What is typical markup or profit for selling camera equipment?

<p>I wonder if anyone reliably knows what the average markup is on, say, a new camera or lens at either a brick and

mortar store, or on line? If I go to Joe's Camera Store and buy a new Canon or Nikon for $1,000, what is&nbsp

;Joe's percentage of profit? And if I order it on line from a reputable Joesdotcom, what is their percent of profit? Does sny

one in this forum really kno

w?<br>

Thanks-- Jo

hn<br>

&nb

<p>John, It has been about 30 years since I have worked in the industry on the maker/distributor's side, but I can tell you there is a dealer net price which varies according to brand and type of equipment. So a body might make a normal dealer 10% (I don't know if this is the actual number), but a lens might be 25%, and a battery pack 30%. Then there are super dealers who buy in such bulk that some companies cut special deals, and other makers/distributors who cut deals with dealers willing to take a pallet of soon to be discontinued bodies off their hands. So it would be a difficult question to definitively answer. Are you asking just for curiosity, or some other purpose?</p>

<p>Today, about 10% body or lens. And we have to pay the charge or Paypal fee out of that.</p>

<p>Typically a business needs to make about 1/3rd (33%) profit to stay in business. This is the number taught in most business schools.</p>

<p>Lenses and bodies are around 10-15% when at normal price. Battery pack more around 20% and smaller direct camera accessories about 25%. Memory cards and other stuff like that can be around 40-50% sometimes, thats where stores make a big part of their profit.<br>

Hugo</p>

<p>Specialty retailers with brick stores need about a 40% gross margin to stay open. So, they pay $600 for a product they sell for $1,000. This of course tends to be an average. So, they may sell some items at 10% or 20% and others at 75%. Small accessories tend to be hugely profitable, for example.</p>

<p>Online stores have lower overhead and need less gross margin. HOWEVER, many popular items like say, an Apple Computer, are sold under marketing agreements which set the lowest retail price allowed. These marketing agreements (or franchise agreements) make all authorized sellers use essentially the same price, even though their net prices are different.</p>

<p>Photo equipment is a niche item, not a commodity, so markups and profits are rather high compared to other retail categories like TVs where margins are very slim.</p>

<blockquote>

<p> So, they pay $600 for a product they sell for $1,000. </p>

</blockquote>

<p>This isn't correct. As several other people mention above, the margin on a camera/lens is around 10%. In some cases, it's less than 10%. There is money from MAP programs that flows in for most authorized retailers to make up for that, and the biggest ones (easy to figure out who) make a lot of their money on the float. </p>

<p>As pointed out above, a lot of money comes from accessories and also from service contracts and other service-related activities.</p>

<p>10% sounds about right. I worked at a fairly large photo store in Boston for some time and took advantage of the employee discount a couple of times....The deal was that employees could buy anything in the store at the store's cost, plus a small fee. It turned out that the discount, at least when applied to cameras and lenses, wasn't nearly as great as I had expected it to be.</p>

<p>Yes, 10% mark-up is the relative "norm". I've worked at a large retailer (brick and mortor & large mail/internet order presence) - they honor competitor's ( pronounced "Bee-ENN-Aych") prices. Spiffs are given to employees selling particular bodies, lenses, and accessories (latest and greatest as well as end-of-production run cameras to make way for new intos.) Pros and big spenders are usually treated to the BEST prices (the guys that come in regularly for paper,chems,ink, gear,....). <br />A smaller, local camera shop will naturally have a higher price tag on most similar items.<br />As Hugo and Michael mentioned above, the little things like extra rechargeable batteries, memory cards, "cleaning kits", and P&S consumer cameras have a bit more in mark-up. <br />Bruce : I feel your PayPal pain !</p>

<blockquote>

<p>. . . typical markup or profit . . .</p>

</blockquote>

<p>The markup, (probably <strong>estimated</strong> by price comparisons) by itself, is not necessarily a solid indicator of net profit, as the different store owners will have other, differing, liabilities they need to address. Markup estimated in error would be an indicator of gross profit; that is, the net profit, plus costs for the item, plus a cut of other costs involved. </p>

<p>In my state, Internet orders and storefront retail are taxed at the same rate. "Sales and Use tax." Aside from simple furnishings, there may not be much need for the costs to be much different between the two kinds of stores. Our state adopted this kind of tax law to stabilize tax collection; without it, we would have had a myriad of potential loopholes which might have encouraged numerous tax exemption claims. </p>

<p>In my state alone, there could easily be 50 different rates of tax collection combination. Surely, major suppliers have recognized this and adjusted their figures to account for projected retail costs in a given area. If they didn't, and chose to bill or control prices at flat rates instead, there would be large areas where certain products could not be sold at all; that is, it would create artificial product "deserts" by establishing a scheme that would never be profitable. </p>

