Tariff pricing kicked in...

[Helge]

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vor 17 Minuten schrieb kiwidad:

The importer is happy tho! Tarrifs increase his and the resellers cut! Rememerbar tarif only applies to the importers price! Some opportunistic money making going on! A 10% tarif doesn’t raise the price 10% at retail!

If the retailer will make the same cut, a 10% tariff will cause a 10% price increase.

[Helge]

vor 20 Minuten schrieb kiwidad:

It’s not really a major price increase on an m body. 

Maybe not yet, however you’ll see the 10% price increase due to the 10% tariff and probably another 10% by the recent exchange rate hike on top.

If not yet, you’ll see it soon - and it won’t be the end of that story.

Edited May 10 by Helge

[kiwidad]

1 hour ago, Helge said:

Maybe not yet, however you’ll see the 10% price increase due to the 10% tariff and probably another 10% by the recent exchange rate hike on top.

If not yet, you’ll see it soon - and it won’t be the end of that story.

10% tarif does not raise prices 10% it 10% on the import value. I would guess Leica hit a the shores at 35% less than retail and that number acquires the tarif. The importer / wholesaler makes more as a per wrangle and then there is retail markup. Leica give a RRP so the end price increase being more than the actual tarif is their doing! 

typically wealthy folk buy leicas and the increases are a drip in a bucket!

[Helge]

vor 38 Minuten schrieb kiwidad:

10% tarif does not raise prices 10% it 10% on the import value. I would guess Leica hit a the shores at 35% less than retail and that number acquires the tarif. The importer / wholesaler makes more as a per wrangle and then there is retail markup. Leica give a RRP so the end price increase being more than the actual tarif is their doing! 

typically wealthy folk buy leicas and the increases are a drip in a bucket!

This is basically not understandable 🤪

The price the retailer pays is increased directly by the tariff, means his import is now 10% more expensive. To achieve the same cut as before, he has to raise the final store price by 10% as well. There is nobody between who would subsidize those extra costs, there is nothing that can be reduced in order to achieve the same cut as before, the only way to keep the profit as before is increasing prices. In addition other costs might increase at the same  time even more than the present tariffs (due the the very special situation presently, esp the inflation), so the retail price could be hit by a higher hike than 10%, however higher prices will reduce the number of cameras been sold, so retailers in the US will probably be careful. The other effect might be caused by the loss of the dollar‘s value resulting in a bad exchange rate also driving import prices. Your guess of 35% less than retail is a myth and far away from been realistic, the retailer might be happy if it is over 10%😃

Edited May 10 by Helge

[kiwidad]

2 hours ago, Helge said:

This is basically not understandable 🤪

The price the retailer pays is increased directly by the tariff, means his import is now 10% more expensive. To achieve the same cut as before, he has to raise the final store price by 10% as well. There is nobody between who would subsidize those extra costs, there is nothing that can be reduced in order to achieve the same cut as before, the only way to keep the profit as before is increasing prices. In addition other costs might increase at the same  time even more than the present tariffs (due the the very special situation presently, esp the inflation), so the retail price could be hit by a higher hike than 10%, however higher prices will reduce the number of cameras been sold, so retailers in the US will probably be careful. The other effect might be caused by the loss of the dollar‘s value resulting in a bad exchange rate also driving import prices. Your guess of 35% less than retail is a myth and far away from been realistic, the retailer might be happy if it is over 10%😃

 

2 hours ago, Helge said:

This is basically not understandable 🤪

The price the retailer pays is increased directly by the tariff, means his import is now 10% more expensive. To achieve the same cut as before, he has to raise the final store price by 10% as well. There is nobody between who would subsidize those extra costs, there is nothing that can be reduced in order to achieve the same cut as before, the only way to keep the profit as before is increasing prices. In addition other costs might increase at the same  time even more than the present tariffs (due the the very special situation presently, esp the inflation), so the retail price could be hit by a higher hike than 10%, however higher prices will reduce the number of cameras been sold, so retailers in the US will probably be careful. The other effect might be caused by the loss of the dollar‘s value resulting in a bad exchange rate also driving import prices. Your guess of 35% less than retail is a myth and far away from been realistic, the retailer might be happy if it is over 10%😃

Wrong!,,,

 

tarifs apply to importer only!

if retail stores purchased directly from Leica  Germany there would only be a 10% tarif on their cost. They do not. They purchase from an importer who pays the tariffs. 
That importer marks up the price and sells it to a store who then marks up that price again.

the tariff is only paid by the importer!

