[Leica] Leica prices

[douglas.sharp at gmx.de (Douglas Sharp)]

Larry,

I agree with your breakdown of why Leica is so expensive almost 
completely, but Leica is also a victim of the irrationality of Leica 
customers.

Any costs cut by relocation of Leica manufacturing to other countries 
would destroy the established trust of their customers (as it did in the 
case of Portugal, and even to some extent with Canada and would make the 
Leica lose its charisma.

Leica is unfortunately in the position that their key unique selling 
proposition is "Quality Made in Germany" and this drives their market, 
particularly the "in Germany" part of it.

But Leica can do nothing to change this without losing the core of what 
Leica has come to mean.


At the base of it all, the main cost factor of any product manufactured 
in Germany is basic and ancillary labour costs.

This is also the main reason why many German companies are relocating 
their production facilities to the countries of eastern Europe. Which 
Leica will not do, and therefore remains a cost-intensive company and 
has to pass this on to their customers.

In addition to a fair wage, employers have to pay 50% of the 
employees?health insurance premiums, unemployment contributions, social 
security, insurance, pension contributions and a few other bits and 
pieces that make an employee who is taking home a pre-tax wage of, let's 
say 2000 euros, into a cost factor for the company of around 3500 euros 
per month.

Cutting the workforce is often more expensive than putting people on 
short hours (the state pays a contribution for each employee when this 
happens) as severance payment compensation is high, particularly for 
people with over 10 years service, and companies are bound over to pay 
for courses designed to get redundant employees back into other jobs 
(and to teach them how to write good job applications). Add to this that 
there are laws governing the number of months notice (dependent on years 
of service) that an employer has to give staff being laid off and that 
each month commands a high price for the employees agreement to leave 
when personnel cuts have to be immediate, you can see that employers are 
pretty much between a rock and a hard place.

The company is simply boxed in by its own history and heritage.

Cheers
Douglas


On 09.03.2010 18:35, Lawrence Zeitlin wrote (in part):
> So why is the M9 and its associate lenses so expensive. Don't give me any
> bullshit about the relative ratio of the Euro to the dollar. Or the 
> increase
> in costs of optical glass. The material costs of a Leica are trivial
> compared to the sales price. Electronics are supplied by various vendors 
> and
> there is a ready sully of silicon foundries. For most technical industries,
> labor costs are 85% of manufacturing costs and labor cost track the 
> consumer
> price index quite well.
>
> I'm sure that no one on the LUG will claim that the M8 and M9 are superior
> mechanically to the M3, in fact just the opposite. Once a lens design is
> established and the glass grinding techniques worked out, the manufacturing
> process of a modern lens and older Summicrons are nearly identical.
> Aspherics are generally molded, by the way, not ground. I'm sure that not
> even Leica will claim that you get three times the picture quality from a
> $3000 lens compared to a $1000 lens. In fact only marginal improvements, if
> that, have been reliably demonstrated over the picture quality for far less
> expensive Nikon lenses.
>
> So we must conclude that Leica pricing is market driven and has
> comparatively little to do with actual manufacturing costs. Just as DeBeers
> diamonds would sell for a fraction of their price if the market was
> uncontrolled, Leica prices are inflated because the company has decided to
> market them as luxury goods. The professional market for Leicas, except
> possibly for LUG members, is so small as to be inconsequential. But get
> Leicas into the hands of rich and powerful, or celebrities, and you have a
> viable "must have" ego boosting item.
>
> Comparative picture quality be damned, "It costs more but I'm worth it."
>
>
> Now I feel better. But I won't be buying any new Leicas.
>
> Larry Z
>
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