Avi Greengart is an expert on the convergence of technology and entertainment: video, audio, computing, and wireless, how these are coming together, and what's likely to survive long enough to make a difference in your life.
Column 21 January 31, 2002
(exchange rates corrected Feb. 2, 2002)
Consumer Electronics Arbitrage
This is the first email I am sending to you. I just found your link. I think your site is great, with very good sound advice. You cover lots of different topics. Thanks for all the work you guys are doing. Now here is my question. I was surfing through avs forum when I found a link for www.pricejapan.com is this site legit? What gives? How come the US price is so much higher than the price directly from Japan. Do you know anyone who has used this site before? Buyer beware or what?
At my local authorized dealer here in the U.S., a top-of-the-line Sharp XV-Z9000 projector sells for $10,000 – approximately 15% off the list price of $11,995. If you push them hard enough, they’re willing to negotiate down to $9,000. Add in the 6% sales tax New Jersey charges on all non-food/non-clothing items, and for around $9500, you’re all set. It’s certainly expensive, but this projector competes (favorably) with models using older technology that cost upwards of $20,000. Viewed that way, $9,500 is quite a bargain. However, at http://www.pricejapan.com, they’ll deliver a Sharp XV-Z9000 to you for under $5000.
Spffff! (That was me spitting out my coffee.) What?
PriceJapan engages in consumer electronics arbitrage. Here’s how it works: you wire PriceJapan money. PriceJapan buys your unit in Japan, ships it by DHL to you, and charges a 5% service fee. The site lists several projectors; the Sony VPL-11HT that can be negotiated down to $8,000 here goes for $4,000 on PriceJapan. The Plus Piano I bought direct from Plus (the only way to get it in the U.S.) for $3,000 sells for $2,637.
What on [different parts of the] earth could make the cost vary so much? I’ve heard several explanations, and I’ll tackle them one at a time:
It’s too good to be true 1: will PriceJapan steal your money?
I can’t vouch for them personally, but there were a couple of folks on one of the online forums who bought from them with good results, posting descriptions of the process every step of the way. PriceJapan does require customers to wire them money in advance, and they even consider shipping insurance optional, so a large leap of faith is definitely required.
It’s too good to be true 2: are they B market goods?
“B” goods refers to items that have been returned to the manufacturer. Legally (at least in the U.S.), you cannot sell used, “pre-owned,” refurbished, reconditioned, or otherwise pre-owned goods without explicitly stating that fact.
The forum folks who bought from PriceJapan received factory sealed goods, and every indication is that PriceJapan simply buys from local Japanese retailers and then ships it overseas.
It’s too good to be true 3: are the models the same in different countries?
Here’s where it gets interesting. In some cases, the models are identical worldwide. Most projectors (and notebook computers, and many other consumer electronics) come with switching power supplies capable of stepping up/down the power to work in many countries. This allows the manufacturer to 'build once, sell many.'
However, this is not universally true: models may carry the same name but differ significantly in terms of power supply, number of inputs and their types, and even different specifications. One common place manufacturers play with projectors is whether to emphasize the brightness output vs. contrast. Another difference may be that the units have language other than English on the menus, case, and remote control.
In some cases, manufacturers post different specifications for each geography. Otherwise, the only way to determine whether the units are identical is by scouring online forums where brave souls may have pieced together the differences and written about them. This process is rather difficult since the major online home theater boards are sponsored by retailers who -- understandably, in my view -- do not allow the forums they support to post competitive information.
Nonetheless, in most cases, these differences do not account for the big gap in price. Japanese lettering on the remote control doesn’t cost any less than English. Difference in contrast and light output on a projector can mean a different bulb (and bulbs cost between $200 and $500), but even that could only account for a small portion of the difference.
However, there are certainly exceptions. Here's one that I know of: the Japanese version of the JVC Digital VHS deck (also listed on PriceJapan) apparently does not have circuitry to play pre-recorded videos in full high definition (coming soon from four Hollywood studios). The U.S. version does. Both decks have the same model number.
