[Kevin Purcell]

How much does an OEM bin cost? Less than you think.

Compared to how much is an OEM bin priced at: which is whatever the market will bear (and whereever peoples price anchors are!).

http://www.24hourcampfire.com/ubbthr.../1#Post2496140

At the SHOT show this year, I was able to meet with several aggressive importers who were willing to build binoculars for whomever would order the quantity they wanted. They had ED 8x42s for $80 a pop. Non-ED were only about $50. We took three home for T&E. They are actually quite good and right up there with Vortex and some of the other up and comers. I thought that the VERY best stuff was still the expensive stuff however. The sharpest spotting scope I have ever looked through is hands-down the Kowa 88 mm TSN with Fluorite crystal lenses. They have to be experienced to be believed. They aren't cheap either. That said, there were some spotters that were 95-96% of this for <$400. That's a big shift for the last edge of performance. I guess kinda like the difference in price between a Corvette and a Lamborghini!

The other arguments on that thread are about robustness which basically seem to come down to brand arguments as no-one actually tests robustness (only nuts like Peter Dunne with a freebie review pair).

[FrankD]

How did I know what this thread was about shortly after reading 24hourcampfire?

;-)

Remember that comment about the Razors only costing $100 to manufacture?

[Tero]

OEM stands for..

[alan_rymer]

Other Equipment Manufacturer.
Manufactured for or Bought in by a "Named" supplier.
Like NEC pc's use an OEM motherboard.

[Kevin Purcell]

Originally Posted by FrankD

How did I know what this thread was about shortly after reading 24hourcampfire?

;-)

Remember that comment about the Razors only costing $100 to manufacture?

Exactly but this one actually quote numbers and is sourced (loosely).

Of course you have to buy a significant number of bins to get this price. How many you would have to buy would be interesting too (1,000? 10,000? 50,000?). Then there's shipping from the factory to your distributer as these are FOB prices (i.e. the price at the loading dock at the factory). Then shipping to the end user.

Then you have business costs (warehousing, staff, sales, customer support warranty and service, etc) to add to that.

Plus I heard the figure quoted that the average sales price of a bin (acorss all sales) is $100. So they sell a lot more $30 bins than they do $1000 bins. But note that average price is below say the Diamondback or Excursion level that we might consider a "minimum" in roofs.

I wonder if there is a boutique market possible in selling bins selling bins starting at $150 to $200 level and up. I guess this is not too far from what Leupold do with their bins (though they are hardly "boutique" with their other business and several hundred employees in Oregon).

OEM is Original Equipment Manufacturer. The term originated in car parts manufacturing then moved into electronics and computer hardware.

[NWBirder]

I am sure the manufacturing cost is only small fraction of total true cost of running any business. They have to deal with workers' wage, benefit, marketing cost, depreciation, interest. Those will probably cost more than the parts itself. I was reading an issue of business weekly about India's Tata motor. It says the cost of raw material consists only 7% of car price for most of the major car manufacturers. But our own Detroit plants are still in huge red. But a peruse of Swarovski EL and some high end domestic ones make me convince that the Big3's binos are way overpriced.

[alan_rymer]

Originally Posted by Kevin Purcell

OEM is Original Equipment Manufacturer. The term originated in car parts manufacturing then moved into electronics and computer hardware.

Kevins right of course.

My memory seized up, and my fingers typed another word.
Its age you know!

[Kevin Purcell]

Originally Posted by NWBirder

I am sure the manufacturing cost is only small fraction of total true cost of running any business. They have to deal with workers' wage, benefit, marketing cost, depreciation, interest. Those will probably cost more than the parts itself. I was reading an issue of business weekly about India's Tata motor. It says the cost of raw material consists only 7% of car price for most of the major car manufacturers. But our own Detroit plants are still in huge red. But a peruse of Swarovski EL and some high end domestic ones make me convince that the Big3's binos are way overpriced.

Although that's true were talking about completed product cost from the OEM.

I suspect the raw materials cost (cost of the glass, Al, plastic raw materials are only a few dollars per bin, more for ED where you need Lanthanum and some other rare earths. The added value is in knowing how to takes these raw materials and make something useful from them.