So assume an importer sells what he pays $100 for to a store for $125 and the store also then adds $25 to the price giving a retail price of $150. If profit margins remain after a 10% tarif is paid by importer then the price to the consumer would be $171.85 not $165. The Leica factor that kicks in is they set the retail price and that complicates it greatly . Needless to say everyone in the retail food chain should love tariffs as they make more money. 
 

I don’t know where you think you learned how retail pricing works but it is incorrect but maybe the world changed since I last worked at a Leica dealer!

If you really think the tarif on German Leica will reduce Leica sales in USA I don’t think you ever identified the average Leica owner! 

[250swb]

LOL @kiwidad and the importer passes the tariff costs over to the consumer, so who pays....the consumer.

And to make it even worse it's now possible with the UK trade deal to import a Jaguar from the UK cheaper than it is to import a Chevrolet from Mexico. You've got to laugh.

Leica products have always been on back order because they don't have enough customers in the USA to stock load, so there will be a lot of things, and especially batteries made in China, that are coming to bite due to tariffs. Nobody other than the consumer is going to hoover up these extra costs, and if the consumer doesn't like it it's time for Leica to leave the USA and re-centre it's northern 'American' operations in Canada, and rely on Canada being a stable trading partner.

Edited May 10 by 250swb

[IkarusJohn]

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The implications of the tariffs, if they hold (a big if), will be interesting.

First, what will constitute “Made in Germany”, if that is the measure?  Simplistically, if a shipment comes from Germany will it get hit with a 10% tariff, and one that comes from the PRC get 145%?  Obviously not.  So somewhere in the US someone will decide what is a Chinese product and what is from Germany or Portugal.  The common wisdom seems to be 51% made in Germany to qualify (who will make that assessment?).  Remember, these tariffs only apply to products imported into the US …

For many products (not so much lenses and cameras), it isn’t such a huge deal for a Chinese owned company to move fabrication to another low tariff country and avoid the issue al together, if tariffs are likely ot become a big cost factor.  China was a preferred place of manufacture in that brief period when quality and the cost of fabrication (mostly labour) were attractive.  Not so much now.

So, returning to Leica - you can be confident that they will retain the “Made in Germany” label to ensure “only” 10% tariffs into the US.  Will they absorb some of that cost to buffer US prices?  Or, will US distributors get a lower pre-tariff price to lessen the blow?  Bear in mind that GST/VAT rates vary around the World, yet US retail prices aren’t 20% lower than in Europe.  Similarly, GST in Australia is 10% but their prices are significantly higher than elsewhere.

Short answer, US prices aren’t very unlikely to just go up 10% as a lot more is going on.  Leica’s pricing strategy seems to be to price a new product at or slightly lower than the preceding product.  Prospective buyers say “Hmm, not as bad as I thought it would be”; but then those prices start to go up, and up …

I don’t think the punitive tariffs will hold.  It’s just a predictable bullying negotiating tactic.  What will happen is that US buyers of all imported products will go up, and will stay up.  There will be an initial surge in inflation, then it will settle and the US will just be a high(er) priced economy.  That will drive other markets to increase.  I sorely doubt that any significant manufacturing will move to the US - those manufacturers will just expand into other markets.

[kiwidad]

12 minutes ago, IkarusJohn said:

The implications of the tariffs, if they hold (a big if), will be interesting.

First, what will constitute “Made in Germany”, if that is the measure?  Simplistically, if a shipment comes from Germany will it get hit with a 10% tariff, and one that comes from the PRC get 145%?  Obviously not.  So somewhere in the US someone will decide what is a Chinese product and what is from Germany or Portugal.  The common wisdom seems to be 51% made in Germany to qualify (who will make that assessment?).  Remember, these tariffs only apply to products imported into the US …

For many products (not so much lenses and cameras), it isn’t such a huge deal for a Chinese owned company to move fabrication to another low tariff country and avoid the issue al together, if tariffs are likely ot become a big cost factor.  China was a preferred place of manufacture in that brief period when quality and the cost of fabrication (mostly labour) were attractive.  Not so much now.

So, returning to Leica - you can be confident that they will retain the “Made in Germany” label to ensure “only” 10% tariffs into the US.  Will they absorb some of that cost to buffer US prices?  Or, will US distributors get a lower pre-tariff price to lessen the blow?  Bear in mind that GST/VAT rates vary around the World, yet US retail prices aren’t 20% lower than in Europe.  Similarly, GST in Australia is 10% but their prices are significantly higher than elsewhere.

