Wrong Expectations
When it became obvious the recession was upon us, I know many photographers were expecting the prices of cameras and lenses to fall. This was a simple error in expectations, they were applying the Department Store Bad Christmas concept inaccurately. The Department Store Bad Christmas concept is 1) Store buys all their Christmas stock, 2) Christmas sales are bad so they’re left with lots of stock which they mark down drastically and sell. This idea didn’t apply to lenses for a couple of reasons. First, department store merchandise has a high markup (50%) so drastic markdowns are possible. Second, department store goods go out of style in a few months so selling at a loss is better than never selling at all. Camera lenses don’t have high markups, and a good lens now will still be a good lens in 6 months, so holding on to it is often better financially than selling at a loss. Plus its often possible for a camera retailer to return unsold lenses to the manufacturer for credit.
The Dollar versus the Yen
The party line for most of the price increases has been that the buying power of the dollar has weakened significantly against the yen. This is true, the dollar dropped from 110 yen in August, 2008 to 90 yen in January, 2009. On the other hand, the dollar has rebounded to 100 yen by March, 2009. When you consider that most multinational companies hedge currency pretty effectively the change doesn’t seem enough to justify the price increases, but I’m sure it does contribute to them to some degree. Or at least justifies them to some degree. The Euro has had a slightly greater loss against the yen than the dollar and European prices seem to have increased more than U. S. prices, so maybe there is something to it. But Japanese prices have increased too, so maybe not all that much.
Manufacturer’s Cuts
Say what you want about their R & D and quality control departments, but all of the SLR manufacturers are huge multinational corporations with decent business sense. They knew a worldwide recession was on the way and took action fairly early. Nikon laid off 10% of their manufacturing force in November 2008. Canon laid off 1,200 Japanese workers and cut input from its suppliers in December 2008. Sony has laid off many thousands of workers, although its impossible to find how many were in their imaging division. Canon also delayed opening a new manufacturing plant and numerous reports say that all the camera manufacturers have cut orders from their suppliers. So there’s no question the manufacturers have consciously cut production.
One can debate whether the manufacturers planned to create a shortage which would raise prices, or whether they overreacted and cut production more than was warranted. Everyone understands that you can sell more items at a lower profit, or fewer items at a higher profit. Businesses spend a lot of time projecting (often inaccurately) the ‘sweet spot’ of price where total profit is maximized. Whether the current shortages were a plan to raise prices, or a miscalculation of how much to cut production makes for an interesting discussion devoid of facts. Either theory is plausible and no one outside of their boardroom knows the answer. I suspect many don’t know for sure inside the boardroom either. It also doesn’t matter much, the deed has been done. Production has decreased more than demand, and therefore prices can be raised.
