[mtroute]

B&H and Adorama didn't start out big, they grew. They aren't Walmart, Costco, or even Best Buy and yet their pricing in better on a lot of merchandise than these large volume dealers.

Last time I was in Adorama, the retail space in the store was less than my local Ritz. Multiply that by 800 stores and then explain to me again how Adorama offered better prices than Ritz? Even when I had no idea about cameras yet alone B&H or Adorama, I knew about Ritz Camera stores. So how is it that B&H and Adorama are the first places I'll recommend now?



Thank you
Russell

It's all about margin! The amount of revenue generated less the cost's associated with generating that revenue = your profit margin. If cost are high, you have to generate more revenue to offset that. You do that either through volume or price. Ritz has chosen price, Adorama has chosen both volume (internet) and price. But They have significantly lower costs so they can actually sell less at a lower price and still make money

Adorama has what, a single location with the overhead on that one space, yet they sell nationwide over the internet? They can reduce thier margins because the majority of their business is internet/mailorder with generally low overhead.

lets pretend we have access to the P&L for both Adorama and Wolf.

assumptions:

1: never been to Adorama so we will estimate it size at 1500 sgft of retail space( I am sure they have a warehouse but thats probably in Jersey somewhere...)

2: Base rent is $50 per square foot annually (based on chelsea rents on craigslist).

3: NNN (triple nets) Insurance, taxes and maint. per month $1,000

4: $3,500 for employees based on an average of $30k per year salary plus benefits and other admin cost

rent: $6,250
NNN: $1,000
SG&A: $52,500
----------------------
$59,750

Adorama=1 location= $59,750
Ritz=800 locations $47,000,000 (thats $47 million PER MONTH!!!!)

Does ritz sell 800 times the product that Adorama sells Probably not. I would guess that it's probably closer to 500 times so Adorama sells %37 of the product and has .12% (thats 12/100's of a percent!!!) of the cost. Hmmm why does Ritz charge MSRP.....?

[aka]

After I picked up my used k10d, I stopped by wolf down the street for a lens cleaning kit, charger, etc. All they had was a "starter kit" with some little tripod and other BS and a small cleaning kit for ~$7. No separate lens paper, lens pens, or anything. I bought the $7 kit and the first time I went to use the blower, a brass washer fell off it an nearly into my camera body.

Oh, and they didn't have the charger or any used lenses but kindly recommended a place for each. (very nice guys) Some of their business seems to be taking portraits and printing/ matting things but otherwise the place is empty. Many others in the area have closed.

[pxpaulx]

Hrm. Well, I've always found them to be very good about returns. If something goes wrong, they want to make it right: they trade on their reputation, after all. I have to admit Fedex has rarely impressed me, though most of my recent experience of them was when I was way up in the middle of nowhere. (Their local driver was a regular Boy Scout, though, when things finally got there. )

It is not fedex in general (although fedex, fedex home, all that is kind of dumb). It is, in particular, Fedex SMARTPOST. All I can say is it the opposite of smart. The fact that Adorama uses it turns me off completely - then to turn around a charge back almost the cost of 2 day shipping (when smartpost takes like 2 weeks) was ubsurd. They are last on my list for that reason. Amazon, whose free shipping is typically UPS ground and still sent the same day (never experienced otherwise) gets my money whenever they have something camera related available.

[fwbigd]

It's all about margin!

Adorama=1 location= $59,750
Ritz=800 locations $47,000,000 (thats $47 million PER MONTH!!!!)

Does ritz sell 800 times the product that Adorama sells Probably not. I would guess that it's probably closer to 500 times so Adorama sells %37 of the product and has .12% (thats 12/100's of a percent!!!) of the cost. Hmmm why does Ritz charge MSRP.....?

Adorama ships their internet sales out of SECAUCUS, NJ not their retail store.

[mtroute]

Adorama ships their internet sales out of SECAUCUS, NJ not their retail store.

Like I said, they probably have a warehouse in Jersey. But all the money for jersey still goes in the same pot.

[junyo]

It's all about margin! The amount of revenue generated less the cost's associated with generating that revenue = your profit margin. If cost are high, you have to generate more revenue to offset that. You do that either through volume or price. Ritz has chosen price, Adorama has chosen both volume (internet) and price. But They have significantly lower costs so they can actually sell less at a lower price and still make money

Adorama has what, a single location with the overhead on that one space, yet they sell nationwide over the internet? They can reduce thier margins because the majority of their business is internet/mailorder with generally low overhead.

lets pretend we have access to the P&L for both Adorama and Wolf.

assumptions:

1: never been to Adorama so we will estimate it size at 1500 sgft of retail space( I am sure they have a warehouse but thats probably in Jersey somewhere...)

2: Base rent is $50 per square foot annually (based on chelsea rents on craigslist).

