The Yen's nadir

[sanmateo]

why is the Yen doing so poorly the past couple years, and why have some J-knife prices dropped significantly (e.g. Misono on Amazon) and some J-knife prices continued to rise (e.g. at many US-based knife retailers)

Not complaining, just curious. (Also I just bought a Misono Dragon for $126 when it dipped in price)

 

[blokey]

Can't answer why yen doing so poorly, that's the job for economist. But factory knives like Misono vs artisan knives are hardly comparison, Japanese based retailers also raised price to compensate for weak yen and rising material cost, like Watanabe, Ryusen, Hado all raised their price higher even compensating for the exchange rate.

 

[Jovidah]

I'll leave the yen situation to people with a better grasp of economics but a large part is that it's actually the dollar that has beem appreciating (not just versus yen but also vs euro).

What you see with handmade knives is that demand grew a lot in recent years while supply is relatively inelastic. So naturally prices increase. Mass manufactured knives made in high volumes are a different story, and likely also didn't see the high increase in demand.

 

[Beerzebub]

I'll just add that higher US interest rates were one factor (Japan didn't have high inflation and monetary policy tightening like the US and many other countries did starting in 2021). Rising energy prices in the last three years probably also played a role (Japan is a big net energy importer whereas the US is a net energy exporter).

 

[sanmateo]

very interesting!

 

[Beerzebub]

Yeah, Japan came into the inflationary period from a starting point of deflation, which had been a problem for them for decades, so when they finally got an increase in inflation it was at much lower levels than places like the US and euro area and was mostly welcome (until just recently perhaps).

 

[Heckel7302]

There was a related story on the Marketplace podcast today. Story starts at 7:37



Basically, a year ago Japan bought up a lot of yen to prop up the value of its currency. The yen had been falling because the US had been increasing interest rates while Japan kept theirs low. That has continued to happen and they are showing signs that they might do it again.

 

[drrayeye]

Japanese production knives try very hard to maintain a stable retail price while offering substantial discounts and "leaks" as necessary in the United States. Last November, Shun announced a $100 discount to it's dual core 8" Kiritsuke at the lowest recent low point in Yen/dollar exchange--after many months of being sold out.

 

[sanmateo]

I'm not quite sure I'm following you — are you saying Japanese production knives try hard to maintain stable retail pricing in both Japanese domestic market and USA, but then people can arbitrage by importing gray market from Japan to US when the Yen is weak relative to the Dollar?

or are you saying they try to

 

[drrayeye]

I'm not quite sure I'm following you — are you saying Japanese production knives try hard to maintain stable retail pricing in both Japanese domestic market and USA, but then people can arbitrage by importing gray market from Japan to US when the Yen is weak relative to the Dollar?

or are you saying they try to

Kai Shun knives in the USA are distributed from a facility in Oregon. There are no appreciable gray market products directly from Japan--but exclusives to Williams-Sonoma are leaked to EBAY at much lower prices--and all products can be distributed to retailers for special promotions--like the dual core kiritsuke. Other than that, Shun has held very similar retail prices for many years.

 

[HumbleHomeCook]

Shun can hold fairly steady prices because they share a house with Kershaw. Kershaw has a massive sales volume that no doubt allows costs to be buoyed and greatly assist in automation and efficiency efforts across all brands. It's not out of some moral commitment to the customer. They will and no doubt do maintain the established profit margin expectations. You can do that by means other than raising prices.

 

[drrayeye]

Shun can hold fairly steady prices because they share a house with Kershaw. Kershaw has a massive sales volume that no doubt allows costs to be buoyed and greatly assist in automation and efficiency efforts across all brands. It's not out of some moral commitment to the customer. They will and no doubt do maintain the established profit margin expectations. You can do that by means other than raising prices.

Kai owns--but does not distribute much through Kershaw--only a few Wasabi products that don't use Shun brand names. They distribute through a separate international facility that also does the free sharpening. The large volume Kai knives are marketed mostly in Japan as Seki Magoroku and several other brand names. They aren't effected by Yen-Dollar fluctuations.

