M8's true cost?

[super7668]

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I just ordered my M8, in case Leica raise price next month. However I don't really believe they will raise $500 for the same digital M8, looks like a brainless marketing strategy to me.

 

ok, here's the question: What do you think about the real cost of M8 (with and without developing fee) ? How much money Leica can make from each unit ( Or still losing money?)? How much profit for retailer?

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[pekem]

It seems to me that Leica are on top of their marketing brief if they can persuade you to part with £3000,approx $6000, for a camera body and then go on to sell you a lens for another $1200 or so, just to get you started, $500 is neither here nor there.

[luigi bertolotti]

Your questions are very difficult to answer... evaluating industrial costs of a product like M8 is quite a difficult exercise... for other kind of simple consumer products is much easier but for a technically complex assembly, with many parts outsourced, many "service-related" costs and so... you'd have to work closely with Leica Company to have an estimate. Just to give a little insight... it's very probable that an important outourced part like the CCD sensor has NOT a "fixed" cost for Leica Co... as it normal in similar contracts, you'll have a base cost of supply and a variable part (plus or minus)depending on volumes ordered, schedules respected and so... whoever has worked in tech industries knows this well.

 

Maybe the exercise can be easier for dealer's margin... I suppose you can think of a 15 to 20% range... but also this can turn a rather complex evaluation: for an example, the dealer I bought my M8 from (I know him well for years) told me that to start selling the M8 he had to discuss a lot the "first-batch-order" : to have a "right price" he committed to buy a certain number of lenses, with a certain schedule, with possibility to make certain amounts of "order exchange" with or without "penalties" depending on certain factors... and his is a respectable but SINGLE shop, not a national chain like Adorama or so...also the selling process today tends to become a financially complex issue.

[Eoin]

Leica put a customs value of €800 on the M8 and €500 on each of the lenses shipped back to me recently. I would guess these values are not too far removed from the material costs.

[jaapv]

I doubt it. That would be a balancing of the internal replacement cost and insurance premium for higher value against the statistical probability of an insured shipment being lost. The real cost at the factory gate is something quite different. For instance, I would be surprised if Kodak charged less than 1000 € per sensor, if not more.

[stunsworth]

The M8 sells in the UK for £3000, so my guess would be that the M8 costs leica somewhere between £1000 and £1500, probably nearer the lower figure.

 

Do dealers only make 10-20% with Leicas? I expected the figure to be higher.

[erlingmm]

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I just ordered my M8, in case Leica raise price next month. However I don't really believe they will raise $500 for the same digital M8, looks like a brainless marketing strategy to me.D

 

American buyers should be aware that the dollar has fallen significantly towards Euro this year. In January 1 USD= 0.77 Euro, while the same USD now gets you only 0.72 Euro. I would assume that the price increase in the US for a European product like Leica is largely due to the weak (and weakening) dollar.

[ho_co]

Jaap--

Kodak offers full information on their sensors including the M8's KAF 10500 and the purchase process via KODAK Image Sensor Solutions - CMOS, CCD, full frame, interline, linear image sensors, which links to KODAK Image Sensor Solutions - How To Buy if you're interested.

 

This is just for your information; I haven't checked prices. As said above, I think there are too many sources in the process for us to get any handle on the process. And I hope they're making enough to be around next year.

 

The real question is, it seems to me: Does it outperform? Are you happy with it? Would you recommend it to others? If it's worth it to you, don't worry how much is tied up in it.

 

--HC

[jaapv]

Thanks, Howard, but I only buy them when they have been gift-wrapped by Leica....

Followed your link. Kodak seems only to give out prices when you fax them an order form.

[carstenw]

I am pretty sure that all the low guesses here are way off. To my knowledge, Leica's profit margin is not that high, if you factor in the cost of sitting in the Leica buildings, all the people who work there, and everything. The cost of experienced, manual, German labour for the assembly and adjustment is also not to be underestimated. I would be surprised if Leica earns much on each camera, but I do expect that they make more money on most (but not all) of the lenses.

[stunsworth]

The prices are going up in Europe too aren't they? So I doubt that it's due to the dollar collapse. I guess those free filters have to be paid for somehow <grin>

 

Incidentaly when I sent my Noctilux in for coding I couldn't help noticing that the dealer's sticker on the box had the original price. The cost of the lens has doubled since the end of 2001 when I bought mine. I certainly wouldn't be able to justify buying one nowadays.

[carstenw]

The American market is very price-sensitive compared to the European market, so it would not surprise me to find out that Leica is partly subsidising the falling Dollar price with a raised European price. Removing tax from the European prices doesn't yield American prices already.

[leicapfile]

Times may have changed but I doubt it.

 

In the 60's the dealer cost was 78 cents on the dollar. Not much of a mark up. However, a dealer or employee could purchase a body and 'normal' lens for half price, provided he agreed not to sell it for two years. Lenses and accessories under the same plan, were 60 cents on the dollar.

 

You don't deal in Leicas for the large margin.

