List of Companies owned by JIP: interesting...

Started Aug 2, 2020 | Discussions thread
Sergey_Green
Sergey_Green Forum Pro • Posts: 12,053
Re: Payback or “just in time”?
1

Tom Caldwell wrote:

justmeMN wrote:

Gnine wrote:

Why does everyone equate success with market share?

Because the only way to get high profitability with low market share is to be a high margin luxury brand? Leica is the only camera company I can think of that qualifies as a luxury brand.

Sigma happily makes low volume camera bodies. Ricoh on its own account and via Pentax keep a foot in the door of the camera body market. Presumably they are either minor profit centres or their managers are mad.

”The only way to make cameras profitably” is to make them and sell them for more than the cost of production.

R&D?

Two main models - high volume semi production line made into stock and the hope that the stock can be cleared before the profit margin runs out. Typically what percentage of production needs to be sold before the cost of the entire production run is covered. The payback principle. Big risk, but can be very profitable for popular product.

The production line only needs to be set up and collated with parts and trained staff just once.

Typically launched at a higher price with price reductions until the market takes off. Too many price reductions and the batch cost is not covered. No profit and either fire sale or pulp the remainder.

It would be interesting to know what the industry uses as a rule of thumb “payback %” - for example (say) 60% which would mean that the entire cost of production would be covered by profit by the time that 60% of the product run was sold. This would mean that the other 40% could be sold at any price and that collective amount would be the profit. However if there are steep discounts before payback than the payback percentage needed would need to be extended and at (say) maybe 80+% there might be slim pickings indeed.

The other is small batches at more even pricing. Don’t make another batch until the previous batch is nearly sold out. Don’t risk huge dead stocks, and every batch is profitable. The just in time principle. Not as profitable as the big numbers, but more flexibility and less chance of being stuck with a shed full of unsaleable stock. Which really is the biggest issue.

The other variation is bespoke - almost hand made. But this would be truly low volume and need “luxury brand” pricing.

So you are saying a financial services company that has no expertise in the camera industry can happily compete with multinational imaging and electronics company (Ricoh) and perhaps even another Japanese company that manufactures cameras, lenses, flashes, accessories (Sigma)? In today's times. If saysing so only made it so.

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- sergey

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