|
When you purchase through links on our site, we may earn an affiliate commission. Here's how it works. |
Over the last year or so, we have seen some troubling signs that all is not well at Canon USA, a lot of you may be seeing the same thing. I'd like to break down what we have noticed and we've learned through speaking with various people in the industry.
First up, this isn't going to be a “hit piece” and I just wanted to provide some insight into Canon USA's business as it pertains to themselves as well as retailers. I don't tend to write a lot of articles like this and leave that to Richard, but I was the one that talked to most of the people when building this article.
Things started to change at Canon USA on January 1, 2024 when Isao “Sammy” Kobayashi was appointed their new CEO1. He had been CEO at Canon Canada for about a year and he been with Canon since 1990 when he started in the photocopier sales division.
Canon Canada is a wholly owned subsidiary of Canon USA, along with Latin America (Mexico excluded) and the Caribbean. A part of me wonders if his appointment as CEO in Canada was to get him ready to take over Canon USA by understanding the business in Canada, which is likely big enough to matter to Canon USA's bottom line.
Almost immediately, Canon USA began laying off employees at their Virigina, USA plant. Canon Virginia manufactures Canon's office and consumer printing products, such as copiers, printers and cartridges. At the time, 55 employees were laid off from the facility2.
This segment of Canon Inc's business has taken a hit over the last bunch of years and appears to be going in the wrong direction. Companies and people simply aren't printing as much as they used to, even in the office environment.
Forward about 5 months and Canon USA began laying off 100-150 employees at their headquarters in Melville, New York3. These layoffs seem to have triggered some new problems for Canon USA. Mostly due to tax incentives they have received for both building their new headquarters and another one more recently.
The downsizing comes about 6 months after Canon USA received $7 million dollars in tax breaks from from the Suffolk County Industrial Development Agency after threatening to leave their Melville, New York headquarters and along with that, an agreement that there wouldn't be any layoffs4.
Canon USA also received $36 million in tax breaks to move their headquarters from Nassau, New York to Melville, New York in 20075. This agreement was set to expire when Canon USA went looking for more tax incentives.
These layoffs also come as Canon USA has said that they are currently on a 4 year streak of increased profitability.
Canon USA has also decided to merge with Canon Services America to form one company6. It's the usual concept that merging makes companies more efficient. People that have been through such an ordeal probably know better than I if that's actually how it plays out.
One of the strangest things that I have seen Canon USA spend money was a new headquarters for Canon Canada in Brampton, Ontario, which opened in 2010. The facility is enormous and I'm not sure why Canon Canada ever needed such a building.
If Canon Canada was its own subsidiary, there's no way there would have been any justification for this to have ever been built. Who knows? Maybe this was the house the PowerShot built.
It could be looked at as an asset, but running such a building costs a pile of money. While it's smaller than the Melville, New York headquarters, it isn't 1/10th the size, which is the population difference between the two countries.
Canon USA has also historically been quite slow to adjust for currency fluctuations between the US dollar and Canadian dollar. At times this has been a boon for retailers north of the border, other times its often a detriment and leads to a lot of grey market sales in Canada. The latter tends to be the reality a majority of the time.
Just like Canon USA, Canon Canada has also laid off a large portion of sales staff this year as part of their “One Canon” strategy7. There are also rumors out there that Canon Canada will be parting ways with their oversized headquarters.
The restructuring at Canon USA seems to be moving in an aggressive direction, which means they are looking to increase profits further in the coming years. That's not really a new phenomenon in corporate business.
Other problems we have seen
Canon USA has had an inventory problem for quite a while now. They have simply had too much of it. While some of the latest gear can be hard to find, such as the RF 10-20mm f/4L IS STM and RF 200-800 f/6.3-9L IS USM. Most other products are now in stock all over the US and Canada.
How do we know this? One just has to look at the Canon USA refurbished inventory. None of that gear is actually “refurbished” in the way a lot of people think that word means, it's simply overstock in both the Canon USA warehouses and credit returns from authorized dealers.