 

[HumbleHomeCook]

Kai owns--but does not distribute much through Kershaw--only a few Wasabi products that don't use Shun brand names. They distribute through a separate international facility that also does the free sharpening. The large volume Kai knives are marketed mostly in Japan as Seki Magoroku and several other brand names. They aren't effected by Yen-Dollar fluctuations.

My post had nothing to do with distribution.

 

[sanmateo]

Shun can hold fairly steady prices because they share a house with Kershaw. Kershaw has a massive sales volume that no doubt allows costs to be buoyed and greatly assist in automation and efficiency efforts across all brands. It's not out of some moral commitment to the customer. They will and no doubt do maintain the established profit margin expectations. You can do that by means other than raising prices.

ok, Kai/Kershaw are more of a marketshare behemoth like Apple, which maintains strong leverage with suppliers

 

[sanmateo]

but exclusives to Williams-Sonoma are leaked to EBAY at much lower prices

How are the Williams-Sonoma exclusives leaked? Do people get them with an employee/trade discount and re-sell, or from some other point in the supply chain ?

 

[drrayeye]

My post had nothing to do with distribution.

The strategy of all but the smallest importers of knives is to ride a stable price--taking advantage of dollar/Yen fluctuations in their favor--and absorbing the extra cost when they must. They try to telegraph long term price increases well in advance. My Shun example is just one case example that just adds in some detail.

 

[HumbleHomeCook]

The strategy of all but the smallest importers of knives is to ride a stable price--taking advantage of dollar/Yen fluctuations in their favor--and absorbing the extra cost when they must. They try to telegraph long term price increases well in advance. My Shun example is just one case example that just adds in some detail.

For discussion, accepting this to be true, why do you think Shun does this?

 

[sanmateo]

For discussion, accepting this to be true, why do you think Shun does this?

To use an example from another industry, look at the iPhone. The price of the new phone signals its place as a premium phone in the market. It's much more expensive than most android competitors, and the price sends a signal that this is "premium" and "desirable." Apple tries to hit a consistent price target year-over-year, despite fluctuations in the Dollar vs Chinese RMB, despite increases in transportation pricing, and despite inflation. They start with a price target, and then design the phone to meet that target. Consumers who always buy the latest phone don't have to wonder whether or when it will go on sale, and they know they can't gain much by shopping around.

Shun goes on sale more than Apple, but Shun wants to signal to consumers that their 7" Chef knife really is a $200 value, that it really is a premium product and really does occupy the upper quality and price stratum of the factory-made kitchen knife market. Consumers know what to expect from a $200 knife at Williams Sonoma, and even if the last knife they bought was 5 years ago, they still walk in looking for that particular $200 price point.

If Shun were to let the price go up and down with the Yen, with inflation, and with the cost of energy, the knife would start to look like a commodity, like potatoes or lumber. The sticker price would stop being a pure signal of "shun quality," and start signaling instead other conflicting economic factors.

I think you could build a chart like this for Wüsthof Ikon and Shun Premier, showing similar multi-year price stability.

 

[HumbleHomeCook]

To use an example from another industry, look at the iPhone. The price of the new phone signals its place as a premium phone in the market. It's much more expensive than most android competitors, and the price sends a signal that this is "premium" and "desirable." Apple tries to hit a consistent price target year-over-year, despite fluctuations in the Dollar vs Chinese RMB, despite increases in transportation pricing, and despite inflation. They start with a price target, and then design the phone to meet that target. Consumers who always buy the latest phone don't have to wonder whether or when it will go on sale, and they know they can't gain much by shopping around.

Shun goes on sale more than Apple, but Shun wants to signal to consumers that their 7" Chef knife really is a $200 value, that it really is a premium product and really does occupy the upper quality and price stratum of the factory-made kitchen knife market. Consumers know what to expect from a $200 knife at Williams Sonoma, and even if the last knife they bought was 5 years ago, they still walk in looking for that particular $200 price point.