The OEM is selling these bins as completed product at wholesale for $50 to $70 so that includes his profit and his overheads.

I still think there's plenty of "excess" profit in the distributor to consumer side of the transaction.

I suspect we might see this change if a Chinese OEM starts their own brand and start selling directly to end users (or redistributing from their one point of sale ... a bit like the model used by Hawke or Dell or any modern company). This is already happening inside China. You can buy Bosma bins - the "Vixen of China" so to speak - but not directly but via their Amazon like outlets and at retail.

The Euro 3 are overpriced. Part of that adds to the cachet. Some of that excess has been attributed to exchange rates. But that has been moving in favor of the dollar recently by about 15% since summer so will we see discounts in the near future? I think not. The next bin out should be the Swaro which won't be cheap.

[Pileatus]

Originally Posted by Kevin Purcell

Although that's true were talking about completed product cost from the OEM.

I suspect the raw materials cost (cost of the glass, Al, plastic raw materials are only a few dollars per bin, more for ED where you need Lanthanum and some other rare earths. The added value is in knowing how to takes these raw materials and make something useful from them.

The OEM is selling these bins as completed product at wholesale for $50 to $70 so that includes his profit and his overheads.

I still think there's plenty of "excess" profit in the distributor to consumer side of the transaction.

I suspect we might see this change if a Chinese OEM starts their own brand and start selling directly to end users (or redistributing from their one point of sale ... a bit like the model used by Hawke or Dell or any modern company). This is already happening inside China. You can buy Bosma bins - the "Vixen of China" so to speak - but not directly but via their Amazon like outlets and at retail.

The Euro 3 are overpriced. Part of that adds to the cachet. Some of that excess has been attributed to exchange rates. But that has been moving in favor of the dollar recently by about 15% since summer so will we see discounts in the near future? I think not. The next bin out should be the Swaro which won't be cheap.

What do you mean by "excess profit" and, furthermore, what do you mean by "overpriced"?

[OwenM]

Well, nothing is ever really "overpriced". Anything that sells is priced for what the market will bear, because consumers ultimately control the price of any given product by what they are willing to spend. The only way to bring the price down is for production to exceed demand....which means people stop buying.

FWIW, production knives and audio equipment typically retail at double dealer cost, though most products sell at a "reduced" rate that is still a 40% markup over dealer cost.
Jewelry may sell for 200-600%, while guns, whose retail is usually set well above market pricing may only sell for 15-20% above cost.
These are just a few things that I'm familiar with due to having friends in whatever industry, or who are business owners. I have no idea about the margins on other products, or the markup between a manufacturer's cost and what they charge a dealer.

[ceasar]

Originally Posted by John Traynor

What do you mean by "excess profit" and, furthermore, what do you mean by "overpriced"?

EXCESS PROFIT: (Def.) A term used mostly during election periods in Democratic Republics by politicians running for office. Currently (ca. 2008) applicable to Oil Companies revenues. It is never used to describe the profits made by companies doing business with the governments run by the said politicians.

Apologies to Noah Webster and Samuel Johnson.

Bob

Harmless Drudge

[Tero]

I have gotten this same argument about "expensive" drugs. People go and Google a certain drug they are taking, and first find Canadian prices and then some Indian company that will sell you a kilogram for almost nothing. But good luck buying and dispensing that kilogram. You will have to measure out 2mg doses each day.

In real life we have the the hurdles of the FDA, then drug companies, drug stores all taking some profit, but also some liability. All the middlemen can be sued. And quality is much more acute for something taken internally compared to binoculars, taken externally. You might just get a little eye strain. It will pass.

[oleaf]

Originally Posted by Kevin Purcell

Although that's true were talking about completed product cost from the OEM.

I suspect the raw materials cost (cost of the glass, Al, plastic raw materials are only a few dollars per bin, more for ED where you need Lanthanum and some other rare earths. The added value is in knowing how to takes these raw materials and make something useful from them.

The OEM is selling these bins as completed product at wholesale for $50 to $70 so that includes his profit and his overheads.

I still think there's plenty of "excess" profit in the distributor to consumer side of the transaction.

