. Then I thought alphas, prices are insane!
 
NG, would that really work - wouldn't he instinctively and instantly fire at the light? Can hardly go more off topic in our idyllic world here but I think a lapse might possibly be justified in such a case. That reminds me I'm approaching 100 posts here, and maybe should turn away less from reality! PS - I added another PS to my last.
 
NG, would that really work - wouldn't he instinctively and instantly fire at the light? Can hardly go more off topic in our idyllic world here but I think a lapse might possibly be justified in such a case. That reminds me I'm approaching 100 posts here, and maybe should turn away less from reality! PS - I added another PS to my last.

Yes, those things are bright- blinding. Hold it out to one side, not in front of you.

While he rots in jail, we will bird in relaxation.

BTW for your 100 post buy some new glass

http://foxnewsinsider.com/2012/07/2...urself-in-a-situation-like-colorado-shooting/
 
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Odd that Newf. Gh., in his current efflorescence, should post this topic today, minutes? after I had made the chart below, to guide in a possible purchase - and, as soon as I saw it whole, had wondered about the same thing! All data are from the Eagle Optics site (FOV and weight converted), selecting models acc. to the stated constraint (somewhat arbitrary) and only those with the best customer ratings. At least one set of figures (Bushn. Excursion) is not quite correct here or has been v. recently updated. PS1. I suspect Leica are conservative in their figure for FOV (as also eye relief) for some reason/s I don't understand. If so the cut-off is unfair to them as one or two of their models come very close. PS2. Noticed two interesting patterns in the figures and graphed them.

Pomp:

You have put in lots of work with your list and graph. These things mean not a lot in the quality of the optic, FOV and weight are some of the dozen factors that come into play.
A wide FOV with problems near the edges, would score no higher than some others. And for some, weight is important, either too light or too heavy. That is why there are averages where most fit.

Take a look at the Allbinos reviews, and how they keep track. Long list.
A binocular is the sum of its parts, and the value and price is set by the
maker and the buyers looking for those models.

Jerry
 
those things are bright- blinding.
NG, another thing that had struck me immediately on reading your previous - and seems to me pertinent even after reading the linked expert advice - is that an aggressor can use that as a weapon.
You have put in lots of work with your list
Jerry, perhaps not for what may be a fair bit of invesment!
FOV and weight are some of the dozen factors that come into play.
That's just the point with the graph. Beyond about midway, despite the enormously higher prices, FOV and light weight are - presumably - compromised for other factors enhancing optical quality, and, maybe less significantly, construction. (I chose FOV and wt. because among figures in the specs they're the most important to me to compare. Eye relief is adequate in all.)

But I was too hasty! If I do go for smthg. it now looks like a Leica 7x42. Don't worry, not so much schizophrenic as in a state of flux (well, okay, mentally unstable) - only just discovering the bliss of lower-power, large-pupil, wide-field bins! Attached is a chart I made a year ago. The relevance to the title of this thread is again the dramatic last column.
for some, weight is important, either too light or too heavy
Wouldn't have thought that at these weights an increase is desired (but then I have an obsession for smallness and lightness!)
 

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NG, another thing that had struck me immediately on reading your previous - and seems to me pertinent even after reading the linked expert advice - is that an aggressor can use that as a weapon.
Jerry, perhaps not for what may be a fair bit of invesment!
That's just the point with the graph. Beyond about midway, despite the enormously higher prices, FOV and light weight are - presumably - compromised for other factors enhancing optical quality, and, maybe less significantly, construction. (I chose FOV and wt. because among figures in the specs they're the most important to me to compare. Eye relief is adequate in all.)

But I was too hasty! If I do go for smthg. it now looks like a Leica 7x42. Don't worry, not so much schizophrenic as in a state of flux (well, okay, mentally unstable) - only just discovering the bliss of lower-power, large-pupil, wide-field bins! Attached is a chart I made a year ago. The relevance to the title of this thread is again in the last column.
Wouldn't have thought that at these weights an increase is desired (but then I have an obsession for smallness and lightness!)

The 7x42 Leica HD is very nice indeed
 
NG, thanks. But, I'm afraid, now - yes, it's another lightning change, and I have to retract that denial of schizophrenia - I favour the Zeiss 7x42 FL, reverting to my position a year ago (in green on that chart). For dark conditions its better FOV plus brightness are more attractive than the Leica's better edge clarity plus contrast. There's no hurry, so will wait and see if there's a Z. 7x42 HT soon - that'll be even better than the FL if it retains that field. By then there may also be a L. New Trinovid 7x42.

The relevance to the title of this thread? Got the new Kowa 6x30 porro this month and am utterly pleased (with everything except close focus). At US$ 100 it is 470 g, has astonishing optical quality, 8° FOV and waterproofing. K. make a 8x42 roof at $ 210 with the same optical quality (as I gather) but FOV 6.3°. I'd make a vague guess that increasing that to the 8° level of Z. and L. will raise the price to max. double of that, and a 7x will be close. The present Z. and L. 7x42 are resp. 1,900 and 2,000. Superior, yes, but about 4 times the price!
 
Thanks, Lee. The good news there is that I won't be subjected to the HT Suspense. The bad news is that now it'll be even more difficult for me to emulate the fellow in the HT Video. PS - we are on topic!
 
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