[LRflex] Re: New, lower cost lenses, from Leica!

  • From: David Young <telyt@xxxxxxxxx>
  • To: leicareflex@xxxxxxxxxxxxx
  • Date: Sun, 12 Aug 2007 10:06:17 -0700

At 12/08/2007, you wrote:

It is NOT about manufacturing costs......it is about price point marketing
and taking a lower GM per lens and competing with used lens prices.

Erwin can be right about the lower manufacturing costs.... but that is NOT
the driver for Leica.



Good  morning, Frank!
You say that with such certainty! And although you are right, to a degree, I disagree that lower manufacturing costs is not a driver.
The essence of any manufacturing concern is to sell products at a price people will buy them, while maintaining sufficient gross margin to cover their costs and make a profit. It does not matter whether you are aiming at the top or the bottom of the market... the basic rule still applies.
I suspect that lowering their manufacturing costs is a huge driver for Leica, because over the last decade (or two), they have not been able to cover their costs! Given what they are currently charging, and realizing that their current gross margins are not making them a profit, lowering their costs is imperative. Certainly, they are hardly in a position to cover their costs by further raising their prices! Yet they realize that lowering quality (as opposed to costs) is not an option, for a German made product will always be in the top price level, and the quality must be there or people will not pay the price.
Leica have been losing money, for years and were technically bankrupt in February of 2005, when the banks cut their lines of credit and they were within 30 days of closing. True, Hermes bought them, but did nothing to cure the underlying problems, within Leica.
Under Herr Andreas Kaufmann (Leica's new owner) and Steven Lee (the new CEO) things are changing ... and, I think, for the better.
Leica have apparently invested in some new machinery. More, I know, is on the way. Exactly what they have bought, I do not know ... though I suspect a lot of CNC stuff, which makes it much easier to produce high precision, machined parts, faster and at lower cost, while maintaining or even improving tolerances. Having seen their old stuff, they are easily 30 years behind the times... the new stuff is badly needed! Such new machinery and, perhaps, new techniques, should make it possible to produce lenses of the same, high quality, while lowering costs.
Leica are also investing, heavily, in new designs. In terms of optical quality, it *is* much easier to design a very good lens, which can be built at a much lower cost (no floating elements, no exotic glass), if the maximum aperture is reduced, which Leica have done with the new Summarit line. As well, they have designed the lenses with some commonality of parts, so that the production runs can be longer and, at least, basic economies of scale can be achieved. Both the 35 & 50 and the 75 & 90 pairs share some parts.
As for the new Summarit's themselves, only time will tell if they live up to traditional Leica standards. But, I suspect that they will. The big fear, then, is that the new Summarit's will steal sales from the Summicrons. But, if Leica can sell a Summicron for E2250 and a Summarit for E1250, and make, say, 200 Euros on each one ... it does not matter. True, sales will decline, but profits will stay the same, or even increase - as more people will be able to afford the new lenses. Those who truly "need" the f2 lenses will still buy them!
Certainly, it will be interesting to watch these new designs play out, over the coming months! 

Cheers!
---

David Young,
Logan Lake, CANADA

Wildlife Photographs: http://www.telyt.com/
Personal Web-pages: http://www3.telus.net/~telyt
Stock Photography at: http://tinyurl.com/2amll4

------
Unsubscribe or change to/from Digest Mode at:
   http://www3.telus.net/~telyt/lrflex.htm
Archives are at:
   //www.freelists.org/archives/leicareflex/

Other related posts:

  1. Home
  2. leicareflex
  3. Archive
  4. 08-2007