<p>While the 10% rule may hold as a guideline, I don't think it'd hold up in specifics. If it did, then we would see a radical change in how camera retailers sold their products. For example, before that retailer gets the markup problem, other businesses were involved and solved their own such problems. Well, would it not stand to reason that the best place to sell a camera would be in the areas with the lowest or fewest such layers of transfer? </p>

<p>Well, guess what? It's not so. Cameras are not warehoused in Vermont and sold in New Hampshire. Instead, they are run through New York.</p>

<p>Well, now look at the prices. Very small variance despite huge changes in how costs might hit different business operators long the supply chain. Meanwhile, there's not much variance (a few points) in commonly advertised prices. So, the end answer is similar, but the pattern or expenditures is very different. </p>

<p>I don't think the idea of an arbitrary, simple markup would hold in an analysis over a wide area. In the US alone it's common for about 10 to 25% of our states to not adopt a named type of taxation. So, in our country, we always have some citizens not affected by a certain pattern of taxation. The entire country is financially heterogeneous. Yet, camera suppliers and large sellers are in megapolis-like cities of New York and Los Angeles. </p>

<p>The only way you're going to get a typical markup is by confining the examined area to a small sample size. Otherwise, you'll never really get around isolating the costs that limit the idea of markup. </p>

<p>Like, if you were using the answer to this question to set criteria like, What city should my camera supplier be in in order for me to prepare a counter offer of ____%, before I know I cut into his markup too far; well, if you tried that with a flat 10%, in some areas it would work and in others it would flunk. </p>

<p>If the answer really was, "10%," and that answer was absolute, then there would be radical variance in observed prices, based on geography and the limiting costs. We don't see that. You can't just get a radically cheaper camera in one city and a much more expensive one in another. There will be some observed price changes, but often not enough to explain a flat percentage based absolute markup. </p>

<p>The costs which limit markup are so radically different that it'd be foolish to think that the markup would be a simple percentage everywhere. </p>

<p>In the US part of the reason why the country remains economically stable is because it is so heterogeneous. At any given time, 10 to 25% of the nation, at a minimum, will remain insulated from some type of cost. Well, start adding in international everything, then how would a simple percentage markup go? Probably less accurate. So, the bigger the sample area, the less accurate the idea of an estimate simple percentage markup will be. By the time the market gets wide enough to envelope a few countries, that whole 10% markup might be a fable.</p>

<p>John - <br>

It doesn't appear that you have any experience with how consumer electronics (and that includes camera) pricing works. It would be better to wait until you had more information before pontificating based on some things you "think." MAP pricing governs consumer electronics pricing, and product margin is low because of that. Money selling a product is made in other ways than product margin and MAP is a key factor, as is the float, as I mentioned above. I've worked in retail and dealt with the big retailers. </p>

<p>Jeff, what I "think" is what anyone can observe about rational costs to business. What you're talking about sounds like a secret agreement designed to make the market an irrational fiction. Those stories are not an observable reality. </p>

<p>MAP pricing doesn't govern commerce. Government does. There are people in that government, and they spoon feed those businesses the rules they will play by. All of those businesses ask permission, "license," their operations from the government. The costs they pay to the group are their taxes, and those taxes are observable. </p>

<p>If we listened to these fictions businessmen handed to us about pricing, we would all believe we lived in a world with no equity, and either no or all liabilities or assets, as the momentary advantage might dictate. </p>

<p>I've worked in government, and I've seen big businesses pay some man $13 a day while charging others exorbitant sums for the fruits of his labor. I have no illusions about the absence of observable truth in some businesses' fantasies of selfish convenience. As a result of those experiences and others, I have a deep seated distrust of any kind of imaginary or irrational inflation of prices brought to me by people in commerce. It's usually just an elaborate lie. </p>

<p>When auditing stable businesses in a rational market, they don't have to spin some tale about profit. Their people can point to it, and boldly identify it as, "This is my cut." They don't need a fiction to hide it.</p>

<p>Lying to everybody is not an acceptable form of profit to everyone. It doesn't count in the rational market of a consumer household. Those are based on equity in and observable liabilities. Profit is observable. It's an observable asset offset by observable liabilities to generate observable equity. </p>

<blockquote>

<p>MAP pricing doesn't govern commerce.</p>

</blockquote>

<p><br />This isn't a discussion of "commerce." It's about retail margins in the consumer electronics industry, that's all. And that's all about MAP. It doesn't need to be turned into the history of civilization, it's a straightforward subject for anyone who has worked in retail or sold into retail. It's not about your feelings on politics or anything else, it's very simple.</p>