Short answer, US prices aren’t very unlikely to just go up 10% as a lot more is going on.  Leica’s pricing strategy seems to be to price a new product at or slightly lower than the preceding product.  Prospective buyers say “Hmm, not as bad as I thought it would be”; but then those prices start to go up, and up …

I don’t think the punitive tariffs will hold.  It’s just a predictable bullying negotiating tactic.  What will happen is that US buyers of all imported products will go up, and will stay up.  There will be an initial surge in inflation, then it will settle and the US will just be a high(er) priced economy.  That will drive other markets to increase.  I sorely doubt that any significant manufacturing will move to the US - those manufacturers will just expand into other markets.

And since the wages in the US have already increased I consider this catch up in management ways

[n8fire]

It’s interesting to see that here in Canada prices have also gone up because essentially the Canadian stock is being imported through the US Leica Entity so we’ve also seen the same relative increase here including the hefty increase on batteries… 530$ CAD for a battery is steep even by Leica standards given they were around 280$ as of April.  Based on conversations with my Local Leica dealer, it seems Leica isn’t interested to adjust their supply chain at this stage.  

What will be interesting to see is if price do go down as some trade deals get made… time will tell.

[emlokto]

7 hours ago, Helge said:

This is basically not understandable 🤪

The price the retailer pays is increased directly by the tariff, means his import is now 10% more expensive. To achieve the same cut as before, he has to raise the final store price by 10% as well. There is nobody between who would subsidize those extra costs, there is nothing that can be reduced in order to achieve the same cut as before, the only way to keep the profit as before is increasing prices. In addition other costs might increase at the same  time even more than the present tariffs (due the the very special situation presently, esp the inflation), so the retail price could be hit by a higher hike than 10%, however higher prices will reduce the number of cameras been sold, so retailers in the US will probably be careful. The other effect might be caused by the loss of the dollar‘s value resulting in a bad exchange rate also driving import prices. Your guess of 35% less than retail is a myth and far away from been realistic, the retailer might be happy if it is over 10%😃

 

10% of $5000 is $500. 

10% of $10,000 is $1000

If the importer pays $5000 for the camera and passes off every penny to the consumer, the sale price goes up $500 (or 5%), not $1000. 

Can the retailer paise the price 10%, and make an extra $500? Absolutely. 

I have no idea what the retailer actually pays, but I bet the Leica store in Germany charges the Leica store in Miami about half the retail value. Maybe the store pays 65% of the list price, I guess? But with luxury items, it's usually a 50% cut. 

Anyway, I have no idea what the specific numbers are, only noting that 10% of an import cost isn't 10% of a list price increase. 

[Helge]

It is funny, to believe that the camera is sold for 65% of the retail price. With technical items like this there is no such cut to make. It is usually in a single digit percentage, maybe low double digit.

And @kiwidad

It doesn’t make the situation easier to have an importer inbetween. The extra costs are just transferred through the chain and end up in the store, at least at the same percentage. Nobody in this chain is interested or probably even able to consume the added 10% and going to make potentially a loss on this deal. At the end the final consumer has to bear those tariffs, which drives the inflation.

[Michael Geschlecht]

Hello Everybody,

Where I am in the USofA Sales Tax is added to the final Retail Price paid & it is paid by the Retail Customer at the time of purchase..

The Shop that sold what was purchased then gathers up the Sales Taxes collected over a given time period & sends them to the Appropriate Authority.

In a situation like that, where the Sales Tax is paid when the item is purchased: The amount of the Tax can be a simple add on cost at the time of purchase. Because the Sales Tax adds no burden to the Shop's costs.

If we use the abbreviations:

Item wholesale cost = 1

Cost of running a Business such as electricity, rent, water, insurance, salaries, etc. + The same costs, etc. for your home at home +  Lunch, etc. for your kids = n

 Sales Tax = T

Retail = R

So, using the above abbreviations:

In many Business situations n is determined by using a fraction of, or a multiple of, 1

So, in the above situation:

1 + n + T = R

Where the Sales Tax is a simple add on Tax  at the point of sale.

Because it adds NO burden to the retail sale cost for the Shop selling the item.

Tariffs are collected as the item crosses the National Border of the Government collecting them. At that point they become part of the Wholesale Cost paid by the Buisness importing the item. Becase they must be paid when the item is at the Border, so that the item can enter the Country.

Which makes them a part of the cost the Shop must pay when the Shop purchases the item  from the Wholesale Supplier.

Using TF for Tariff:

So, now the Wholesale cost has become (1 +TF)

Which makes the retail cost (1 + TF) + (n + %TF) + T

Which is a higher amount than simply adding the Tariff based on a Wholesale Price to the previous Retail Price.

Best Regards,

Michael

Edited May 11 by Michael Geschlecht

[Helge]

The sales tax is always added to the labeled retail price in the US, that is not really related to this thread.

