And if a particular industry were to attempt to be pure, not offering any discounts for volume, it would end up following the model of Harvard game theory. Game theory says that there is more incentive to "cheat" than there is to not cheat, and in fact, there are disincentives to not cheating. If you have four businesses who all agree to not lower their price, given enough pressure one of those businesses will cheat and lower their price. The remaining three will lose sales to the one that does cheat. Thus, the real incentive is to be the first one to break the agreement and grab market share.
Market share is a good thing, is it not? Greater market share means greater financial resources to dominate the market with a broader selection of product. Market share is the golden goose. And one way to grab it is to incentivize large buyers to buy your product.
Canon is pretty good at this. They compete fiercely with the big buyers. With smaller buyers, they know the small guys need their product too because of its name recognition, so they're not nearly as forthcoming with the discounts. Honestly, Pentax provides better incentives and pricing to smaller buyers, IMHO. And was in a position to know this sort of thing up until about five years ago. You might say that Pentax cares too much about the little guy, and has remained too pure. The result has been that they're getting whomped in market share by C and N.
One of the reasons I own Pentax is because of the relationship I had as a buyer with the Pentax company. What I mean is they were the ones who really stepped forward and supported the small dealers (I bought for 14 stores, which by todays standard is a small chain). They serviced our account with diligence and care. How could I not like this company? So I bought Pentax for myself too. At PMA, Canon barely even had time to meet with us (though admittedly the rep was in my office monthly). At PMA, Pentax made us feel like it was our show.
But I am certain that if I had been buying for a big box retailer, Canon would have fallen all over themselves to support me, and Pentax wouldn't have been able to offer much more than they were already giving.
William Robb wrote:
----- Original Message ----- From: "Kostas Kavoussanakis"
Subject: Re: Apples and Oranges (was Re: Why and How I switched to Canon (for those who care) long)
Surely selling cameras as loss leaders was a bad idea that had nothing to do with the customer. No?
Yup. As I said in the post, it ruined the new camera market from a profitability standpoint. The boxes were already in on it, and were selling at or below our cost anyway, and customers have this weird idea that the best price is the one to buy at, without looking at the long term consequences.
The real problem, from my perspective now is the volume rebate programs and sliding cost price scales based on volume purchasing.
This allowed high volume sellers who could afford very low margins, and gave little or no service, either before or after the sale (I was competing head to head with a large grocery store chain for SLR sales) to completely undermine the ability of the smaller stores to compete on price.
I think if the manufacturers themselves hand't been such whores, things would have worked out differently, and real camera stores might have stood a chance.
Canon was, I believe, the worst of the lot with bribing the big players with rebates and tiered pricing based on volume sales.
Ultimately though, when the boxes got involved in photo finishing in a big way, the fate of the ndependant lab/store was pretty much sealed.
William Robb