<p>Talking endlessly on a topic doesn't make it the right talk. </p>

<p>John O., you are talking about generalities and business theory vs. the actual practice with the camera industry. As the others have mentioned, the hard equipment (cameras, lenses etc) are loss leaders. The profit margins are extremely low while the soft goods (filters, cases, memory cards, etc.) are marked up much more to compensate. The soft goods used to also include film, darkroom supplies, finishing, etc. Since film, darkroom supplies and finishing are drying up, this is a reason why stores are struggling. They can't make up the losses with the hard goods.</p>

<p>MAP programs DO help cover some of the losses, but also payment anticipation and ad co-op helps stores who can take advantage of them.</p>

<p>I worked in a camera store/photo lab in the 1990's. To compete with chains, mega-stores, and internet sales (just starting back then) we couldn't go more than 10%, usually less, and that was for the entry level gear we sold a lot of. Pro gear often sat on the shelf gathering dust until someone needed an emergency replacement, or we marked it down to our cost (we'd often see it marked lower on the internet). Because of Nikon/Canon/Tamron kick-backs to the sales people I usually made more money on lens and camera sales than the store did. The business ran on the lab work. My boss said that while the camera gear made money when they started out, at the time I was working there we barely broke even on it. When I asked why not drop the gear sales she said she felt we were expected to carry it as a photography store.</p>

<p>EDIT: The mark up on camera bags, filters, batteries, frames, etc... was much higher. </p>

<p>Let's be sure we are all using the same definitions. Are we talking about net profit margin or are we talking about markup? Though somewhat related, the two concepts are not the same.</p>

<p>If we are truly talking about markup (i.e. 100%*(R-W)/W), where R is the retail price and W is the wholesale price, and if the markup really is 10%, then I don't see how a camera store can cover their costs, let alone make a profit.</p>

<p>If we are talking about net profit margins (i.e. 100%*(S-C)/S), where S is sales and C is total costs to run the business, then 10% is not too far out of line compared to many businesses.</p>

<p>The difference between the two numbers is that the first only includes the wholesale and retail prices, whereas the second includes those numbers plus the other costs of doing business.</p>

<p>Let's run some numbers. Imagine you run a small store with two employees that stays open for 8 hours per day, five days per week. Now, imagine that these are low-wage employees that cost you $10 per hour for wages and benefits. The employees alone are going to cost you about $40,000 per year. Now, imagine that your rent is $1500 per month, which I think is a pretty low rate. That would amount to another $18,000 per year in cost. We are already up to $58,000 per year in costs, and this is probably a gross underestimate of these costs, and it does not include everything needed to run the business. Let us take a wild guess of $10,000 for other costs. This is probably also an underestimate. This puts us at $68,000 per year to cover costs.</p>

<p>Now, suppose that the owner would like to make a rather modest net profit of $100,000 per year.</p>

<p>Therefore, to cover costs plus profit would take $168,000 per year, keeping in mind that this figure is probably a gross underestimate. The $168,000 would need to be covered by the markup.</p>

<p>Let us assume that the markup was 10%. The would mean that to cover the $168,000 in costs plus profit the store would have to sell $1.68 million (wholesale) in product. The retail sales would be closer to $1.83 million. To make these numbers the store would have to be selling about $70,000 of retail product per day, which would be roughly 100 entry level DSLR cameras per day, or about 12 cameras per hour. This would mean that each employee would need to be selling 6 cameras per hour, or about one camera every ten minutes.</p>

<p>The number of units per hour would be more if they are low priced items, like filters and low priced lenses, and fewer if they were higher priced items such as high end DSLR cameras or high end lenses.</p>

<p>I do not think that these numbers for sales per hour are realistic. At least when I loiter in camera stores I don't see the sales people selling product that fast, and keep in mind that these number are probably gross underestimates of what would actually be required. Therefore, I don't see how a 10% markup could possibly be a realistic number, at least not for a normal retail store.</p>

<blockquote>

<p>This isn't correct. As several other people mention above, the margin on a camera/lens is around 10%. In some cases, it's less than 10%. There is money from MAP programs that flows in for most authorized retailers to make up for that, and the biggest ones (easy to figure out who) make a lot of their money on the float.<br>

As pointed out above, a lot of money comes from accessories and also from service contracts and other service-related activities.</p>

</blockquote>

<p>Jeff,<br>

I am rather certain you are wrong. A retail store might survive a <em>profit</em> of 10%, but a <em>margin</em> of 10% would have then in bankruptcy before they got going. I was a manufacturer of consumer electronics and have sold to stores in specialty fields not unlike cameras. Offering a 10% margin would be laughed at. 40% and 50% is the norm.</p>