What is a credit return? Retailers who have overstock of specific items can send them back to Canon USA for a credit. Sometimes, Canon USA themselves will influence dealers to return certain items for credit bonuses. I'm sure there's an accounting reason for this, but that was by far my worst subject at business school.
One thing I do wonder, when Canon USA brags about sales in the US, are they deducting credit returns from those sales numbers? Do they consider selling at steep discounts as an honest sale? What about Canon Global? I'll err on the side of being skeptical of that.
Where do these credit returns go? They simply get a new SKU and are sold at a discount as refurbished at the Canon USA store, and sometimes at a steep discount. This is one of things about Canon USA that I cannot stand, I actually find it gross for lack of a better term.
Canon USA is competing directly with its own retail network. So a retailer sends back half of their inventory of a camera body, but they are still selling what they have left at retail prices. Canon USA then turns around and sometimes sells the exact same and brand new camera for 30% less than the authorized retailer. Refurbished inventory comes with the exact same Canon USA 1-year warranty. You can even buy CarePAK for refurbished cameras.
If Canon USA put a 90-day warranty on the products and didn't allow CarePAK, maybe I'd feel better about the whole thing, but that's not going to happen.
Canon USA used to put all of their refurbished gear in simple brown boxes, but we have seen over the last little while that some (I can't say all) are being shipped in actual retail boxes with new stickers on them.
What other things do retailers have to deal with?
Instant rebates. While these are great for you, the customer. These actually cause a lot of stress for some retailers. I'll note that I think B&H Photo lives by a different set of rules, but that's just an assumption on my part (Yeah, I know what assumptions are).
So let's take the $500 instant rebate that you all enjoyed earlier this year on the Canon EOS R6 Mark II. The camera before the rebate was retailing for $2499. The dealer cost would have be about $2200 on the camera. Some may receive a volume discount if they order enough of them, but those tend to only be a couple of percent points at most.
Now, the retailer is selling that EOS R6 Mark II for $1999. So every time during that rebate an EOS R6 Mark II left the store, the retailer was losing $200 on every sale. Now you'll say, “well Canon will just pay them back”. This is true, but the retailer only gets between 80-90% of the rebate value back. So now they have lost margin on the camera, when they didn't have a big margin to begin with.
The process of Instant rebates isn't just a simple click, click, click for retailers. A lot of stores actually have to employ a human just to do instant rebates. They have to be done manually, like the internet doesn't exist. So there is more margin off of that EOS R6 Mark II sale in wages.
Some subsidiaries around the globe still use customer mail-in rebates. If you haven't seen them in your country for a while, you may remember how much of a pain they were. Cut the UPC off the box, fill out a form, put a stamp on an envelope, snail mail it to Canon and in 45-90 days you'd get that cheque.
Ok, so they're done manually?
Well a second problem is Canon USA can take anywhere between 45 days to 90 days to give the retailer those rebate dollars. The problem that causes retailers is in cash flow. A lot of retail outlets as well as other businesses operate using lines of credit for the down times in sales, capital investments, inventory investments and many other things during the year. If you have been paying attention, interest rates are quite high at the moment. So that is even more margin off the sale of that EOS R6 Mark II.
So how much margin are retailers getting on Canon gear? A couple of retailers told us similar stories. They have to get a 20% margin on the sale of a Canon serialized product to achieve a 1% operating profit. Canon products carry a 10%-12% margin, so they have to move accessories to meet the 20% on the invoice. This did fluctuate a bit depending on footprint and geographical location, but not all that much.
This is a problem and one of the big reasons retailers have been disappeared over the last 10-15 years. They simply cannot sell Canon gear at a profit.
So, Canon directly competes with its own retailers offering steep discounts, they use an antiquated system and a long wait to give rebate dollars back to retailers forcing them to incur costs for operational cash flow. They also don't provide retailers with the ability to have a solid margin on Canon products. If you're going to have MAP pricing, where are the margins?
