U.S.$ is now up 8% over the Euro. Will Festool USA drop prices if it continues?

[SittingElf]

In the last three months, the US$ has climbed by around 8% against the Euro...which is the currency that Festool Germany uses.

It would appear that the dollar may continue to climb due to new European economic setbacks.  There are a number of financial pundits that are even predicting that we may see the dollar/euro go to par (1:1) within a year. 

The question is whether Festool USA will pass on the savings to their U.S. customers, or just reap the additional profits of a stronger dollar without benefit to Americans if the trend of the stronger dollar continues.

In my own case, while stationed in Germany until recently, I purchased a substantial number of Expensive NAINA Festool products. If I were still there and buying the same products now, instead of earlier, I would save over $2400 vs. the price I paid while the Euro was significantly higher.

Currently, the official exchange rate is US$1.26 to the Euro. I averaged US$1.39 during the time that I purchased my products.

The cost to Festool USA, operating in US$ is obviously much lower than in the last couple of years. Will they pass it on to their U.S. customers?

Cheers,

Frank

 

[gippy]

Or maybe they will take the increased profits and use them to reduce the prices for the rest of the world. The prices in the USA are far lower than anywhere else and you are still complaining?
OK, rant over. Americans complaining about Festool prices is a pet peeve. To give an example the Domino 500 is the equivalent of $1750 US where I live.

 

[peter halle]

Frank,

Festool's policy has always been not to discuss marketing or pricing strategies publicly, so unless there has been a change to that I sincerely doubt that you will get an official response here.

Just a head's up.

Peter

 

[Kev]

This is amusing ... maybe the exchange rate movements will bring some equalisation so that the rest of the world no longer needs to fund Festool's march into North America!! [wink]

Something to consider - stock in the US warehouse doesn't instantaneously vary in value relative to the international exchange rate.

Speaking from a corner of the world that is severely influenced by international exchange rate changes (Oz), negatives are typically passed on and positives are banked.

Kicking and screaming you may go, but please realise you are part of a global marketplace and as the US market dominance is diminishing, you'll see more of this.

The reality is we're on a planet where things will be sourced at "source" and you'll pay for shipping - that fact will then blow back and influence point of manufacture.

Please fasten your seat belts. [wink]

 

[mouppe]

No chance, and it's not that simple to translate the exchange rate into profit.

For example, Festool will have long-term supply contracts from suppliers, and those raw materials are probably denominated in US dollars. Also, the cost of running the North American business is obviously in $US. So the weakness in the euro (currently around 1.28) can also be a negative contributor to Festool's costs.

 

[Administrator_JSVN]

Like Peter said, we do not discuss pricing strategies publicly.

 

[Paul G]

Nice try Frank LOL

 

[SittingElf]

Nice try Frank LOL

Heh heh... worth a shot! [big grin]

Actually, the idea that the prices are lower in the USA is generally a misnomer. What is fact is that most other countries have a penalizing VAT added on to purchases which makes them more expensive. The VAT doesn't add to Festool's profits. It is simply a tax, and in Germany it is 19%.

Many of Festool's products are cheaper in Germany than the USA if you don't have to pay VAT as we didn't while stationed in the military there, and due to the ability to order products from out of state in the USA without having to pay sales taxes on them is a true benefit. (Think buying from ToolNut or Bob in states other than NY and NJ).

I was not trying to start a fuss...just making a point that the US$ is suddenly climbing rather rapidly against foreign currencies...and in other products like electronics from Asia, the price of those products usually ends up dropping as a result.

