Expect prices on Chinese Violins to rise

[pahdah_hound]

Beijing had been under strong pressure from its trading partners, especially the United States, to abandon the yuan's peg of 8.28 per dollar, which they said undervalued the currency and handed Chinese exporters an unfair advantage on world markets.

I would expect prices on Chinese violins to dealers to rise by 10-20% within the next 90 days.

Jesse

[FINPROF]

What will be intersting is whether there is a spillover to other violins - e.g. old German trade violins, and the prices of these substitutes follow.

The hedge funds have been going crazy speculating on the yuan.

[hanxiao]

jesse, have followed your auctions on ebay for sometime. man, i can't believe you don't get paid just to show up there. you are one entertaining and articulate dude. many times i am afraid to bid because i figure you are too well known that there is not enough juice left by the time i get there, lol.

on another note, i take exception to your suggestion that the violins from china to the dealers will cost more due to the currency issue. i truely think the demand is not there to warrant that. supply way over demand. or, to put it another way, i wonder if the dealers "dare" to increase the price even if they are really squeezed by the chinese.

[pahdah_hound]

Thanks for the very nice note. I can list at least 30 violins I have sold over the past year that would have sold for 2x as much on another day. If one looks like a really good deal, it often is. Enough advertising!

Your point is well made about supply vs. demand. I am not familiar with the supply issues, although I see fairly good demand for cheap violins. From what I have seen, many dealers ask 4x the cost in a retail setting, so for a $999 package, the cost is likely $250 or so. If it goes up to $300 would a dealer just absorb the additional $50 in cost on the sale to maintain the retail price point? But if the market is currently saturated, the higher cost, lower volume producers, will be the ones to get squeezed. That is unfortunate. Perhaps if Chinese manufacturers attempt to maintain their margins on less attractive currency exchange, the quality will suffer. I can't believe that there will be no impact on the market with higher costs of doing business.

Jesse

[pahdah_hound]

If prices rise on the low end, prices will be driven higher across the board. There is no question decent, new Chinese violins hurt the market the contemporary European makers of trade violins, and I assume hurt the market for the old stuff, also.

Jesse

[hanxiao]

jesse,

1. in no way would i suggest your listed violins are not good valued items. in fact, i think your listing are as transparent as they can be. you get so much attention that the final number, at least on that day, reflects a fair price in the market. i look forward buying some from you one day, because i trust your quantitative and qualitative description. one day soon, that emotional connection to one of your listings will prompt me to buy at any price, lol.

2. agree with your overall analysis on the chinese violin. the cost of manufacturing for the chinese makeres remain the same in regard to the currency situation. the bottom line is their profit margin for export. if the US distributors have a good supply in stock, the pricing issue may not come into the picture that fast. further, agree with you that it is tough to tell if the chinese will swallow the lower margin due to exchange, or come up with lesser quality models at the same price.

[Fellow]

I don't know what Chinese (exporters) will do or will not do. Jesse simply and honestly pointed out the currency factor.

All other things said were speculations. No one has to swallow anything. /yuen/

[hanxiao]

huh?

[T_Rocca]

Yuen mean its a theory based on the currency change only. None of the predicted changes had actually show up yet

[hanxiao]

rocca and yuen, understood. i was just having a conversation with jesse on china. my interest in china is personal because i have business dealings there. my interest in the petrochemicals there is affected second by second by many different things...crude price, currency, supply/demand, cycles,etc. my interest in the IT industry there is affected most by consumer demand. i am not qualified to talk about chinese violin with authority, but my theory is that the currency factor may not affect wholesale price in short term because the ebay indicator tells me that there is a glut. too much of a so so thing. there could be several outstanding, world class luthiers in china, but they have to fight the reputation of those fellow makers who are boiling and roasting the wood and serving you a finished product faster than a McD drivethrough.

[sweetmusic]

What I think a lot of people overlook is the cost of finding these superior instruments (travel, translation fees, time) and the cost of shipping (cheaper by container: $0.69/# if you can fill a 20' - but slower: up to 3 months if your business is in MA), much more expensive by UPS or DHL (recently I paid $900 to have 12 unfinished violins, and 100 bows shipped from Beijing). Sure the instruments are less expensive there than similar Europeans. But the cost of going over there, researching them and having them shipped from China often make this enterprise a challenge for most suppliers, and result in higher pricing on the shelf.

