Japanese importers profiteering by exploiting devalued Yen

Started May 17, 2013 | Discussions
ragspix
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Re: Profiteering is a strong word
In reply to bflood, May 19, 2013

bflood wrote:

You are operating on the assumption that all disadvantages of currency value are to be shouldered by the manufacturer, and any benefit from a change in currency value must be forfeited by the manufacturer to the customer, and if this doesn't happen, the manufacturer is cheating the customer.

Aside from your oversimplification of basing everything on only the change of the yen vs the dollar, bear in mind that the change in the yen is a recent phenomenon and if you as CEO of Nikon ordered product prices in the US to be adjusted to reflect the drop, you've be out of a job immediately. A multinational corporation never adjusts prices on short term changes - they will want to wait and see if the currency value remains stable at the new value.  Otherwise, changing prices now followed by a return of the previous currency value forces the company to either lose money on product sales or to RAISE PRICES back to what they were, something no company wants to do.  If you don't believe it, feel free to cite an example of a company that has done just that.

OR.... they maintain their price marks and develop a timed coupon/rebate program.

Your point is good, but the currency mitigation is higher up the hierarchy.it takes all of the divisions of the company into consideration.

Rags

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sunhorse
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Re: Wrong
In reply to Lance B, May 19, 2013

Lance B wrote:

Chad Gladstone wrote:

I don't know how many of you have noticed the near 30% drop in Yen value verses the dollar or Euro over the past year, but the profit generated by the currency devaluation is not exactly being past on to consumers, even with the instant rebates, the street prices of Japanese exports does not comport with the dramatic devaluation is the Yen's currency exchange.  To the contrary, parity in consumer price fails to mirror the near 30% rise in margins realized by the importers (without accounting for the cost of imported resources necessary to engineer and ship the consumer products).  One would expect to see a demonstrable rise in direct imports to counter this trend, but this has not yet occurred.  The bottom line is that the Japanese exports are purchased at margin far above what should be expected and foreign consumers are paying a substantial premium above their trade value because the foreign currency has more buying power.  If Nikon USA or whomever your countries authorized importer is, does not properly reduce their price of their products accordingly, direct importers should surely capitalize on the generous price gouging we are allowing ourselves to be subjected to if this trend continues.  How long are we willing to tolerate such practices?

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Chad Gladstone

How do you know how close to the bone they were selling products before the devaluation of the Yen? I mean, you are really making some huge assumptions here and have no proof whatsoever bandying about these wild accusations about pricing and gouging. For all you know, they could have been selling them close to cost in Yen terms and are now just starting to reap the benefits of the lower Yen. Also, do you have any idea of where and how they move their money around to offset or soften fluctuations in exchange rates, as many multinationals do?

The other thing to remember is that most of the products are not made in Japan these days, some being made offshore in China which is pretty much linked to the US$ and has moved abouit 2% in the last 12 months. Other countries where they are being made have not fallen to the extent the JPY has fallen. Nikon makes much of their product in Thailand and the Thai Baht has only fallen about 6% against the $US in 12 months, so no joy there.

With all this outsourcing, the cost of these outsourced product parts need to be factored into the cost of the total finished product even if they are assembled in Japan as these other countries currencies have all climbed against the Yen.

Lance, the Thai Baht has actually *appreciated* in value against USD over the past 12 months. Just google "THB vs USD".

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Ramesh

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Chad Gladstone
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Re: Profiteering is a strong word
In reply to bflood, May 19, 2013

bflood wrote:

You are operating on the assumption that all disadvantages of currency value are to be shouldered by the manufacturer, and any benefit from a change in currency value must be forfeited by the manufacturer to the customer, and if this doesn't happen, the manufacturer is cheating the customer.

Aside from your oversimplification of basing everything on only the change of the yen vs the dollar, bear in mind that the change in the yen is a recent phenomenon and if you as CEO of Nikon ordered product prices in the US to be adjusted to reflect the drop, you've be out of a job immediately. A multinational corporation never adjusts prices on short term changes - they will want to wait and see if the currency value remains stable at the new value.  Otherwise, changing prices now followed by a return of the previous currency value forces the company to either lose money on product sales or to RAISE PRICES back to what they were, something no company wants to do.  If you don't believe it, feel free to cite an example of a company that has done just that.