Trust me when I say that about $40,000 later, I don't have much more to buy from Festool until they come up with some new product, but I'll be waiting to spend when they do!! [tongue]

Cheers,

Frank

 

[Stephen B]

[size=14pt]

$40,000US, no wonder that German dealer welcomed you at the door. They should at least be sending you a Birthday and Christmas card for life!  [big grin]

 

[Just F Me]

Canon recently lower the prices of some of their lenses POSSIBLY due to exchange rates.

http://www.cnet.com/news/yes-canons-high-end-lens-price-cuts-are-permanent/

We do complain a lot here in the US that prices are high, but it is true that things here are so much cheaper, even though we don't think it is.  American consumer mentality  [big grin]

 

[SittingElf]

Canon recently lower the prices of some of their lenses POSSIBLY due to exchange rates.

http://www.cnet.com/news/yes-canons-high-end-lens-price-cuts-are-permanent/

We do complain a lot here in the US that prices are high, but it is true that things here are so much cheaper, even though we don't think it is.  American consumer mentality  [big grin]

My original point precisely!

In the case of the yen, it saw an exchange rate as low as 79yen/US$ as recently as a couple of years ago. The current exchange rate topped 109 yen yesterday. That's a whopping increase that should lower all Japanese produced products in the USA, and it is happening as you have shown.

Now comes Europe! [big grin]

Frank

 

[Paul G]

Nice try Frank LOL

Heh heh... worth a shot! [big grin]

Actually, the idea that the prices are lower in the USA is generally a misnomer. What is fact is that most other countries have a penalizing VAT added on to purchases which makes them more expensive. The VAT doesn't add to Festool's profits. It is simply a tax, and in Germany it is 19%.

Many of Festool's products are cheaper in Germany than the USA if you don't have to pay VAT as we didn't while stationed in the military there, and due to the ability to order products from out of state in the USA without having to pay sales taxes on them is a true benefit. (Think buying from ToolNut or Bob in states other than NY and NJ).

I was not trying to start a fuss...just making a point that the US$ is suddenly climbing rather rapidly against foreign currencies...and in other products like electronics from Asia, the price of those products usually ends up dropping as a result.

Trust me when I say that about $40,000 later, I don't have much more to buy from Festool until they come up with some new product, but I'll be waiting to spend when they do!! [tongue]

Cheers,

Frank

They may not collect it but you still have to pay in most states that have a sales tax. Yes I realize most people don't declare their out of state purchases but ultimately it's a tax cheat and puts your local suppliers at a disadvantage.

/rant

 

[SittingElf]

Nice try Frank LOL

Heh heh... worth a shot! [big grin]

Actually, the idea that the prices are lower in the USA is generally a misnomer. What is fact is that most other countries have a penalizing VAT added on to purchases which makes them more expensive. The VAT doesn't add to Festool's profits. It is simply a tax, and in Germany it is 19%.

Many of Festool's products are cheaper in Germany than the USA if you don't have to pay VAT as we didn't while stationed in the military there, and due to the ability to order products from out of state in the USA without having to pay sales taxes on them is a true benefit. (Think buying from ToolNut or Bob in states other than NY and NJ).

I was not trying to start a fuss...just making a point that the US$ is suddenly climbing rather rapidly against foreign currencies...and in other products like electronics from Asia, the price of those products usually ends up dropping as a result.

Trust me when I say that about $40,000 later, I don't have much more to buy from Festool until they come up with some new product, but I'll be waiting to spend when they do!! [tongue]

Cheers,

Frank

They may not collect it but you still have to pay in most states that have a sales tax. Yes I realize most people don't declare their out of state purchases but ultimately it's a tax cheat and puts your local suppliers at a disadvantage.

/rant

Like Apple stores, my closest Festool dealer is more than 2.5 hours drive away. That is NOT "local". That' s a five hour round-trip and I can have product shipped to me in a couple of days from my computer by going to very highly-regarded dealers who are in other States. I'm not a big fan of Woodcraft....the only dealer I have access to, a long drive away.

If you can find ten people in the USA who declare their out of state purchases to their home state in order to pay taxes on them, then I would be very, very surprised.  It is what it is....