I suspect we might see this change if a Chinese OEM starts their own brand and start selling directly to end users (or redistributing from their one point of sale ... a bit like the model used by Hawke or Dell or any modern company). This is already happening inside China. You can buy Bosma bins - the "Vixen of China" so to speak - but not directly but via their Amazon like outlets and at retail.

The Euro 3 are overpriced. Part of that adds to the cachet. Some of that excess has been attributed to exchange rates. But that has been moving in favor of the dollar recently by about 15% since summer so will we see discounts in the near future? I think not. The next bin out should be the Swaro which won't be cheap.

Kevin,

Lots of consumers get very excited when they learn about OEM costs (from any industry) Now take a look at the supply chain. Lots of margin goes to importer/brand, distributor, reseller... etc. All for good reason.

Companies like Leupold, Vortex, Bushnell are all good honest brands. How can any company give you a new bin to replace your slightly worn, slightly out of alignment, etc,etc, bin? It's built in to the price. Lifetime warrantee.

Not much is overvalued as competition keeps this in check. No one is getting rich here. Remember what Leupold wanted to get originally for their Gold Ring bins? Nothing doing! That's not their market... and it showed. What are they now... 40% of the original cost? That market belongs to Nikon (kind of), Swaro, Leica, Zeiss. You want to try to compete here? Go ahead... good luck.

Given labor costs, etc, how can anyone seriously compare $50-$100 OE bins to European brands (that manufacture their own stuff). Really... come on!
Euro bins are expensive. And for good reason. Sure, they might be a couple hundred $$ over what is really reasonable... but am I going to place the Swaro EL's along side the Hawke ED (if I have the money for either) and have a hard choice? No (it's Swaro for many reasons outside of just pure view). If I'm searching for the best price/performance bin? Maybe Hawke ED. But, if I'm looking to keep these bins for 15 or 20 years? Easy choice (Swaro).

Every price point has a reason to live and a buyer to buy.

Kevin... my advice is for you to buy a container load of these OE bins and build a brand name and sell them... for a whopping profit. It's easy!

Cheers

PS. The reason Dell sells cheaper is that they cut out the distributor/retailer in their selling model. They do not buy their components any cheaper than anyone else. Selling direct is the future, but not without it problems as you need to develop much more infrastructure to support this selling method.

[vkalia]

Originally Posted by oleaf

Not much is overvalued as competition keeps this in check.

Well, in a sector like this, I am not sure how much of a pressure competition puts on the price. In the entry-level, sub-$1000 category, sure it does. But in the higher-end segment, it is not really a simply matter of competition based on price. For one, when there is no readily apparent and universal measure of quality, it is easy for companies to set themselves apart using quality, features & brand as differentiators. In fact, price is often used as a proxy for quality...

Your example of Leupold vs the Big 3.5 (Nikon's only halfway there, atleast in terms of perception) is a good indicator of how competition does NOT drive prices down. In fact, the fact that Nikon has hiked the prices of their EDG binos in order to be taken seriously indicates the perception-oriented nature of this market. That is the ideal case for manufacturers, as they suffer relatively little pricing pressure (unless, of course, they fail to establish themselves as a brand).

Given labor costs, etc, how can anyone seriously compare $50-$100 OE bins to European brands (that manufacture their own stuff). Really... come on!

For starters, a good rule of thumb in manufacturing is to use the formula "Material costs = Selling price / 10." Using that, it is quite reasonable to assume that the $700 binos cost around $70 or so to make.

Euro bins are expensive. And for good reason.

Yes. Brand equity for one. Deliberate price leadership for another. Lower volumes and less efficient manufacturing for third. If they go for a lower segment, they have to compete harder. On the other hand, their brand lets them occupy a segment that keeps others out (see Leupold).

Sure, they might be a couple hundred $$ over what is really reasonable... but am I going to place the Swaro EL's along side the Hawke ED (if I have the money for either) and have a hard choice? No (it's Swaro for many reasons outside of just pure view).

You said it - "many reasons outside of just pure view." Features, brand, other indicators of quality (some real, some perceived).

Every price point has a reason to live and a buyer to buy.

PS. The reason Dell sells cheaper is that they cut out the distributor/retailer in their selling model. They do not buy their components any cheaper than anyone else.