3: NNN (triple nets) Insurance, taxes and maint. per month $1,000

4: $3,500 for employees based on an average of $30k per year salary plus benefits and other admin cost

rent: $6,250
NNN: $1,000
SG&A: $52,500
----------------------
$59,750

Adorama=1 location= $59,750
Ritz=800 locations $47,000,000 (thats $47 million PER MONTH!!!!)

Does ritz sell 800 times the product that Adorama sells Probably not. I would guess that it's probably closer to 500 times so Adorama sells %37 of the product and has .12% (thats 12/100's of a percent!!!) of the cost. Hmmm why does Ritz charge MSRP.....?

Not sure about the real estate but the taxes/insurance/labor cost are almost certainly much higher. You'd be homeless in NYC on $30K, the taxes are among the highest in the nation, as are insurance rates. But that's a quibble.

Your money quote is "Ritz has chosen price, Adorama has chosen both volume (internet) and price." Ritz's business model is a choice. Nothing stops them from competing on volume and price, in fact their larger b&m footprint should give them an advantage in that area. The cost of Web presence should be roughly equivalent; and Ritz can/should be able to generate the same volume of sales online. And since product costs aren't fixed (a larger volume seller pays less for cameras than a smaller volume one does) the potential greater sales volume of combined online and nationwide in-store sales should mitigate the differential, at least somewhat. So it's possible for Ritz to be competitive.

Ritz doesn't/didn't compete because their business model was based on a the idea that physical presence and consumer lack of options/awareness was enough. They were essentially minilabs that sold camera as a sideline and got caight flat footed by the change to digital and the collapse of the photo developing services market. They were never, as a whole, particularly good camera shops.

If you want to charge a premium price you have to deliver premium products/services. I often drive an hour and a half to shop at the brick and mortar B&H and pay the 9% premium for shopping in store due the the 'instant gratification' factor, as well as the selection and the knowledgeable sales staff. In addition to the volume, its just a really good camera store.

[mtroute]

Ritz's business model is a choice. Nothing stops them from competing on volume and price, in fact their larger b&m footprint should give them an advantage in that area.

Except it's not a choice, there is much more to it than just lowering the price. Their operating costs "per location" are 99.9% higher than Adorama, they need to support 800 locations and that requires significantly more margin to cover those costs. Each location is not an island in the Ritz ocean. There are probably good performing stores and poor performing stores. Anyone that has ever managed a "branch location" understands the the profit made by a good performing store is used to cover the costs of poor performing stores. Adorama and B&H have single stores to support with the volumes that they have you cannot compare the two business models.

It's incorrect to think that all they have to do is lower the price to increase profit through higher volumes. They would be far worse off than they are today if they chose that route. How many "discount" stores of any type do you see in malls.....

[junyo]

Except it's not a choice, there is much more to it than just lowering the price. Their operating costs "per location" are 99.9% higher than Adorama, they need to support 800 locations and that requires significantly more margin to cover those costs. Each location is not an island in the Ritz ocean. There are probably good performing stores and poor performing stores. Anyone that has ever managed a "branch location" understands the the profit made by a good performing store is used to cover the costs of poor performing stores. Adorama and B&H have single stores to support with the volumes that they have you cannot compare the two business models.

It's incorrect to think that all they have to do is lower the price to increase profit through higher volumes. They would be far worse off than they are today if they chose that route.

I never said they could simply lower the price. I simply said that not competing on price was a choice, which it is, and pointed out that that choice wasn't a barrier to profit.

You seem to be stuck on the fact that Ritz has higher margins thanks to their higher number of locations.

So what?

Where they place stores is a choice. How they stock and staff the stores is a choice. 800 retail outlets is a choice. They didn't magically spring out of the ground. They weren't forced upon Ritz at gunpoint. they decided to open those stores. So the increased overhead is really irrelevant. Ritz's margin is Ritz's problem and it's either sustainable (turns a profit) or it's not (what they''ve been doing). If they want to stay in business saying "well we have higher costs so we're going to charge more, m'kay" is suicidal. Especially when they're competing with businesses that have lower costs, and therefore lower prices at the same margin.

In a well run business locations that don't turn a profit and require the resources of other locations are closed unless the location is part of some business strategy that ultimately increases profit. Ritz could decrease the amount of overhead they had to support via killing off underperforming outlets or taking the steps needed to get/return them to profitability.

Or Ritz could add additional revenue streams, i.e. a web presence that would operate on even footing with lower overhead retailers and effectively operate as a very well performing store who's resources shored up the retail outlets. If they were really wacky they could try and leverage the physical locations as part of the web strategy (order online, pickup today - let's see Adorama do that for customers in Nebraska).

And as I said, Ritz can sell enough to negotiate lower product costs for itself. Those lower costs can be used to increase margin without increasing their retail prices OR lower costs their retail OR lower prices at a lower margin to make them price competitive.

And finally if Ritz decided their only viable business model requires them to obtain a premium price for products, then they need to cost justify that price to the target consumer. Again, "You can hold it and I really need to pay for this floor space" are not particularly compelling reasons (for me at least) to pay a more. Customer service, a certain level of expertise, and selection do.