On the surface this was thought to help smaller retailers who can't afford what B&H Photo may be able to do with moving gear because of sheer volume with tighter margins without MAP. However, the way its currently set up isn't really helping anyone.
Now keep in mind, while I talked to various retailers, it's still a small sample size of the entire United States.
All is not bad
According to a few retailers they are appreciative that Canon does drive traffic through their doors and to their web sites. Idiots out there aside, Canon is still king as far as sales and brand recognition go. That cannot be overlooked. If the customer comes through the door, they may buy other things that are at a higher profit margin to keep the doors open.
Canon USA also needed a little bit of an ego adjustment culturally I think, and their forced restructuring may finally bring that about. I have met people that work for Canon at many subsidiaries around the globe and they have been nothing but kind to me, and at times they do like to have some fun with Canon Rumors.
People I've met at Canon USA? For lack of a better term, they've usually been quite arrogant and dismissive. I so fondly remember that cease and desist from Canon USA. I always wondered if the lawyer ever wore that Canon Rumors t-shirt I sent?
Interestingly, Chuck Westfall was the kindest person that I have met at Canon USA.
Past success isn't currency for future success and Canon USA definitely has some work to do to right the ship for themselves, their retailers and customers.
I will note that no other people I spoke to outside of the United States have experienced the same sorts of difficulties. That's not say there aren't issues elsewhere, but we couldn't find anything that seemed all that pressing.
While we are noticing these issues in Canon USA, we don't know if Canon Global has been trying to right the ship for a few years to the point of bringing in a new CEO to correct the mess. It could be that Canon Global is trying to quickly rip the band-aid off and fix the problems with Canon USA.
Of course, since Canon USA never answered my emails or calls (shocker!), I had to go with what I had. We can only hope that both Canon USA and Canon Inc are aware of the issues and are working towards solutions beyond just layoffs, divesting of real estate holdings and taxpayer dollars.
Sources
- https://www.usa.canon.com/newsroom/2024/20240104-cusa ↩︎
- https://finance.yahoo.com/news/canon-virginia-lays-off-55-234500608.html ↩︎
- https://12ft.io/https://www.newsday.com/business/canon-usa-layoffs-tax-breaks-l9d9xm2l ↩︎
- https://suffolkida.org/canon-wins-preliminary-approval-for-an-additional-7-million-in-tax-aid/ ↩︎
- https://www.nytimes.com/2007/02/18/nyregion/nyregionspecial2/18litopic.html ↩︎
- https://libn.com/2024/08/02/canon-u-s-a-makes-consolidation-moves-and-will-merge-subsidiary/ ↩︎
- https://www.thelayoff.com/t/1qkPFREe ↩︎
Not written by or for fanboys, but to inform objectively about what's really going on!
In their financial documents, Canon forecasts that for 2024 as a whole, their Printing division will have a 299.8 billion yen Operating Profit, a +31.3% increase compared to 2023.
Yet, in order to be able to use my Leica R vintage lenses with accurate focusing, I bought an EOS R, without conviction. And planned to get an EOS DsR as a 3rd. body.
I didn't...
I will never buy a second DSLR again. Recent mirrorless simply have too many advantages, especially when focusing.
You don't believe me? Just buy or test an R5 or R5 II. No one I know has ever turned back to DSLRs.
And I still love my 5 D IV, but do not use it that often...
Time to jump ship, but pay attention, please, some ships are crappy...
A catastrophe in sunshine, and the liveview screen is too small. Also, focusing is lightyears behind the speed and precision of the newer mirrorless cameras. Plus: pressing a camera against your forehead gives you much higher stability than handholding it at elbow distance. In my opinion, apart from maybe tripod photography, liveview is no option at all, and definitely no alternative to mirrorless.
I never thought I'd say it some day, but DSLRs have grown obsolete.
And the R3 is certainly much better than most DSLRs ever made.
I can't recall if it's just plain misleading to investors or it's illegal and misleading.