Oversimplification aside, I am suggesting the importer, not the manufacturer is potentially realizing gains due to currency fluctuations that are not being passed on to the consumer.  I am neither presupposing that Nikon, the manufacturer, is raising or lowering prices wholesale prices but rather, whomever is importing the Nikon goods and paying with an appreciated foreign currency can do so at a lower relative cost without the manufacturer shouldering any additional risk or reaping any additional benefit.  The run is too short to indicate how the manufacturer will react if the currency remains devalued for a protracted period, but at least in the short run, anyone who purchases wholesale goods with a higher valued foreign currency would (at least in the most simple terms of economics) expect to pay less than they would have prior to the devaluation.  Nikon's strategy to hedge against such speculation is an interesting discussion, but beyond the intention of the original proposition.

I am just not catalyzing the type of discussion that was anticipated because many are transmogrifying the manufacturer (Nikon) into the importer or subsidiary (Nikon USA, or whatever firm is potentially receiving the windfall).  I am not suggesting that Nikon should, would or has a duty to sell their products at any other price than they deem appropriate, nor am I interested in exploring the long term impacts of the devalued Yen.  I am only posing the possibility that somewhere in the supply chain, the currency rate has a demonstrable impact and that impact has not rippled its way back to the foreign, retail consumer.  There is no conspiracy to report.  However, if the Yen continues to remain devalued and imported Nikon goods maintain the same retail prices in countries with higher valued currencies than was the case when Nikon set its wholesale prices, I expect to see a return of grey market imports by enterprising capitalists.  This is just an observation, not an attempted analysis of supply side economics.

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Chad Gladstone

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KewlEugene
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Re: Japanese importers profiteering by exploiting devalued Yen
In reply to Chad Gladstone, May 19, 2013

The Nikkei index is way up since the Japanese are printing yen like crazy to pay off their national debt. Not bad.

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Lance B
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Re: Wrong
In reply to sunhorse, May 19, 2013

sunhorse wrote:

Lance B wrote:

Chad Gladstone wrote:

I don't know how many of you have noticed the near 30% drop in Yen value verses the dollar or Euro over the past year, but the profit generated by the currency devaluation is not exactly being past on to consumers, even with the instant rebates, the street prices of Japanese exports does not comport with the dramatic devaluation is the Yen's currency exchange.  To the contrary, parity in consumer price fails to mirror the near 30% rise in margins realized by the importers (without accounting for the cost of imported resources necessary to engineer and ship the consumer products).  One would expect to see a demonstrable rise in direct imports to counter this trend, but this has not yet occurred.  The bottom line is that the Japanese exports are purchased at margin far above what should be expected and foreign consumers are paying a substantial premium above their trade value because the foreign currency has more buying power.  If Nikon USA or whomever your countries authorized importer is, does not properly reduce their price of their products accordingly, direct importers should surely capitalize on the generous price gouging we are allowing ourselves to be subjected to if this trend continues.  How long are we willing to tolerate such practices?

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Chad Gladstone

How do you know how close to the bone they were selling products before the devaluation of the Yen? I mean, you are really making some huge assumptions here and have no proof whatsoever bandying about these wild accusations about pricing and gouging. For all you know, they could have been selling them close to cost in Yen terms and are now just starting to reap the benefits of the lower Yen. Also, do you have any idea of where and how they move their money around to offset or soften fluctuations in exchange rates, as many multinationals do?

The other thing to remember is that most of the products are not made in Japan these days, some being made offshore in China which is pretty much linked to the US$ and has moved abouit 2% in the last 12 months. Other countries where they are being made have not fallen to the extent the JPY has fallen. Nikon makes much of their product in Thailand and the Thai Baht has only fallen about 6% against the $US in 12 months, so no joy there.

With all this outsourcing, the cost of these outsourced product parts need to be factored into the cost of the total finished product even if they are assembled in Japan as these other countries currencies have all climbed against the Yen.

Lance, the Thai Baht has actually *appreciated* in value against USD over the past 12 months. Just google "THB vs USD".

Sorry, I was reading it the wrong way round.

It just adds more credence to my belief that the outsourcing has had and affect on the cost that the Japanese companies have to deal with.

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Ramesh

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sunhorse
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Re: Wrong
In reply to Lance B, May 19, 2013

Lance B wrote:

Lance, the Thai Baht has actually *appreciated* in value against USD over the past 12 months. Just google "THB vs USD".

Sorry, I was reading it the wrong way round.

It just adds more credence to my belief that the outsourcing has had and affect on the cost that the Japanese companies have to deal with.

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Ramesh

I agree with you. It seems some people don't understand that the Yen being soft has little bearing on the final price of a product made in countries with strengthening currencies. There is another factor in that has an impact as well, at least for products made in Thailand: rising cost of living. Since the beginning of last year, the Thai government increased the minimum wage, first in Bangkok, then in every province. This had a wide ranging effect on the cost of goods, transportation and services.

