D800 discount based on 20% devaluation in yen since announcement?

dave6670

Any thoughts on the likelihood of a bigger discount based on the fact that the yen has lost about 20% of its value against the US$ since its announcement about last February?

Symphotic

Currently the selling price at BandH and the selling price at Yodobashi (USD and JYE respectively) is almost exactly the same. Given there is a 5% consumption tax on the JYE price which you could get refunded if you export the camera, the Japanese price is actually less. So if Nikon USA does not discount a little more, you can expect to see more gray market D800s hit the streets. A quick internet search will find some substantially lower priced D800s with no US warranty...

TaoTeJared

Unfortunately that is not how pricing works on a micro level.

In general the YEN was valued too high as the Japanese decided not to print more $ like the rest of the world did to fend off other countries banking failures. Japanese companies tried to keep prices low so people would purchase goods even though they lost some of the margin. That is one small part in Nikon's (and many other companies) losses (under-performance) for it's last fiscal quarter. The large under performance on expected margins, and in general of many Japanese tech companies is what is finely prompting their government to address their currency valuation.

The prices are coming down a bit more due that it has now been a year since it's release - which has been normal. Usually Nikon's camera prices drop about 10% in the first year of release, and about 5% each year there after.

Ade

Japan has been "printing more money" like the rest of the world. In fact, Japan has had an extra incentive to print more money -- and lots of it -- due to deflation. Hence the Bank of Japan embarked on its "Comprehensive Monetary Easing" (CME) policy starting in late 2010 to increase the money supply through asset purchases ("quantitative easing", which the Japanese practically invented).

Then in 2011 the earthquake and tsunami hit, and the BoJ decided to double their asset purchase program to immediately weaken the Yen again and stimulate the economy. The BoJ then eased monetary policy five times (!) in 2012, including twice in two months in the Fall of 2012.

However, twin concerns over sovereign debt in the Eurozone and the then-looming "fiscal cliff" in the US meant that for investors, the Yen was comparatively a "safe haven" currency. The low (or negative) inflation also made the Yen attractive. As a result, Yen became the preferred currency. In essence, Yen was being bought at a faster rate than Japan can "print" the money.

Now with the fiscal cliff deal behind us and Japan's new Prime Minister's plan to weaken the Yen to maximize the labor market, the Yen is plunging back downwards (at least until the G20 meetings this weekend).

What does it mean for Nikon prices? Well, Yen exchange rate aside, Nikon cameras are still subject to supply vs. demand. There is good evidence that Nikon (as well as other camera makers) has excess supply. But instead of simply slashing prices, Nikon might address the problem by cutting production, then offering rebates (bundles) to take out the short-term excess while attracting new-to-Nikon customers.

While the falling Yen gives extra room for Nikon to be agressive with pricing, they also don't want to get caught in a bad spot if the Yen strengthens again (as it did today). The money market is volatile and if the Yen falls too far, other countries will start to intervene by potentially devaluing their own currencies vs. the Yen.

TaoTeJared

Ade did a good job in giving more detail than I - Nice job Ade!

World monetary policies aside, companies plan on small sways in currency valuations, and as Ade pointed to, much of the devaluation has come within the last year due to the rest of the world's problems. One thing to keep in mind though, unlike the stock market, currency and monetary policy is not as volatile, and are announced prior to happening. (Granted these days not as early as it once was) but it still is fairly predictable to see where the value will be (in the ballpark for company predictions) in the near future (6-12months).

Public companies build that into their fiscal reporting and the markets react, which then can lead to pushing or holding on margins. You won't see a company purposely "ease" on margins and lower prices. You will see the bundling of high margin items with lower margin items at a discounted price instead of that. That way the average margin is retained. Nikon did to a ton of that at the end of last year and extended it through the end of their reporting period. Bundles are about the best we will see I guessing.

dave6670

With regard to Ade's comment about getting caught in a bad spot if the Yen strengthens, why could they not simply offer limited-time discounted prices as they have recently? ($200 on D800, for example, through February) I appreciate the historical observation by Tao that Nikon tends to lower prices by about 10% after one year and 5%/year thereafter.

Unfortunately for consumers (but fortunately for vendors, Nikon no longer allows discounting by vendors for most products, so everyone has the same price for the US-version D800. On the other hand, B&H and Adorama throw in some other stuff "free", so that's a form of discount I suppose if you find the"stuff" useful.

TaoTeJared

The pricing actually works better for consumers in the long run. I do wish they would keep track of my pocket book when I need them too as well

spraynpray

Companies often have pricing agreements in place to share wild swings in exchange so no one loses big time. A weak yen doesn't necessarily mean that Nikon USA is pocketing all of the gain.

Ade

@dave6670: Yes, that's why I mentioned rebates. For short-term imbalances it's easier to directly offer (limited-time) rebates rather than changing the MSRP down and then back up again. That's especially true when the imbalances might be geographic because some local economies might be doing better than others.

More permanent price reductions can be introduced with a longer-term view.