D7100?

[amolitor]

The differences are in:

- R&D, as noted. This cost is disproportionately borne by the new high-end gear.
- BoM cost, as noted but not detailed. Bigger sensors, more machined metal parts and less injection molded stuff, more powerful CPUs, more precision optics (pentaprism, viewfinder) etc, etc,
and as you know higher BoMs gets multiplied since you're holding inventory and rejecting parts and so on and so forth, so every $1 in the BoM is several of real cost, and a whole bunch of $ of retail.
- Calibration, there are several optical paths that need to line up perfectly to make this thing work right. Higher priced models have more stringent calibration, which costs more man hours.
- Testing, higher priced models are tested to higher standards, which costs more man hours, and note that rejected units go back in as another cost multiplier.
- probably several other items I have forgotten, it's been a few years since I've built product you can kick.

Sure, actual cost to assemble the thing is trivial. If only the assembly cost was a substantial part of delivering a product like this to the consumer, one would be fully justified in complaining about the price differences!

 

[AaronLLockhart]

Sure, actual cost to assemble the thing is trivial. If only the assembly cost was a substantial part of delivering a product like this to the consumer, one would be fully justified in complaining about the price differences!

This is very true! However, the original point is that any manufacturer has enough markup that making minor changes, (IE: Tight sealed rubber gaskets in all of the joints to waterproof) the unit could be sold at the same exact price it's suggested without those changes, without affecting the company's profitability. I'm not saying they would, just that they ​could.

 

[TonysTouch]

Sure, actual cost to assemble the thing is trivial. If only the assembly cost was a substantial part of delivering a product like this to the consumer, one would be fully justified in complaining about the price differences!

This is very true! However, the original point is that any manufacturer has enough markup that minor changes, (IE: Tight sealed rubber gaskets in all of the joints to waterproof) that the unit could be sold at the same exact price it's suggested without those changes, without affecting the company's profitability. I'm not saying they would, just that they ​could.

Funny, because I remember stating

I dont see why a swirvel screen cant be waterproof.

Sure it could be weather resistant. Hell they could make the camera waterproof. But let's face it, many of these things we are listing are adding $$ to the price tag and may bumb the cost too far to be placed in the prosumer level and then probably not be a 7X00.

I simply stated to begin with that added features like the ones mentioned will bump the price, not whether or not it would mean less profit to the company to keep the same price.

 

[AaronLLockhart]

Sure, actual cost to assemble the thing is trivial. If only the assembly cost was a substantial part of delivering a product like this to the consumer, one would be fully justified in complaining about the price differences!

This is very true! However, the original point is that any manufacturer has enough markup that minor changes, (IE: Tight sealed rubber gaskets in all of the joints to waterproof) that the unit could be sold at the same exact price it's suggested without those changes, without affecting the company's profitability. I'm not saying they would, just that they ​could.

Funny, because I remember stating

I dont see why a swirvel screen cant be waterproof.

Sure it could be weather resistant. Hell they could make the camera waterproof. But let's face it, many of these things we are listing are adding $$ to the price tag and may bumb the cost too far to be placed in the prosumer level and then probably not be a 7X00.

I simply stated to begin with that added features like the ones mentioned will bump the price, not whether or not it would mean less profit to the company to keep the same price.

and i simply asked a question as to whether or not you were implying that the margin were so low that waterproofing would result in a mandatory price change, and here we are.

 

[TonysTouch]

This is very true! However, the original point is that any manufacturer has enough markup that minor changes, (IE: Tight sealed rubber gaskets in all of the joints to waterproof) that the unit could be sold at the same exact price it's suggested without those changes, without affecting the company's profitability. I'm not saying they would, just that they ​could.

Funny, because I remember stating

Sure it could be weather resistant. Hell they could make the camera waterproof. But let's face it, many of these things we are listing are adding $$ to the price tag and may bumb the cost too far to be placed in the prosumer level and then probably not be a 7X00.

I simply stated to begin with that added features like the ones mentioned will bump the price, not whether or not it would mean less profit to the company to keep the same price.

and i simply asked a question as to whether or not you were implying that the margin were so low that waterproofing would result in a mandatory price change, and here we are.

I never implied anything about the mark-up. I only said that if Nikon adds more features they will add a bigger price tag. After that my only real argument was price to make different size sensors.

 

[AaronLLockhart]

I never implied anything about the mark-up. I only said that if Nikon adds more features they will add a bigger price tag. After that my only real argument was price to make different size sensors.

Well, man, this was one hell of a conversation to get to that answer

 

[TonysTouch]

I said it earlier, but apparently not clear enough.

Sure it could be weather resistant. Hell they could make the camera waterproof. But let's face it, many of these things we are listing are adding $$ to the price tag and may bumb the cost too far to be placed in the prosumer level and then probably not be a 7X00.

Are you implying that Nikon's markup on the hardware is not that great? I tend to disagree. I bet 90% of their product line is built for under $1,000.00/ea. from start to MSRP.

We all know that the more features a camera has, the heftier the price.

 

[amolitor]

Margins at the low end are pretty skinny, I bet.

A $700 body+kit lens probably leaves the Canikoungony factory for $300 or so. I haven't a clue what the cost of goods is, but I am having a hard time wrapping my mind around less than $100. These are bespoke chips in there, being built in fairly low numbers (as chips go), and when you start adding up a couple bucks here and a couple bucks there for injection molded bits and pieces it adds up. I dunno what it costs to assemble and test the things. Testing and calibration are gonna be pretty minimal, and you've got enough volume to justify some pretty decent jigs etc, but if you can turn parts into cameras for less than $50 I'm surprised. Add in some packaging, some manuals, a few cables and a this and that I am having a real hard time envisioning this thing costing under $200 just to get a box with a camera inside it onto a pallet.