How many "discount" stores of any type do you see in malls.....

You mean besides Walmart, Kmart, Target, Costco, and Best Buy?

[Mister Guy]

It is not fedex in general (although fedex, fedex home, all that is kind of dumb). It is, in particular, Fedex SMARTPOST. All I can say is it the opposite of smart. The fact that Adorama uses it turns me off completely - then to turn around a charge back almost the cost of 2 day shipping (when smartpost takes like 2 weeks) was ubsurd. They are last on my list for that reason. Amazon, whose free shipping is typically UPS ground and still sent the same day (never experienced otherwise) gets my money whenever they have something camera related available.

I do think it's funny how different parts of the country seems to have different impressions of shippers. UPS has aggravated me beyond belief. They are completely unpredictable as to when they'll deliver, whether it'll end up at my house or the neighbors, and whether or not they'll demand a signature. I've missed more than one day at work being told I was going to need to sign for something that didn't arrive the day it was supposed to, or ended up being left on my step without the doorbell being rung after dark that same evening. Not to mention the frustration of a package that wasn't paid for overnight from a directly nearby location. I've had more than one package sit in a warehouse less than two miles for my house for multiple days and (and in one case, almost a week) because they wouldn't deliver it or let me have it until the day they said it'd be there.

FedEx, however, always manages to have my packages waiting for me when I come home from lunch, and always seems to be on the short side of whatever delivery scale I've paid for, often giving me overnight service even with cheaper options. I wonder what the difference is.

[pxpaulx]

I do think it's funny how different parts of the country seems to have different impressions of shippers. UPS has aggravated me beyond belief. They are completely unpredictable as to when they'll deliver, whether it'll end up at my house or the neighbors, and whether or not they'll demand a signature. I've missed more than one day at work being told I was going to need to sign for something that didn't arrive the day it was supposed to, or ended up being left on my step without the doorbell being rung after dark that same evening. Not to mention the frustration of a package that wasn't paid for overnight from a directly nearby location. I've had more than one package sit in a warehouse less than two miles for my house for multiple days and (and in one case, almost a week) because they wouldn't deliver it or let me have it until the day they said it'd be there.

FedEx, however, always manages to have my packages waiting for me when I come home from lunch, and always seems to be on the short side of whatever delivery scale I've paid for, often giving me overnight service even with cheaper options. I wonder what the difference is.

That is too funny! I do like that Fedex (DHL was the same) will deliver it when it gets there, not when they say. But, most of the time those times are the same for me at least (living in Minnesota, everything is coming from the East or West coast it seems!)

On the other hand, if I miss a UPS package that needs a signature, the driver told me I can just meet him by their drop-box at 4pm down the street - you certainly seem to be right that the service from both can vary a great deal!

[mtroute]

You seem to be stuck on the fact that Ritz has higher margins thanks to their higher number of locations.

No, they have higher margins TO SUPPORT the higher number of locations.

You mean besides Walmart, Kmart, Target, Costco, and Best Buy?

Those are not malls they are shopping centers!

None of those stores are next door to JCrew, Victoria Secret or The Sunglass hut...that's a mall.

[Pentax_XTC]

Went into a Wolf Camera yesterday at the Mall of Georgia (largest in the Southeastern United States) to buy a more comfortable neck strap. After digging a little bit what I got was "We are still working with all our vendors on negotiations to get Pentax back. We just don't know when."

[Ratmagiclady]

Went into a Wolf Camera yesterday at the Mall of Georgia (largest in the Southeastern United States) to buy a more comfortable neck strap. After digging a little bit what I got was "We are still working with all our vendors on negotiations to get Pentax back. We just don't know when."

Well, that's cool. Did you find your strap? Last time I checked in there they had something Quantaray which looked pretty nice. Soft black one, ...it made me think of some conversations on the Accessories board as something some folks here might like.

[Pentax_XTC]

Yeah, I got the curved Quantaray strap and I'm loving it!. My neck was starting to hurt from my K7, Battery Grip, DA*50-135, 2 batteries, and AF540 Flash being supported by the stock strap.

Now I can barely feel it! I recommend the one that's curved because it distributes the weight across your shoulder muscles more than directly on your neck.

[Ratmagiclady]

Yeah, I got the curved Quantaray strap and I'm loving it!. My neck was starting to hurt from my K7, Battery Grip, DA*50-135, 2 batteries, and AF540 Flash being supported by the stock strap.

Now I can barely feel it! I recommend the one that's curved because it distributes the weight across your shoulder muscles more than directly on your neck.

Yeah, I use the curvey Optech ones. (I do like a camera to have some heft to it: up to a point, I'm just steadier that way.) I also like the different colors, cause it makes life easier when the inevitable tangles occur. But not everyone likes them.

You ought to review that strap on the Accessories forum. I'm not sure if the one I saw was curved, actually, but those discussions seem to get pretty big every time.