Electronics are less expensive in Japan because they’re made there
It’s certainly true that electronics are generally less expensive in the far east – many people visiting Tokyo or Hong Kong make sure to include shopping trips on their agenda. But it can't be because the goods are made in Japan – or the U.S., for that matter. (Some projector companies are based in the U.S.) The actual manufacturing may occur anywhere in the world, and shipping costs for small, light consumer electronics are a fraction of the overall price.
UL listing requirements for the U.S. market adds costs
The cost for obtaining UL rating is definitely real. However, it typically does not result in a difference in the actual hardware, and cannot account for the large price gaps we’re seeing.
The exchange rate is wacky
No question about it, exchange rates are difficult to understand. And my macroeconomics is a bit rusty. But after dusting off my MBA textbooks and checking Bloomberg.com for currency rates, (and posting incorrect information, and correcting it) I can confidently state that right now the yen is weak vs. the dollar, so it should be less expensive to buy anything directly from Japan. How much cheaper? Around two years ago, the yen was at 108 to the dollar. Today it's at 133. That's about a 20% difference.
Avi’s Theory: Home theater retail profits differ in the U.S. and Japan
If you add up all the factors above, in theory, you'd end up with less expensive electronics in the Orient - maybe 25% less expensive. And that's they way it works out in real life for most consumer electronics. If you compare prices on other electronics – business projectors, video game systems, camcorders – you’ll find that there’s a definite price gap of 10 to 30%, but nothing as dramatic as 40 or 50%.
I believe that the same Japanese retailers that sell camcorders and computers and DVD players also sell home theater projectors. Thus, retail profit margins across all those categories are consistently low. In contrast, in the U.S., big box retailers (Best Buy, Circuit City) sell a broad range of electronics with low profit margins, but they don't carry home theater projectors. Those are sold exclusively by specialty retailers with the higher profit margins needed to sustain a low volume, high service business.
I think - eventually - margins are going to have to come down here in the U.S. as well. Home theater retailers are going to make their money on consulting and installation, not reselling gear. It reminds me of computer VARs (Value Added Resellers). In the 1980’s, when PC and networking equipment was new and expensive, they made money reselling gear and throwing in service for free. In the 1990's they were forced to switch to selling the gear at cost and charging for services.
Other things to worry about
So... if you want to play the projector arbitrage game, first you’ll need to ascertain that the Japanese and American model numbers are substantially similar. But you still have some other things to worry about before buying a projector from halfway across the world.
All sales final – PriceJapan has no return policy. If you are dissatisfied with your purchase for any reason, you’ll either have to live with it or sell the unit for a loss on eBay. There's a reason home theater projectors are not yet mainstream (see column #17) - these things require a lot of hand holding. Therefore, if you aren’t 100%, absolutely positive that the unit meets your needs perfectly (for example, whether the projector can be properly mounted in the location you want in your room) buy locally from a dealer who can advise you, and who has a return policy.
Warranty – as the unit will be purchased legally, it should be under warranty. Somewhere. A few companies have global warranty policies; most don’t, so you may have to send the unit to Japan for servicing. Your technician there may not speak English, and problem resolution could be difficult.
Resale value – a unit with Japanese lettering on the remote control won’t fetch as high a price should you want to resell the unit in the future.
Are you already planning to visit Japan? While you’re there it certainly makes sense to buy whatever consumer electronics you might need.
But using PriceJapan only makes sense in certain rare situations. For example, take my Plus Piano: I seriously question whether it's worth risking wiring money to someone you don't know in a foreign country, accepting an "all sales final" policy, dealing with international shipping and customs, with the promise of probable warranty difficulties down the road... just to save $340. All that just to get 10% off? Seriously, I think it's psychology: If Plus priced the units at $3500 and resold them on eBay for $3000, everyone would be happy that they "got a deal!"*
My take on the U.S./Japan price differences is that it's a temporary anomaly. In general, electronics do tend to be cheaper in Asia, but not by such large margins. Serious hobbyists (definition: someone who can do troubleshooting and repair work themselves) may consider engaging in projector arbitrage when the savings approach 50% of the total and many thousands of dollars. However, most folks - even most knowledgeable hobbyists - are still better off paying more locally to someone they trust who can help them install and configure their system.
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© 2001, 2002 Avi Greengart