If Shun were to let the price go up and down with the Yen, with inflation, and with the cost of energy, the knife would start to look like a commodity, like potatoes or lumber. The sticker price would stop being a pure signal of "shun quality," and start signaling instead other conflicting economic factors.

I think you could build a chart like this for Wüsthof Ikon and Shun Premier, showing similar multi-year price stability.

View attachment 270719

Oh I completely agree and in no way would expect a company to adjust prices with monetary valuation trends. I was just pushing back on what I thought was an assertion of being in some kind of good faith to the consumer.

 

[drrayeye]

For discussion, accepting this to be true, why do you think Shun does this?

Price stability is at the heart of contracts with retailers, and with Shun, much of their retailing is through an exclusive relationship with Williams Sonoma. By promising price stability for a specific period of time, they get to set terms for discounting and requirements for promotion. The terms they set with Williams Sonoma then carry over to their other smaller retailers.

 

[sanmateo]

Price stability is at the heart of contracts with retailers, …

this makes perfect sense.

 

[drrayeye]

To use an example from another industry, look at the iPhone. The price of the new phone signals its place as a premium phone in the market. It's much more expensive than most android competitors, and the price sends a signal that this is "premium" and "desirable." Apple tries to hit a consistent price target year-over-year, despite fluctuations in the Dollar vs Chinese RMB, despite increases in transportation pricing, and despite inflation. They start with a price target, and then design the phone to meet that target. Consumers who always buy the latest phone don't have to wonder whether or when it will go on sale, and they know they can't gain much by shopping around.

Shun goes on sale more than Apple, but Shun wants to signal to consumers that their 7" Chef knife really is a $200 value, that it really is a premium product and really does occupy the upper quality and price stratum of the factory-made kitchen knife market. Consumers know what to expect from a $200 knife at Williams Sonoma, and even if the last knife they bought was 5 years ago, they still walk in looking for that particular $200 price point.

If Shun were to let the price go up and down with the Yen, with inflation, and with the cost of energy, the knife would start to look like a commodity, like potatoes or lumber. The sticker price would stop being a pure signal of "shun quality," and start signaling instead other conflicting economic factors.

I think you could build a chart like this for Wüsthof Ikon and Shun Premier, showing similar multi-year price stability.

View attachment 270719

Completely agree, but where Shun and iphone differ, is that, once introduced, a kitchen knife remains the same, year after year, whereas iphones, and similar products seem to change almost by the hour. It's a growing market vs. a stable market.. I purchased both a Wusthof Classic Ikon and a Shun Classic Chef knife about 7 years ago, and I still can purchase either of them at about the same price I paid then. A 7 year old cell phone will be replaced by a very different phone under different terms.

 

[ReiHamono]

The dollar is strengthening, also Japan made a lot of bad choice for their economy. They’re about 20 years ahead of where we are going to end up.

 

[drrayeye]

For more limited production suppliers, pricing can be by the batch, and dollar/Yen exchanges can be more taken into account. Still, some strive for price stability comparable to the bigger suppliers. For really small production artisan suppliers, prices by the batch can fluctuate wildly. For example, the HADO lacquer ginsan santoku I just purchased is sold out at my supplier, with a price for the next batch already listed for $60 more--and newer models priced even higher.

 

[sanmateo]

For more limited production suppliers, pricing can be by the batch, and dollar/Yen exchanges can be more taken into account. Still, some strive for price stability comparable to the bigger suppliers. For really small production artisan suppliers, prices by the batch can fluctuate wildly. For example, the HADO lacquer ginsan santoku I just purchased is sold out at my supplier, with a price for the next batch already listed for $60 more--and newer models priced even higher.

it's nice that the artisans—rather than scalpers—are able to benefit from the increased demand for their wares

 

[drrayeye]

How are the Williams-Sonoma exclusives leaked? Do people get them with an employee/trade discount and re-sell, or from some other point in the supply chain ?

I don't know. I got one recently in an unopened box with all papers for about half the listed Williams Sonoma site price. That one was probably what you supposed. Others are offered with open boxes--or no box-- at close to site price. Usually not by an obvious store employee--usually more than one for sale.