[Fellow]

Hi Hanxiao,

I don't know where is your idea coming from. If I go to China today, I would just get lost on the street. Never mind of assessing how the Chinese luthiers making their violins. Have you been in China, honestly? It is easier to get lost than in New York City. Believe me.

I do not know what is going on there.

so, I say very little of anything about

Chinese products,good or bad. Just to be on the safe side .

/yuen/

[sweetmusic]

I know this wasn't directed at me, Yuen, but I have been to China, several times. In fact, I'm going back in October...it is not so hard a country to navigate if one has good local assistance

[hanxiao]

i was born in beijing, china, now living in NY region. i have no problem believing you that you will be lost in china. it is changing so fast in some metro areas there that even i get lost because the streets are changing!

hate to put jesse, my admired ebayer seller, on the spot since he brought up the subject. he did not just announce the currency rate change as you indicated. He further made a statement regarding a possible and rather specific price appreciation in a defined short term. i happen to disagree since i have nothing else better to do. his opinion is based on his judgement. my, mine. it is just like he and i started debating over the future of a stock. sure, what we say is so called educated guess. but in the process, if we learn something, then the trip is worthwhile. since you are labelled "old hand" and i am a "stranger", let me have some breathing room, ok? regards

[hanxiao]

thanks for that info. i guess what is confusing to many is the range of different quality of violins from china. maybe i am mistaken, but i doubt if there is even one dealer that can venture into getting 1000 usd violin by the 40 foot container. in the recent past, we have been shipping energy saving light bulbs by the containers because we know they are less durable goods and the demand is clearly there during the energy crisis in ca.

the only scenerio that i can see is that someone would ship one container of 5 usd violins and then distribute it across the usa for 10 bucks. however, judging by the ebay sales of low end chinese violins, i think it is a very tough biz to be in.

with that scenerio, if the price per unit goes up to 5.5, i do not see the US consumers hurt by it much. to me, paying 30 or 35 dollars per violin should not be too much of a struggle.

[Fellow]

Thank you, Sweetmusic.

First hand information is important. I think. /yuen/

[pahdah_hound]

and I am an addict....

I think we should all have opinions and when they diverge there is reason for discussion and debate. I think it is boring if everyone agrees. The real issue is whether costs drive pricing or market forces of supply and demand drive pricing. Currency costs are real, as real as wood and labor. The glut of new violins on eBay is not, in my opinion, the real violin market. Even with 5000 listings at any one time, and 90% of those for inexpensive Chinese goods, it is only a tiny fraction of the market. There is plenty of demand for anything that is differentiated from the usual slop. I have sold some Chinese violins for between $1000 and $1500 on ebay. They certainly weren't the usual stuff and they were excellent values for the buyers. But eBay is dwarfed by the market that retail shops serve. Big rental dealers put thousands of Asian violin packages into the hands of young students every year. Many shops make rentals their primary business.

It is my belief that makers are already operating with slim, competative margins, and will need to increase prices on the wholesale level. If there is over supply, than that would support my opinion that margins are already tight. I believe that the retailers might absorb currency related price increases but the makers cannot. Would a 15 percent reduction in gross revenue for the makers be cause for price action-I think so. Would $2 a month increased rental charge dissuade a parent from signing up their kids? I think not.

Time will tell, and discussion helps clarify my ideas.

I don't really care myself as I do not deal in new instruments. I do think my inventory of old stuff increased in value for the fall market based upon the strengthening Yuan. I already sell more to the Far East than any other region of the world except California. There are Chinese dealers agressively buying old European and American violins. They can now happily pay more.