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Ramesh

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RichRMA
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Re: Japanese importers profiteering by exploiting devalued Yen
In reply to Chad Gladstone, May 19, 2013

In 2008, oil was $140.00/barrel and gasoline in Canada was about $1.40/L.  Now, oil is only $95.00/barrel but gasoline is $1.27/L.  Doesn't matter what the price is at the origin, they will always find a way to keep prices high at the retail level.

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ragspix
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Re: Japanese importers profiteering by exploiting devalued Yen
In reply to RichRMA, May 19, 2013

By jove, I think you've got it...:-D

When interests rate go down, surprisingly - rates to the borrower lag on adjust. loans

But they rise in anticipation of an increase. If they can't do it legally, they will do it illegally (manipulation of the London Interbank Rate)

Welcome to the real world, I agree with the gray market potential

Rags

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bflood
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Re: Profiteering is a strong word
In reply to Chad Gladstone, May 19, 2013

Your point about the gray market is a good one. Nikon USA is a subsidiary of Nikon in Japan, and the pricing structure between the two is no doubt determined by Nikon in Japan. But as you say, if the changing value of the yen offers other importers the opportunity to give customers a substantial price advantage over the official imports, the prices on the gray market hardware may be too good to resist.

Still the actual net change in cost to the importer here isn't as simple as the 30% change in the yen in recent months. Manufacturing in various countries, plus the supply chain delay, makes assessment of the actual change so far very difficult for someone outside the process.  The fact that the yen is 30% lower today has no effect on the manufacturing and price obligations set several months ago for merchandise just arriving now.

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kenwj
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Re: Japanese importers profiteering by exploiting devalued Yen
In reply to Chad Gladstone, May 19, 2013

You will tolerate it forever.  Business is business.  They have no obligation to pass savings along.  They will only drop their price to gain market share like any other rational business.

If the Yen went 30% the other way would you be happy to share the pain and pay 30% more?

You have ridiculous expectations.  You can't have your cake and eat it too.

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Eamon Hickey
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importers are subsidiaries in most cases
In reply to Chad Gladstone, May 20, 2013

Chad Gladstone wrote:

This may definitely be the case.  I an not referring to the Nikon company, only those who imported goods from Nikon and other Japanese manufacturers and purchased those goods with foreign currency.

In every major market in the world, the Nikon importer is a wholly-owned subsidiary of Nikon Japan, and each subsidiary's financial results are merged with the parent corporation's (that's Nikon Corp.) financials. This is what the word "consolidated" means in Nikon's (and any other company's) financial reports: subsidiary financial results are "consolidated" with the parent company. The same is true, with slight variations, for all of the other major camera companies.

So Nikon Inc. (that's Nikon USA) is owned in total by Nikon Corp. (Nikon Japan), and if it makes a profit or loss, those results are shown on Nikon Corp's financial reports.

It's certainly true that Nikon USA is now paying less for the products it buys from its Japanese parent company. And it's also true that Nikon USA might simply pocket that windfall (and then, in effect, "send" it to Nikon Japan since they own the pocket.)

But the standard way of lowering prices to consumers when the yen's value falls is to offer rebates. This is safe because if the yen recovers, which it always has in the past two decades, the rebates can simply be ended.

If, however, Nikon USA becomes convinced that the yen's devaluation will be long lasting, you probably will see some (not all) list prices get reduced because lower prices are more effective than rebates in spurring sales.

Lowering prices is a huge logistical problem, however, because existing stock in the retail sales channel has to be price-protected -- i.e. Nikon USA has to refund the price difference to stores like B&H for every item that B&H bought at the old, higher price and still has in inventory. Very complex and time-consuming process. Because it's so difficult, it's not undertaken unless there's a really strong reason to do it.

Secondly, if the yen turns around and gets stronger again, Nikon USA would just have to raise prices again. That's not logistically difficult, but it has a negative marketing effect.

Those two factors work against straight price reductions and in favor of doing rebates.

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KewlEugene
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Re: importers are subsidiaries in most cases
In reply to Eamon Hickey, May 21, 2013

Make sure it's an instant rebate or you'll be jammed up the sphincter by Nikon.

After 4 years, I still haven't receivedmy Sandisk mail-in rebate for two CF cards.

The 800 number doesn't answer with a human.

I've been cheated and ripped off by Sandisk.

I even stopped by Sandisk in Milpiitas on the way to a chip fab one day and tried to get my money and they said rebates are contracted out.

To be cheated and ripped off by Sandisk is not good.

That's why I use Lexar cards now.

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