 

Jerry

[dfarkas]

Your questions are very difficult to answer... evaluating industrial costs of a product like M8 is quite a difficult exercise... for other kind of simple consumer products is much easier but for a technically complex assembly, with many parts outsourced, many "service-related" costs and so... you'd have to work closely with Leica Company to have an estimate. Just to give a little insight... it's very probable that an important outourced part like the CCD sensor has NOT a "fixed" cost for Leica Co... as it normal in similar contracts, you'll have a base cost of supply and a variable part (plus or minus)depending on volumes ordered, schedules respected and so... whoever has worked in tech industries knows this well.

 

Maybe the exercise can be easier for dealer's margin... I suppose you can think of a 15 to 20% range... but also this can turn a rather complex evaluation: for an example, the dealer I bought my M8 from (I know him well for years) told me that to start selling the M8 he had to discuss a lot the "first-batch-order" : to have a "right price" he committed to buy a certain number of lenses, with a certain schedule, with possibility to make certain amounts of "order exchange" with or without "penalties" depending on certain factors... and his is a respectable but SINGLE shop, not a national chain like Adorama or so...also the selling process today tends to become a financially complex issue.

 

Luigi,

 

As a dealer in US, there are no such dealer arrangements to my knowlege. There are no price breaks based on quantities or of certain product mixes. It is certainly very challenging to predict what the market will desire, though. That is a real challenge of a "first batch order" as you say. Will the M8 be a success? How about a new lens like the 28 f/2.8 ASPH? Will people still want the 28 Cron ASPH? Etc. And Leica product requires a LOT of cash tied up in inventory to be well stocked, not to mention a highly knowledgable sales staff. But these days, it is hard enough to get product in house, and keep it in house. Or at least the right product.

 

As far as margin... while I'm sure Leica wouldn't really like me to share this info I can tell you that it is certainly not what you'd expect. The camera retail business has very slim margins all around. As I say, we aren't selling ipods and Xboxes here. There are no quantity breaks or incentives like in the consumer electronics business. I can say this, on Nikon and Canon lenses that we sell, our maximum markup on any lens is 10%. You'll pay more than that in gratuity going to a restaurant and getting mediocre service. Our sales staff might spend an hour or more helping someone decide what is best for their needs, rather than merely pulling a box off of a shelf and pointing them to the register (or online checkout). That's the paradox. Many people say they want great service. Few (but a growing number indeed) are willing to pay anything more for that service.

 

Please understand, this is not a complaint or a rant. It just may help you understand the nature of the camera business today on the retail side.

 

As far as Leica AG's cost of manufacturing... I don't know. Having been to the factory twice in the last year, I can tell you that alot of money goes into the state-of-the art CNC equipment, high-grade materials, and highly skilled labor in Solms. I might venture to guess that labor costs account for a very large percentage. There is also the cost of strict quality standards, resulting in less yield, more waste, and certainly more time and labor. Add to this the long-cycle R&D work (the 50 Lux ASPH took 10 years to develop!), smaller batches and a rising Euro and we can start to see where all that money goes. Believe me, as a dealer I'd rather not see continuing price increases. I'm sure Leica wouldn't prefer to do this either, but you cannot prosper manufacturing products at a loss.

 

Hope this sheds some light on things.

 

David

[Joe Mondello]

and his is a respectable but SINGLE shop, not a national chain like Adorama or so...

 

Luigi, just so you know, Adorama is a single shop, not a chain.

[luigi bertolotti]

David, I red with interest what you wrote about camera selling business today... that is consistent to what my dealer says too... his margins come from print service, consumables, "low price" tech gear and so ... cameras count for very little, considering the time you dedicate to customers...he frankly admitted that was dubious about selling or not M8 (and he's the ONLY Leica dealer in a rather important town....) BTW, in Italy the business is managed by a distributor/importer, not by a Leica co. affiliate... this can explain some differences in order arrangements... he told me that made tentatives of cross-border business with dealers outside Italy... too complicated and strongly discouraged by Leica co. (through warranty management and so).

[luigi bertolotti]

Luigi, just so you know, Adorama is a single shop, not a chain.

 

Sorry, we italian provincials think that everything is LARGE in America...

[Guest Olof]

It seems to me that Leica are on top of their marketing brief if they can persuade you to part with £3000,approx $6000, for a camera body and then go on to sell you a lens for another $1200 or so, just to get you started, $500 is neither here nor there.

 

We have discussed a similar question in the german forum, a few months ago. The intersting thing is, if you compare the price of a M3 in the 50th, with the today price of a M8, you can see that the M8 is not really more expensive (if you set it into realation with a workers earnings).

 

I want to say that the M-System always was a very complicated system to build, and it never was cheap.

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Hallo,

Look here: Leica M

[jaapv]

Incidentaly when I sent my Noctilux in for coding I couldn't help noticing that the dealer's sticker on the box had the original price. The cost of the lens has doubled since the end of 2001 when I bought mine. I certainly wouldn't be able to justify buying one nowadays.

In 2001 as I recall the Dollar cost 1.15 Euro, now it is 75 cents. Surely that, and inflation, about cancel out the price difference.

[stunsworth]

Jaap, I live in the UK. When the Euro was launched at the begining of 2002 I think from memory there were 1.65 Euros to a pound. Currently there are around 1.48-1.50.

 

My Nocti cost just under £1500, it's currently £3413 from the same dealer.