Jesse

[hanxiao]

good post and good thoughts. again, i want to clarify that my opinion below is based on my experiences outside the violin circle.

in all of my dealings with USA buyers, so far everyone put in an offer in USD, not in YUAN. this is significant because the mind set is such that if home depot give me one US dollar, what can i make with it? i would think that the large volume lower quality rental type chinese exporters also base their business on USD, not on YUAN. in my experience and opinion, the first thing that may go in the event of rising costs or lower profit margin is..........you guess it, quality. i would think it is not that difficult to cut corners to produce a 5 usd violin, based on the 6 usd violin. the chinese manufacturers are smart enough to tell you, no problem, we will make less, but you may have to help out by buying more, and meanwhile, cut one part out of the violin making process. you know the difference by look between a light bulb that lasts 7 years versus one that lasts 5 years, assuming you cannot trust the label?

further, i believe the currency change is in the neighborhood of 2-4% max.

in my opinion, the supply of chinese violin is unlimited in the foreseeable future, which by itself will put a heavy brake on price appreciation from the artistic aspect. you simply do not know when the next better violin will come up.

it is a much safer bet with older european violins.

[Fellow]

I like your conclusion that older European violin are of better value. Why it is necessary to degrade

Chinese product to make a point. I doubt you know anything about China . It is a very big country. If I live till 100 I still do not know much.

(Light bulbs lasts for 7 years?) Have you done experiment? Honestly. Average about 1000 hours.

for your information /yuen/

[pahdah_hound]

I agree with most of your points. However, even if everything is priced in US dollars, the dollar buys a bit less labor and material for the factory paying expenses in Yuan. If the factory pays its employees and suppliers in dollars then they are effectively an American company operating offshore. My point is that the US Dollar will buy less Yuan today than last week. If sellers convert their USD payments into Yuan to pay their bills, their margin is squeezed as they get fewer Yuan than last week. Will they simply take less? Maybe, if there is unlimited supply as you suggest. If that is true, Chinese makers will eventually take over the general marketplace for violins completely. If, as I suspect will be the case, the quality continues to improve and the cost remains low, there will be few large European makers left to compete in the new violin market. Gliga, Otto Klier, and others must be delighted by the revaluation of the Yuan, and the stabilization of the dollar in relation to the Euro. I must believe Chinese makers feel the opposite.

Jesse

[hanxiao]

in no way am i degrading chinese violins. i am just saying things that are echoed by probably everyone on this board, that is, chinese violin serves a great value if you are looking for 30 dollars violin, but for higher end, the chinese models cannot compare with older europeans. at least for the next 100 years. i am chinese, and i have been frank.

i have tried to be as civil to you as possible, so stop throwing knives. who has been quick to judgement here is up for others to judge.

go to your home depot and look up a compact fluorescent light bulb and see the life span for yourself. try to find one that is not made in china. if you decide to buy one, i say: thank you.

[hanxiao]

hear this: i agree with most of your points as well. i can only offer my one line to my fellow countrymen: it is the quality, stupid.

when are you going to put up another violin on ebay? let me know when you come up with a great 1/2 one.

[sweetmusic]

I don't buy finished 4 strings from China. There are too many excellent companies in North America doing just that and I could never compete with volume pricing. I stick to bow hair, unfinished instruments, and 5 string violins/violas. It's a niche, I know, but what I can offer is personal attention. Because I go to the factory and pick out the products myself, I know what the customer is going to get well in advance. And I'm involved in every step of the process from research to meeting the maker/manufacturer, to purchasing, shipping, packing and handling. It's a long and laborius process...but very rewarding in the end. A happy customer is my ultimate goal, and I have had better success working with Chinese suppliers than any from Europe or S. Korea. And yes, I have been doing this for a while...

[Fellow]

++++++++++++++++++++++++++++++++++

hear this: i agree with most of your points as well. i can only offer my one line to my fellow countrymen: it is the quality, stupid. ( Hanxiao)

+++++++++++++++++++++++++++++++++++++++++++++++

I know there are smart people in this world and who are also

knowledgeable in light bulbs (incandescent).

Here is a problem for them to figure it out:

In a building (inside) there are three identical looking switches to control one light outside. Only one switch is actually working.

Which one? If you allow one to check three time outside, he can find it without too much of a problem. Ordinary people may need two trips to find out. Smart people ,someone like my fellow countryman, claims only one trip. How? /yuen/ (Hint: Incandescent.)

[hanxiao]

awesome! great to see a guy from MA venture into world and come back with goodies. i have always wondered if it is too much to ask (cost, practicality,etc)to incorporate sound into a website and in your case, have sound quality samples of the 5 strings violins as demonstration showing the entire range.