If they buy a lot more components, then yes, they probably do get them for cheaper.

Vandit

[oleaf]

Hi Vandit,

Good points. But I was not trying compare Leupold, and others to Swaro and company... I was trying to make a point that a $50-$80 OE bin allows a company to give some away for replacement with margin to spare.

Also, you can price yourself to be the leader... but if you can't back up the quality... you're gone in a hurry.

Nikon has yet to get the flow going on the EDG. The prices will settle out below the big three I believe.

Brand plays a part for sure... but so does history... and performance.

Tell me who is not satisfied with Swaro, Leica and it's not just the name. It's quality. Going from Hawke quality to Swaro quality is a big jump. BIG JUMP. And it's not just quality control I'm talking about.

$70 OE equals $700 retail? Not likely. Maybe $200

Cheers

[NWBirder]

Originally Posted by oleaf

Tell me who is not satisfied with Swaro, Leica and it's not just the name. It's quality. Going from Hawke quality to Swaro quality is a big jump. BIG JUMP.

It will be interesting if someone can quatitatively put Hawk or Promaster Elite together with Swaro and compare. Frank, we are looking up to you.

[Kevin Purcell]

Originally Posted by NWBirder

It will be interesting if someone can quatitatively put Hawk or Promaster Elite together with Swaro and compare. Frank, we are looking up to you.

What, oleaf, hasn't tried it?

But how would he know how they differ?

[NWBirder]

Originally Posted by Kevin Purcell

What, oleaf, hasn't tried it?

But how would he know how they differ?

Kevin, what are you doing here? You should be busy replying my post about field flatness vs magnification on another thread. Just kidding. Have a good night.

[oleaf]

Originally Posted by Kevin Purcell

What, oleaf, hasn't tried it?

But how would he know how they differ?

Hi Kevin,

You're right.. I haven't tried the Hawkes. But I really respect Franks comment on the bin and don't doubt they are every bit the fine view he describes.

I'm just saying there's much more to the top bins than just view. Ergonomics, manufacturing precision (which will show over years of service), light-weight construction, durability, customer service, etc.

Please don't believe the top three are making $100 bins that retail at $1800.

Please believe you would see the value 5, 10, 15, 20 years down the road when you are still using the same pair of bins.

Personally, I work in the bike biz for brands that make their own stuff and also for an OE company. It's all really works the same... just different products and markets (in relation to binocular manufacturers and markets).

Brands that make their own stuff have struggles... companies that OE me-too's have other struggles too.

I just respect the companies who design, develop, build, market their own products. Not that I can afford them!

Purchasing 6 middle pack bins over 10 years = $1800 +-

Purchasing a pair of Leica, Swaro, Zeiss bins used for ten years = $1700 +-

But this dead horse has been kicked to death.

Cheers

[Kevin Purcell]

Oleaf, I don't disagree with most of what you say in that post (despite the claims that you say that I beleive a Zeiss or Sawro cost $100 to build ... I don't believe I said that as neither are building in China. Yet. And I suspect their QA to verify their components costs a fair amount).

Except perhaps the last bit.

You manipulate the numbers to make a equal case. But whose to say these $500 bins won't last 5 years or 10 years? The biggest danger to replacement seems to be binocuholism and the quest for a better bin or ... what? Damage? Loss? The same problems that the Euro 3 could suffer. That brings their lifetime cost down to $100 per year over 5 years. That's a lot cheaper for not a lot worse view. And it's the view that counts.

I look through the Hawkes I have (from FrankD so my investment is pretty low) I see a great view. Better than any of the other bins I own (though surprisingly not by quite as much as I'd hoped but just better along a number of parameter). It's a bin that is incrementally is probably difficult to better by a great deal (perhaps by refinements by the Alpha bins for four times the cost).

EDIT: one place where it fails (even compared to my Bushnell Discoverer and Elite is stray light in difficult conditions ... 20 degrees off the sun). That is perhaps the first place to improve and one place the current Alphas would all best it.