Now add in your cost of warranty and service for the model (dollars per unit sold), specific marketing campaigns etc etc etc (not including overall branding costs, just the model-specific marketing, but still amortized over all the units sold) and suddenly you're talking maybe 10-20 percent margins, tops. Add 50 cents in worth of rubber in there, and another 20 cents to assemble it, and after you apply all the multipliers suddenly you're not hitting your $699.89 target any more, it's gotta sell for $710 to make the margins work all the way down the distribution chain, and now you're not going to move enough units to justify the business case for the model and the whole thing collapses in your lap.

 

[AaronLLockhart]

Margins at the low end are pretty skinny, I bet.

A $700 body+kit lens probably leaves the Canikoungony factory for $300 or so. I haven't a clue what the cost of goods is, but I am having a hard time wrapping my mind around less than $100. These are bespoke chips in there, being built in fairly low numbers (as chips go), and when you start adding up a couple bucks here and a couple bucks there for injection molded bits and pieces it adds up. I dunno what it costs to assemble and test the things. Testing and calibration are gonna be pretty minimal, and you've got enough volume to justify some pretty decent jigs etc, but if you can turn parts into cameras for less than $50 I'm surprised. Add in some packaging, some manuals, a few cables and a this and that I am having a real hard time envisioning this thing costing under $200 just to get a box with a camera inside it onto a pallet.

Now add in your cost of warranty and service for the model (dollars per unit sold), specific marketing campaigns etc etc etc (not including overall branding costs, just the model-specific marketing, but still amortized over all the units sold) and suddenly you're talking maybe 10-20 percent margins, tops. Add 50 cents in worth of rubber in there, and another 20 cents to assemble it, and after you apply all the multipliers suddenly you're not hitting your $699.89 target any more, it's gotta sell for $710 to make the margins work all the way down the distribution chain, and now you're not going to move enough units to justify the business case for the model and the whole thing collapses in your lap.

that would be true in a situation that you are talking about end user. As the unit goes through a set of hands, it costs more money. If the camera is $700.00 MSRP, that is a price set by the manufacturer. They then sell it to their retailers for wholesale, which is 30% off of that, which would be $490.00. It probably cost them $300.00 to produce that unit (there's no way that these cameras cost more to build than a computer, and that's about what the cost of the average computer for a manufacturer to build), leaving $190.00 profit for the manufacturer out of the gate with retailers. Now, the warranties are an added bonus to beef up that profit margin back up, as they just dropped 30% of it to Best buy when they sold it to them.

On the retailer's side, the purpose of the retailers warranty, such as the one that Best Buy sells you, is done so that they can make a decent margin on the product, because by the time it makes it through their hands, the margin is so diluted (for best buy, as their overhead then becomes involved) that there is little to no money to be made on the hardware, so they have to make it up in the warranty.

So, the margins are probably very thin, but only on the retail end.

 

[amolitor]

I think you might be underestimating the prices these things cost.

There's custom chips in there, and the volumes on those chips are nowhere near what the PC makers are seeing. The assembly is considerably more technical because of the tight packing, AND there are precision mechanical and optical subsystems that have to be dealt with (assembly, testing, calibration, etc) that PCs simply don't have. It's more like cell phones, but worse than them as well because of the precision mechanicals and opticals.

Add to this that at least for the higher end cameras, you're building in batches.

How does it change the economics of your manufacturing plant in this situation:

You can build 20 similar products with overlapping BOMs, but every product has at least a handful of components which are unique to it. Suppose that 5 of those products are low volume, so you can build a year's supply in one week. Now you have to either carry parts inventory, or source batches of parts for each batch. For each batch, you have to re-program the factory, re-train workers on model-specific test and calibration, fool around with inventories (either sourcing or pulling warehoused parts), possibly dig out and reinstall and recalibrate/test a couple of model-specific test jigs. Then you run one or more lines for a week or whatever, then you idle again to re-tool for another model. Now you've got $20M or $100M in built inventory that you have to warehouse and distribute over the next year.

The higher end DSLRs probably have fiddly little bits of injection molded crap in them that have cost 10x as much to carry as inventory as the actual part cost. For every one of those parts, you get to make the choice of maintaining tooling in storage and pulling it out once every N months, when it's time to build a batch, or just build a million parts, scrap the tooling, carry the parts forward, and then scrap 200,000 parts out when the model is finally discontinued. Ditto machined metal parts. Ditto some chips (you hope to share a lot of electronics with other models, but you might also design a nextgen chip for the flagship DSLR, and by the time you push that technology down into the prosumer model you've spun the chip a couple times and integrated more crap onto it, so you still need to carry the first gen chip specifically for the flagship model). What do you do when your flagship is mature and the sensor manufacturer is discontinuing that sensor? You buy too damn many sensors, carry them as inventory, and scrap when the model is discontinued, right?

The flagship DSLR cost, I suspect, is driven at least as much by inventory concerns as by actual parts and build cost.

At the lower end, you're building more of them so you can manage your inventory a lot more JIT-like, AND you've probably streamlined all the tech so your parts counts and parts costs are reduced, but at this point you have to trim margins to sell the thing.