The way that most electronics manufacturers manage their distribution is to set a discount structure to their wholesalers/distributors based on the recommended selling prices in a particular region. When I say 'region', this can encompass an entire continent (or two) in the case of a global brand.
So, if a product has a RSP of £1000 in the EMEA marketplace (Europe, Middle East & Africa) then the wholesale discounts can be of the order of 40%-50% off the RSP. Note that this does NOT include any countries specific VAT regime so the RSP is exclusive of VAT. Furthermore, these discounts are usually based on order quantity.
Lets take something like a Canon 7D with an RSP of say £1000 (ex-vat) which costs the wholesale market anything between £500-£600 per piece. This is then sold from wholesale to the retail market at prices ranging from 20%-40% off the RSP. Once again, quantity discounts will apply.
Therefore, our £1000 (ex-vat) product has cost the retailer something between £600-£800 per piece to buy-in. They must then decide to sell it at the RSP (not much chance of a straight sale), or to discount it to a level which is competitive in their marketplace. The big-boys who can achieve the largest purchase/sales volume will have more room to manoeuvre than the small independent shop, but at the same time, they have significantly larger overheads. So, when someone like Jessops offer £200 off, they may still be making the same profit as the small shop selling the same product without any discount at all. It's not a level playing field.
There is another aspect to pricing which I have not covered and that is the 'over-rider'. An element of additional discount applied retrospectively when a pre-determined sales target has been met over a defined period. In other words, a retailer can perhaps get 30% discount off the RSP when purchasing throughout the year, but if they reach an annual target, they will get another 5% back from the supplier at the end of the year. This is why some products can be sold at an apparent 'loss', if that single sale means that they will reach their annual target to gain back 5% of their annual sales volume. In practice however, what typically happens is that the retailer will purchase the stock regardless to achieve their target and then stack em high in the January sales.
Note that in all the above processes, there is no accounting for VAT which is additional to the cost of the product at the point of sale only and is effectively paid only by the buyer from the general public. VAT rates differ from country to country, hence a retail product can be cheaper in Germany than in the UK, whilst dearer in Belgium. The wholesale costs however haven't changed and it is only the respective governments who are netting different amounts.
Finally, the RSP in Asia may well be lower than in EMEA for whatever reason (including a perceived difference due to currency fluctuations.) Quite often, the ex-works price (from the factory) will be priced universally in an arbitrary currency like the US Dollar ($). A Japanese global manufacturer (eg Sony) will probably sell it's wares in $ despite the fact that it's home currency is the Yen. I don't know if the same goes for Canon/Nikon who may well use only Yen. If the pound is poor against the dollar (or Yen), then the cost to the UK wholesaler effectively goes up which can appear to mean that the Asia market is paying less for the same thing.
So in summary, there are very few, if any, UK retailers who are really 'coining it' here. The facts are:
- The (UK) government is always guaranteed it's (20%) margin, even if the retailer is just breaking even.
- It is impossible to compare like with like when you are dealing with the same product across international borders.
- You can't include the VAT element when comparing product costs with sellers outside of the UK.
Sorry if I've wasted five minutes of your life in reading this. You are quite welcome to continue to bash the UK retail industry and believe that they are the demons of hell who are stealing from you, but I can assure you that they are not. I've been an independent retailer with a £9M turnover and I'd never, ever, ever go back to that again. Some years, my basic counter staff were making a lot more than I was!
because I don't want my only insight into how much my products are being sold for based on the number of product failures? Yeah, that makes sense.