The biggest problem right now is the rate of innovation in China for bin design and production. It's faster than the "normal" replacement rate of bins which defines "disruptive innovation". So buying the first of the "really good Chinese ED" bins now leaves you open the "really really good Chinese ED" in two or three years that's lighter and more ergonomic and perhaps has a fractionally better view. I guess I'll take that chance.

[NWBirder]

Originally Posted by Kevin Purcell

Oleaf, I don't disagree with most of what you say in that post (despite the claims that you say that I beleive a Zeiss or Sawro cost $100 to build ... I don't believe I said that as neither are building in China. Yet.).

Except perhaps the last bit. You manipulate the numbers to make a equal case. But whose to say these $500 bins won't last 5 years or 10 years? The biggest danger to replacement seems to be binocuholism and the quest for a better bin or ... what? Damage? Loss? The same problems that the Euro 3 could suffer. That brings their lifetime cost down to $100 per year over 5 years. That's a lot cheaper for not a lot worse view. And it's the view that counts.

I look through the Hawkes I have (from FrankD so my investment is pretty low) I see a great view. Better than any of the other bins I own (though surprisingly not by quite as much as I'd hoped but just better along a number of parameter). It's a bin that is incrementally is probably difficult to better by a great deal (perhaps by refinements by the Alpha bins for four times the cost).

The biggest problem right now is the rate of innovation in China for bin design and production. It's faster than the "normal" replacement rate of bins which defines "disruptive innovation". So buying the first of the "really good Chinese ED" bins now leaves you open the "really really good Chinese ED" in two or three years that's lighter and more ergonomic and perhaps has a fractionally better view. I guess I'll take that chance.

Nod, nod...well said, KP.

[Steve C]

Kevin has it correct when he says that the view in the Hawk is incrementally better in several parameters from his less expensive binoculars. The Promaster is the same deal. The major reason I have always stuck to the mid price glass, from the <$300 Monarch to the <$500 Viper is because the premium glass, to my eyes, was only incrementally better in several parameters from these. That small incremental difference was never worth it to me to fork out an extra $1,000.

Now we have, for the mid price level @$500, two binoculars in the Promaster/Hawke that show the same incremental improvement over the Monarch/Viper that the premier glass does. No, they do not yet have a solid product longievity/durability/customer service/warranty record. But on the other hand, the Monarchs have lasted without whimper for seven years, some $40 per year of use. The Promaster seems every bit a solid and well built as the Monarch, so unless one typically beats up theur binocular with extreme usage, I feel pretty confident that these new glass will hold up at least as well as the Monarch. Now that I have said that, it is likely an objective lens will fall out when I next remove them from the case .

What will interest me is what will happen with updated versions of the Promaster/Hawke by the time Swarovski gets off of top dead center with their new $4k new deal wonder. I really wonder what the new guys will be able to accomplish with an offering of a $1k improvement. Swarovski may be at the ultimate price tipping point. Swarovski will only be able to offer an incrementally better binocular than what the havw and for that price? Me, I doubt there is very many people now who would fork out that sort of $$$. Certainly I'm not one. I ntend to use my $500 Promaster and see what happens. There is likely some real change on the horizon. We just now see the first of it with the Promaster/Hawke.

[oleaf]

Originally Posted by Kevin Purcell

Oleaf, I don't disagree with most of what you say in that post (despite the claims that you say that I beleive a Zeiss or Sawro cost $100 to build ... I don't believe I said that as neither are building in China. Yet. And I suspect their QA to verify their components costs a fair amount).

You manipulate the numbers to make a equal case. But whose to say these $500 bins won't last 5 years or 10 years? The biggest danger to replacement seems to be binocuholism and the quest for a better bin or ... what? Damage? Loss? The same problems that the Euro 3 could suffer. That brings their lifetime cost down to $100 per year over 5 years. That's a lot cheaper for not a lot worse view. And it's the view that counts.

The biggest problem right now is the rate of innovation in China for bin design and production. It's faster than the "normal" replacement rate of bins which defines "disruptive innovation". So buying the first of the "really good Chinese ED" bins now leaves you open the "really really good Chinese ED" in two or three years that's lighter and more ergonomic and perhaps has a fractionally better view. I guess I'll take that chance.

Hi Kevin,

Well I was commenting to some that believe $80-$100
OE bins are selling at $1000+ retail.

