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Exhange rate effects flowing through

December 2, 2010: With the Australian dollar approaching and occasionally passing parity with the greenback, there is anticipation in some quarters that Australian retailers will see the local currency’s strength reflected in lower wholesale prices for cameras and other photo equipment.

JB HiFi’s new CEO, Terry Smart was quoted in late October as saying he expected lower prices resulting from the stronger Australian dollar should flow through from suppliers in late November at the earliest.

‘A lot of those [Christmas] items have the potential to become cheaper, and therefore we should be able to benefit on the volume of that,’ he said.

The issue of high local pricing has been highlighted recently via the debate on GST-free sales by online grey marketers. Disturbingly, much of the online comment from consumers has identified local retailers as overcharging, when insiders know only too well that this is not the case.

We asked some leading local camera distributor representatives whether there was any room to move in pricing structures in the short term.

‘Canon Australia continually reviews its pricing in order to ensure that we’re positioned well against local competitors, and with recognition that we are now operating in a complex global market,’ said Darren Ryan, general manager, Consumer Marketing, Canon Australia (pictured left).

‘There are many factors that influence price and exchange rates are just one element. Recently we’ve taken price action on certain lenses and DSLR models, including the EOS 60D in all kit configurations and will continue to monitor prices and act accordingly.’

He made the point that there has been some depreciation of the Australian dollar versus the Japanese yen in recent times.

‘This is a fact that may have been lost amid the highly visible appreciation of our currency versus the US dollar. It is also important to note that, while we’re aware of competing in a global market, Canon Australia has ensured consistent pricing for local consumers as evidenced by the few price rises that have taken place in the past despite relative weakness of the Australian dollar.’

The depreciation Canon refers to has been fairly modest, at least over the last four months: Since July the dollar has moved from a low of 73 yen to a high of 82 yen in early November, sitting at a fairly healthy 81 yen today.

Canon said its stock levels in the lead up to Christmas were reasonably healthy.

‘We don’t see any particular supply issues. Stocks are tight for certain popular models based on growth in our market, but we expect to receive everything we’ve ordered and finish the year strongly.’

Olympus Imaging managing director, Marc Radatt said the pricing issue was more complex than doing a simple currency conversion.

‘There is always some differential, but it needs to be at an acceptable level,’ he said.

If the market changes significantly, he said, Olympus Australia goes back to Tokyo to argue its case and try to renegotiate local pricing.

He also pointed out that Olympus also uses the yen as its base currency, and prices are worked out on an exchange rate which is fixed internally over a six-month period.

This has not proven as issue with camera models changing every six months or so, but may become more challenging in a maturing market with models having a longer life on retailers’ shelves during periods of volatile currency exchange.

He conceded that the local house needed to be competitive with other parts of the world, but also noted that the cost of trade seemed to be higher in Australia due to economies of scale and other factors.

‘It does cost more to trade in Australia than in other parts of the world,’ he said. ‘I’ve worked in South Africa and the UK and feel that trading terms are higher here. I left the UK six years ago so it could have changed, but I’ve also been told that by Tokyo.

He said the rebate structure and supplier co-op advertising ‘eats up margin’ for wholesalers.

He also noted that rapid price drops for cameras can be destabilising as consumers who purchased before a price reduction can feel they have been ripped off.

In regards stock levels, Raddatt said Olympus had been cautious in forward ordering ‘given the conditions earlier this year’ but was comfortable with its ability to supply retailers leading up to Christmas.

Rather than discounting, Olympus was focussing on retailer bundles, and a $150 cashback offer on its PEN interchangeable cameras.

Stuart Pickerskill, general manager, Digital Camera, Tasco Sales, said that as new stock arrives it is paid for at the exchange rate a that time, and this was reflected in prices passed on to retailers.

He noted that the current situation was a lot better than in 2008, when the Australian dollar was at low levels against both the US dollar and the yen.

He said Tasco intended to ‘put out some specials for Christmas’.

Competition from the grey market wasn’t such an issue for Ricoh, as the brand wasn’t marketed intensively in the US these days, and that was where much of the grey activity was coming from.

‘It [the grey market] is not as big a deal for us as other brands,’he said.

He noted there there was also some activity out of Hong Kong, but more focussed on relatively big ticket items. With most Ricoh models around the $500 mark, there was less incentive for consumers to go beyond the local marketplace.

Adeal’s Gary Pertot said that they had passed on significant price reductions on the Leica range about three weeks ago. For example, the M9 was reduced by 12 percent, or around $800 to the dealer.

Peter Michael, managing director, Michaels CVD, said there had been a steady flow of ‘Price Repositoning’ notices from suppliers recently, especially with high-demand models, mentioning Sony NEX and A390, Nikon Coolpix and Panasonic models as having been ‘repositoned’ in the past few weeks.

He said that due to the highly competitive nature of the business, and the fact that some competitors operated on price alone, the lower pricing delivered no extra margin to retailers, but rather the same margin on a lower price point.

He argued that a high cost of doing business in Australia wasn’t the main reason local prices were relatively high.

‘Possibly the core reason is international price variations,’ he said.

That is, local Australian distributors are charged more by their parent companies.

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