Originally Posted by Green_Flash
Hey Frank, I got a question; I know a lot of the products sold are at a direct JPY to USD conversion rate; for example a Solar 1 is $650 USD and in Japan about 52,000 JPY.
Why is the AQUASKY 602 priced at $600 USD when the the direct JPY is 29,000 or $350?
I can't imagine customs/shipping is much different than the Solar series. It would be less I would think because of lower price and weight/materials.
I would also imagine a lot more units would sell at that lower better price, myself included.
This is a great question, and I am happy to explain it.
First, we haven't settled on an official price yet - and the price probably won't be officially set until about a week before arrival.
To fully explain it, I need to discuss the economics of Japan and its relativity to the USA.
Classically, the Japanese market had always needed to sit at an exchange rate of an average of 100 to 110 yen / dollar.
This lends certain advantages to exporting manufacturers in Japan, as they can cover their costs in yen and the importer can match or be lower than Japanese prices while enjoying higher profit margins.
However, especially since the earthquake, the Yen skyrocketed and the dollar has remained weak - setting the exchange on average at 78 Yen to the dollar.
What this means is that, even with prices in Japan staying the same, over the past 2-3 years there has been a de facto price increase of 20% - leading to a typical excess charge in price for the same order of the same size placed three years ago costing another $28,000 per container on average. Again that's without factoring price increases from raw material costs - so the same order of the same product placed today costs another $28,000.
Now this has profound ramifications on the market itself - and it's a little known fact that ADA being provided in North America almost came to a complete stop because of this radical.
It took a lot of hard work and dedication and team building for me to essentially rebuild - and expand - the Nature Aquarium market from a literal point of the entire USA having less than $1,000 available to reinvest due to the massive losses from be earthquake and the recession.
Today, the scene is much different and things are stable and growing beyond demand to the highest reaches its ever been in the States.
But that said, the strategy for ADA in Japan is to sell the AquaSky for a very low margin. Currently retailers in Japan have a 15% profit margin on AquaSky over the price they buy it at.
This is because the Japanese market is over saturated for planted aquariums and the market demands it. They have both the volume and the demand to make the low margin worthwhile.
Now unfortunately, Japan's cost to produce it doesn't change much between Wholesale Japan and distributor worldwide buying price. And it's basically impossible for us to provide the product for the $375 that the exact exchange would say - we would barely cover import costs without factoring for overhead and salary.
The demand simply isn't high enough for us to accept a 5% profit margin - this would completely exclude the retail network we're creating and fostering from ever carrying the product.
Now on AquaSky 361 and 301 the prices work out to appropriately fit margins and not be totally far from Japan prices.
However on the larger sizes there is a massive gap between intended distribution strategy and pricing levels.
Which of course, causes the problem. Sell for too little and there isn't enough money to warrant importing it again. Sell too high and people won't buy.
dollar for dollar, the lighting systems are the least profitable thing in the entire line up - aside from glassware. These items are mainly only carried so that they can be available in the USA.
Now, I'm a hobbyist at heart and this is a very serious issue for me, personally, as I am caught between the right decision as a business man and the right decision as a hobbyist and teacher of nature aquarium.
Unfortunately, when talking money, business Frank must always win for the preservation of the line in the USA among all entities.
Especially now that I have been fostering the growth of retailers who are essentially beginning to carry the baton - my decisions on the import side of things and as the managing director for ADA here means my decision not only affects my livelihood, but also the livelihood of the retailers that have fully embraced the line and are passionate about the hobby itself as well. That's a lot to consider! Unfortunately, we do not have the luxury of simply price matching Japan.
That said, there are very precise mathematics that I deploy to ensure that everyone wins - the hobbyist for the cheapest price possible, the retailer to earn a living and be rewarded and us for expanding and reinvesting into ADA so that one day we can get to a point where it's more universal for spreading this great passion - and that's where business Frank and hobbyist Frank meet in the middle.
That said, I'm proud to say that whomever you buy ADA products from - whether it be me or one of our qualified retailers, you are supporting a cast of people who are first and foremost pioneers and extremely passionate about growing out the planted aquarium hobby - because it's one of those things that deserves being spread, and the uniqueness is everyone from ADA Japan to you, the hobbyist, we're all proud of what we do and in providing inspiration...other companies seem almost cold with their robotic approach to skews. Whether you buy ADA or not, remember, every piece of product passed through the hands of someone who loved it - from the designer to the craftsman, to the ADA staff, to the distributors and retailers and finally...
And that is why we will continue to work as hard and as fast as we can to give everyone the best square deal on the economics as possible - so we can all get to enjoying the art.