 

[jcpsmallwoodworkershop]

so you think the USD up over 8% vs euro is the only thing happening?
i bet the following are also occurring:
festool sales in europe is slowing, perhaps not in england but in eu? not working.
festool sales in russia collapsed(i dont know why festool releases all new products in russia
and not in usa, unless there is actually less demand for festool products in usa than
russia, oh but i forgot festool is a german company)
probably doing a bang up job else where to make up for losses, australia slowing too,
wonder how festool aussie is doing?

and now to america, i bet there is single digit growth in festool usa, no new products to
spike demand?

bring some new tools, along the basic product lines, not some vaccum wings to america.

 

[adubeau]

I doubt it...

 

[gkaiseril]

There are many factors that enter into this. There could be tariffs or shipping cost absorbed into the U.S. pricing.

It is true the U.S. does not have the VAT and U.S. residents buying in Europe and shipping or bringing the tools back to the U.S. are not subject to the VAT.

As for state sales taxes. Check with your state, county and municipality. Many state have enacted a Use Tax that applies to purchases made out side the state but brought into the state by residents. This tax is at the same rate as the sales tax and is either a question on the state income tax return or requires the resident to file a special return.

Florida Department of Revenue Use Tax

Some states are sending dunning letters to residents about this requirement. Note that many state allow for a credit for sales/use tax paid to the state or purchase. There are also other adjustments for purchase made while a resident of another state.

 

[AlexThePalex]

i dont know why festool releases all new products in russia
and not in usa, unless there is actually less demand for festool products in usa than
russia, oh but i forgot festool is a german company

Russia is 220 volt, and for Germany close to home. America uses 110 and Festools' production line for 110 is very small compared to the 220v line.

 

[Stephen B]

i dont know why festool releases all new products in russia
and not in usa, unless there is actually less demand for festool products in usa than
russia, oh but i forgot festool is a german company

Russia is 220 volt, and for Germany close to home. America uses 110 and Festools' production line for 110 is very small compared to the 220v line.

[size=14pt]
Spot on Alex. I think our North American friends often forget this limiting factor in Festool production when discussing NAINA yet and pricing. It is only the ultimate potential of the NA market that provides incentives for Festool to manufacture some of its range in 110v.

Fortunately the Australian doller is tending to hold with the Euro, but has lost relative parity with the U.S. and indeed went below 90cents US last week. Festool Aus will probably increase prices as it usually does early in the new year. From my observations here on the FOG, Festool US adjusts its prices also annually. So NA members should not, I believe, expect any price movement until 2015.

 

[tbellemare]

I once bought a 21-year old, '75 Mercedes 450 SL with low mileage from the original owner. It was a VERY cool car. I lived in Houston and the freeways typically tooled along at around 60-70 MPH. I commonly took that car from 60-100 in a few car lengths. That car STARTED to feel "right" at about 90 MPH.

As I recall, '75 was the first year that cars sold in the U.S. were required to have "catatonic" converters. Actually, I shouldn't make fun of them. Catalytic converters had a profoundly positive effect on our air...

Anyway, it seems that Daimler wanted to sell their cars here but didn't want to reinvent them, yet. They took the existing design and put a catalytic converter under the hood on the passenger side. This was a huge V-8 in a roadster. There wasn't a lot of room for it under there.

It was a bad idea to put that incredibly hot thing under the hood. Not only did it make the cabin hot but it baked everything under the hood.

I tell this story because sometimes the Sirens call and one isn't ready. I think Festool does a pretty good job of carefully approaching the Siren Call...

Tom

EDIT:
I just reread this post and I have to admit that I want all of their products here and NOW. I understand how that isn't likely to ever happen.

 

[Administrator_JSVN]

....and Festools' production line for 110 is very small compared to the 220v line.

A lot of the stuff in this thread is speculative, so I'm not going to address all of it. But, 110 and 220 tools are produced on the same lines during different runs. So, it has nothing to do with production capacity. Also, without knowing how many tools are sold in North America vs the rest of the world and other variables, it would be a guess as to the economics involved.

Companies that keep prices the same for a year at a time, or longer, can't rely entirely on volatile currency exchange rates. Plus, there are many other factors beyond exchange rates.