[Michael Geschlecht]

5 minutes ago, Helge said:

The sales tax is always added to the labeled retail price in the US, that is not really related to this thread.

Hello Helge,

I added the system used in some parts of the USofA as a point of clarification because in some other parts of the Planet, some taxing authorities Tax items using different systems than taxing authorities do in some other parts of the Planet.

Best Regards,

Michael

[Helge]

That’s fine but not really relevant here😉

[Michael Geschlecht]

36 minutes ago, Helge said:

That’s fine but not really relevant here😉

Hello Helge,

I thought this would be relevant because this is an International Forum made up of many kinds of well meaning people from all over this Planet who come here to meet other people, to have an enjoyable time & to learn things about photography & all kinds of other things from the wide variety of people with al kinds of backgrounds & all kinds of knowledge, about all kinds of things who read & write on this Forum.

We are all friends here.

1 thing some people do here is to mention things specific to the part of the Planet they are discussing. Even if it might be tangential to the main topic at hand.

So, a person taking part in a Thread about franfurters might mention that in Frankfurt, frankfurters are often sold in pairs along with a piece of bread & some mustard.

And another person might mention that in Copenhagen frankfurters are often also sold in pairs with a piece of bread. But, in Copenhagen they would come with catsup, not mustard.

Tangential to the topic of frankfurters?

Perhaps. Because in some parts of the world frankfurters are sold singly with sauerkraut. Or, singly with nothing at all.

Possibly tangential. But, possibly interesting to some people.

Best Regards,

Michael

Edited May 11 by Michael Geschlecht

[Helge]

@Michael GeschlechtIt is relevant in general, however not really for the question of how tariffs affect retail prices. I understand that you would like to share your knowledge about the specifics of the US sales tax system (a lot different from the system in Germany, where no sales tax exists, only VAT). Maybe you set up a different thread for that, not to get too much away from the actual topic here 😉

Edited May 11 by Helge

[Helge]

vor 6 Stunden schrieb n8fire:

It’s interesting to see that here in Canada prices have also gone up because essentially the Canadian stock is being imported through the US Leica Entity so we’ve also seen the same relative increase here including the hefty increase on batteries… 530$ CAD for a battery is steep even by Leica standards given they were around 280$ as of April.  Based on conversations with my Local Leica dealer, it seems Leica isn’t interested to adjust their supply chain at this stage.  

What will be interesting to see is if price do go down as some trade deals get made… time will tell.

It might be necessary for Canada in more areas (not just the import of expensive cameras) to become independent of the US economy. Leica might overthink their strategy once sales drop in Canada due to this dependency.

Edited May 11 by Helge

[Michael Geschlecht]

58 minutes ago, Helge said:

@Michael GeschlechtIt is relevant in general, however not really for the question of how tariffs affect retail prices. I understand that you would like to share your knowledge about the specifics of the US sales tax system (a lot different from the system in Germany, where no sales tax exists, only VAT). Maybe you set up a different thread for that, not to get too much away from the actual topic here 😉

Hello Helge,

Since Value Aded Tax is a Tax added to certain things being sold: Doesn't that make Value Added Tax a form of a Tax that is, in effect, a Sales Tax?

If you re-read the above Posts under discussion you will notice that my use of a Sales Tax added at the point of Retail Sale was used as an example of how a Tax (A Tariff is a form of a Tax.) might be added: Without adding additional costs beyond the amount of the Tariff itself..

This example might be useful for some people.

If it is not useful, it does not need to be taken into consideration for the rest of the explanation as to why a Tariff paid at the Border adds more to the retail cost than simply adding the Tariff amount alone to the previous retail price.

If you re-read the portion of this Thread that is relevant to the issues we are discussing here, you will notice that: The material that you wrote: Might be material for a separte Thread:  Was initiated & was developed by you.

Best Regards,

Michael

 

Edited May 11 by Michael Geschlecht

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[kiwidad]

5 hours ago, emlokto said:

 

10% of $5000 is $500. 

10% of $10,000 is $1000

If the importer pays $5000 for the camera and passes off every penny to the consumer, the sale price goes up $500 (or 5%), not $1000. 

Can the retailer paise the price 10%, and make an extra $500? Absolutely. 

I have no idea what the retailer actually pays, but I bet the Leica store in Germany charges the Leica store in Miami about half the retail value. Maybe the store pays 65% of the list price, I guess? But with luxury items, it's usually a 50% cut. 

Anyway, I have no idea what the specific numbers are, only noting that 10% of an import cost isn't 10% of a list price increase. 

I believe all Leica product comes thru a us importer and then goes to the Leica stores.