As for price performance... I just drew a comparison to someone buying 5 bins to get to a price over 10 years against buying a costly euro-bin. You can say it's not a fair comparison or manipulative... but it is a truthful and realistic comparison.

"rate of innovation in China for bin design and production"

OK... this really stopped me in my tracks and tells me you're missing and not placing value on a big part of the development of any product.
First... no Chinese OE is driving innovation. They rely on their R&D departments located in various parts of Europe and Japan (namely Austria, Germany, Czech) and other good brands that demand innovation. This takes nothing away from the hard working people who work for these OEM companies... but if you call the new Hawke/Promaster an "innovation" then you're truly missing something.

Please don't pin this as a nationality issue either. It's not. And sorry for what some will call a cheap shot at Chinese OEMs... it's not.

In a sentence you've totally devalued design innovation, elegant industrial design, scientific research, etc, etc. from companies that might or might not follow the lowest wage rate.

The direct rate of "innovation in China for bin design and production" is in direct proportion to the developments made by the market leaders. And... always seems to follow... funny how that is.

I'm not trying to make anyone mad but just trying to illustrate a point. Be careful of always trying to get the best for the cheapest. How would you like your living to depend on this? Could you work that hard?

Look at the states... seems we've backed ourselves into a pretty deep corner. How do we get our products cheaper still to keep on buying, buying, buying? Where do you go from here?

Sure, the Hawke/Promasters are cheap and good (maybe great) but tell me what is innovative about that? I've heard through the grapevine that the Promasters are sold through camera shops and not the biggest bin retailers. I wonder why? My guess is EagleOptics has a deal with their OEM to not compete directly with the Vortex brand. How come EO doesn't carry the Promaster wonderbin? I predict the new re-tooled Vipers and Razors will equal the Hawke/Promaster soon. Seems to me the OEM slipped it to other brands (maybe their own partners) before Vortex releases their new bins. Oh the pitfalls of not making your own stuff. I could be full of "stuff" for that matter! I'm looking at this from the outside as well!

We all have our own personal reasons for what we buy. Please don't discount the hard work of the people driving "innovation" no matter where it comes from (Europe, China, Japan, USA, and elsewhere).

Just trying to illustrate a point... correct me if I'm off base. But, I've worked for companies in Germany, USA, Taiwan, China and still do to this day.

Cheers

[oleaf]

Originally Posted by Steve C

What will interest me is what will happen with updated versions of the Promaster/Hawke by the time Swarovski gets off of top dead center with their new $4k new deal wonder. I really wonder what the new guys will be able to accomplish with an offering of a $1k improvement. Swarovski may be at the ultimate price tipping point. Swarovski will only be able to offer an incrementally better binocular than what the havw and for that price? Me, I doubt there is very many people now who would fork out that sort of $$$. Certainly I'm not one. I ntend to use my $500 Promaster and see what happens. There is likely some real change on the horizon. We just now see the first of it with the Promaster/Hawke.

Hi Steve,

I'm curious you wonder what the new guys will come out with next. Like there's a new innovation that the big 3 or 4 are somehow missing. The new guys are really the same old guys that have been making OEM bins for Bushnell, Minox, Vortex and others on and on and on. The brands drive the innovation of what they need and the OE builder manufactures. In addition the OEM can also suggest other options gleaned from X competitor company to give to you for free. In the process your new innovation goes to someone else... give and take.

In any mature market the innovation is incremental. This is not new. Every year I'm surprised at the bins available at $250 - $400 or so. Cutting costs or dropping price is not the same as innovation.

Your new Promasters will serve you well I bet. If you're waiting for this non-brand (and I mean no disrespect so please don't flame me) to lead the market soon with their next big technology push... you'll have a while to wait.

I'm sure when I get a chance to handle a pair I'll be impressed. But, I'll also balance this against reality.

cheers

[Hans Weigum]

Not yet sufficiently familiar with the cost structure of binoculars, I would like to share a reliable figure from a technologically not so distant type of product. For the strong belief in brand names linked with prestige, the customer of quality luxury watches today pays a price in which the costs of manufacture amount about 15 -20 %.