<p>To restate what I said: "An item they pay $600 wholesale for, they sell for $1,000." That's a gross margin of 40%. Now FROM THAT MARGIN, they must pay all costs of selling such as rent, electric, labor, taxes, leases, licenses, insurance and what not. What is left over is <em>profit</em>. That <em>profit</em> might well be in the range of 10%, but even that would hardly be worth being in business.</p>

<p>You are suggesting the margin on a camera is 10%. That would be paying $900 for a camera, and selling it for $1000. And somehow then paying for rent, lights, labor, advertising and such out of this 10%? Impossible. And, it's simply not how the business works.</p>

<p>What's left now is to accumulate some factual evidence. I might be able to gather some from the local owner of our photo store. I'll make an attempt.</p>

 

<p>Sorry guys but Jeff is absolutely right. I too have worked in the industry for many years both running a retail outlet and for the camera suppliers (Pentax, Konica and Nikon). Camera mark up here in the UK was also about 10% but to say that this would not allow a business to survive is plainly wrong. Retailers sell other stuff as well! What you are looking for is called margin mix, you try to sell all the other stuff such as filters, flashguns, cases etc where the markup can be 100%. If you are in business you should also not be looking at markup or even margin, these are probably easier to understand but not the true picture, Profit on Return is the best measure, ie how much profit do you make compared to cost not compared to selling price. I can also tell you that some of the really large retailers make more margin purely because they can demand a lower cost price whilst still selling at similar costs to the smaller retailer. I can honestly say that whilst at Nikon I sold cameras to a large retailer where the cost of a promotional sleeve on the carton was the difference between Nikon making a profit or not! To be fair they were buying an initial order of 40,000 units though. As a comparison the perceived POR to survive was about 27% here.</p>

<p>There isn't any point in talking finances. It doesn't matter what a camera store must make to stay in business. That's not how pricing happens with photo gear. To put it another way, if you want to sell Nikons or Canons (for example), you're going to make the margin they give you. That's why successful stores push film, or processing, or seminars, or printers and ink, or brands where the dealer is not allowed to discount. Yes, a successful business needs more than 10% to make ends meet, but cameras is not where they get it.</p>

 

<blockquote>

<p>I am rather certain you are wrong...</p>

</blockquote>

<p>You don't understand how it work. MAP and the float is how the store profit is made. The actual profit margin is very low.</p>

<p>As everyone who has posted here who has first hand experience (including me) has noted, margin on cameras and lenses is quite low.</p>

<p>I think it's rather obvious that there is confusion over the terms. Markup, margin, profit. They are not interchangeable.<br>

Percent Markup = 100*((price-cost)/cost)<br>

Percent Margin = 100*((price-cost)/price)<br>

An item costing $500 selling for $1000 has a <em>markup</em> of 100% and a <em>margin</em> of 50%. So, terms are rather important. As for profit, that calculation has to include all the expenses, taxes, depreciation, interest, and myriad of other outlays, so without a complete financial statement it is rather pointless to speculate.</p>

 

<p>That's not the issue here. The issue is that price maintenance through MAP means low margins and payment on the back end. A side effect of this is that the manufacturer/wholesaler can claim high margins on the product because the rest of the money goes out through the marketing channel.</p>

<blockquote>

<p>That's not the issue here. The issue is that price maintenance through MAP means low margins and payment on the back end. A side effect of this is that the manufacturer/wholesaler can claim high margins on the product because the rest of the money goes out through the marketing channel.</p>

 

</blockquote>

<p>Why don't you give an example then Jeff? Assume a camera that has a retail price of $1,000. And assume I am a store on Main street. Tell me how much I make when I sell that $1,000 camera - when all is said and done including any payouts under any marketing agreement. "Payout on back-end" is nebulous. Net it out.</p>

<p>For clarity, my position is the retailer must make $400 on that $1000 camera or he is soon out of business. So, please provide some detail behind what you are saying Jeff.</p>

<p>The retailer doesn't have to make any profit on the camera if the retailer thinks that he'll also sell a lens or two, a flash and other accessories. Could be as "loss leader" like OJ at the supermarket, with the price margin cut to almost zero to attract visitors to the store (subject to MAP agreements)</p>

<p>Another example. The manufacturer's margin on printers is very small indeed. They sell them cheap in the hope that people will keep buying the $60 ink cartridges. At one time there was a printer (Lexmark I think) which was cheaper than the ink. You saved money if you just bought another printer since it came with the ink cartridges.</p>

<p>I'm not in the business, but my understanding from those who are is that the typical markup on popular cameras is in the 10-20% range. That's markup, not profit.</p>

<p>Auto dealers work on an even smaller markup, often only a few percent. Again they hope to make money on accessories, parts and service</p>