Hikvision Direct Mega Deals Start

Author: John Honovich, Published on Nov 30, 2015

Merry Christmas... from China.

Earlier this month, IPVM exposed how Hikvision had tried to hide its new direct end user sales offering / 'company'. Now, Hikvision has slashed pricing to new record levels, as first raised in a member's discussion over the weekend.

In this note, we examine the offering, its impact and explain how this illustrates a radical different strategic approach for Hikvision compared to every other mega video surveillance manufacturer.

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Comments (26)

Konstantin Avramenko

11/30/15 03:09pm

It does not make sense to enter in a price war for Axis and other Western manufacturers. At the same time, the technology and quality levels of Chinese manufacturers are growing. What can "Axis" do?

John Honovich

IPVM | In reply to Konstantin Avramenko | 11/30/15 03:17pm

I think Axis and the other big brand manufacturers need to get their pricing closer. Instead of being 50% to 100% more than equivalent Hikvision, get in the range of 15-20%. Most buyers trust Axis more than Hikvision but the delta is too much for most to justify.

If they don't fight back, they are going to quickly end up in situation where they lose the majority of their dealers to Hikvision and others willing to match Hikvision's price trajectory (our 2014 results show that trend and our 2015 results, to be published this Wednesday, show this trend even further).

Assuming Axis understands this risk, perhaps they hope Hikvision will blow themselves up or retreat at some point (Chinese economy tanks, Hivision realizes they need to make profits, etc.). But if that does not happen soon, Axis will shrink into a niche provider. Sony, Panasonic, Pelco are all already far down that path.

Konstantin Avramenko

In reply to John Honovich | 11/30/15 03:35pm

I think Axis and the other big brand manufacturers need to get their pricing closer. Instead of being 50% to 100% more than equivalent Hikvision, get in the range of 15-20%.

John, is it possible at all? They will need to cut their costs and for sure it will affect R&D that will mean the same failure in a long run.

John Honovich

IPVM | In reply to Konstantin Avramenko | 11/30/15 03:58pm

It's a revenue / total profit vs gross margin percentage issue.

For sure, if they cut their prices, presuming their product costs stays the same, their gross margin percentage declines. That's not good.

On the other hand, by doing so, surely they will sell more units. What is hard to figure out is: Would the increased volume of units sold make up for it in terms of total revenue and total profits?

The bigger risk I see is that each Hikvision defection is an opportunity for Hikvision to upsell former Axis dealers into Hikvision's higher end products damaging Axis' core, e.g., 'I see you are having great success selling TurboHD analog kits for $299, that's great. I also notice the local hospital is one of your customers. Do you know that we have great high end super low light and WDR cameras that are just as good as Axis and half the price? etc., etc."

Michael Goodwin

In reply to Konstantin Avramenko | 11/30/15 10:02pm

depends which price you are saying they need to get close to... the Gray or the local models

I agree that I can't see Axis/other Western's being able to touch the China price, people in the West want to drive BMW's, be paid enough to afford Mansions etc..

Security Cam stuff is not really it's own field anymore, it's getting pushed into General Electrical/IT/Computers... and in that field everything gets cheap fast.

The future is that it's just another thing that gets plugged into the network, so brand isn't important, Hik are already all over the 4k

Undisclosed Integrator #2

In reply to John Honovich | 12/01/15 12:45pm

Are you sure they're not making profits? There has been a recent round of recruiting going on for local sales engineers in the US. This has to be backed up by capital coming from somewhere. Their volume of product sold must have to be insanely high at these prices.

John Honovich

IPVM | In reply to Undisclosed Integrator #2 | 12/01/15 12:53pm

"This has to be backed up by capital coming from somewhere."

Oh, there's capital coming from somewhere. China.

According to their own financial statements, they are absolutely printing money from their domestic Chinese operations (i.e., Chinese government infrastructure projects, Chinese 'safe city' projects, etc.).

Undisclosed #3

In reply to Undisclosed Integrator #2 | 12/01/15 02:59pm

Their volume of product sold must have to be insanely high at these prices.

The old "sell at a loss, make it up in volume" joke applies.

Michael Goodwin

In reply to Undisclosed Integrator #2 | 12/01/15 08:08pm

making profits?

I bet they are... bet the price to make these things is atleast 50% less than they sell them for... Tech ain't worth crap these days, and the king of making tech for nothing is China.

in my views Tech sold from elsewhere costs a motsa due to the sellers bundling in RnD costs + massive markup into everything, look at the Mobile phone teardowns... amazing how cheap it all is

Undisclosed #3

In reply to Michael Goodwin | 12/01/15 08:13pm

Tech sold from elsewhere costs a motsa due to the sellers bundling in RnD costs + massive markup into everything...

What exactly is one supposed to do with R&D costs?

Michael Goodwin

In reply to Undisclosed #3 | 12/01/15 08:19pm

R&D costs?

I was under the impression that the whole China game was copy other's stuff so there are very little RnD costs :)

John Honovich

IPVM | In reply to Michael Goodwin | 12/01/15 08:15pm

"bet the price to make these things is at least 50% less than they sell them for..."

You'd lose that bet. Hikvision is a publicly traded company and their reported gross margin is ~40%.

"due to the sellers bundling in RnD costs"

This certainly helps and I agree. Because Hikvision sells millions of cameras inside China, their overhead can be spread out over a lot larger base, meaning that they can profit with lower margins / prices.

"Tech ain't worth crap these days"

However, local sales, marketing, support, engineering, etc. costs a lot and this a very costly area where they have no advantage.

Michael Goodwin

In reply to John Honovich | 12/01/15 08:22pm

gross margin is ~40%.

I'm referring to cost to make the hardware alone.

However, local sales, marketing, support, engineering, etc.

of which atleast in the rest of the world, I suspect Hik have very little. wonder what Hik's non hardware costs are like compared to others...

Undisclosed #3

In reply to Michael Goodwin | 12/01/15 08:29pm

Gross profit IS the sum of the direct costs of the production of goods.

It does not include sales or marketing.

Michael Goodwin

In reply to Undisclosed #3 | 12/01/15 08:35pm

direct costs of the production of goods.

Do you believe them?

Undisclosed #3

In reply to Michael Goodwin | 12/01/15 09:55pm

Do you believe them?

Public companies are under pressure to make themselves look as profitable as possible.

Accounts of such companies pulling out all the stops maintain the appearance of profitability, including deceptive reporting, are numerous.

I am not aware of any public company that has been accused of putting in all the stops and intentionally under reporting profit as a long term strategy.

So, while I may not believe their GP is 40% I see no reason to believe it is higher than that.

Michael Goodwin

In reply to Undisclosed #3 | 12/01/15 10:00pm

Fair enough, I just doubt how much it costs for all this stuff, when I've tested 3mp board cam's that I've bought sub $50 and are essentially the same thing that is in the Hik's...

Mike Weymer

11/30/15 03:24pm

I dont know what to think...199 for a recorder and 4 cameras...the harddrive itself is ~$50... is the system/equip any good?

It seems like the camera industry is setting itself up for failure like the banks did before the recession. Question is, when will it crash, and what do you think will happen?

John Honovich

IPVM | In reply to Mike Weymer | 12/01/15 12:30am

"Question is, when will it crash, and what do you think will happen?"

It's a good question. I don't know because it entirely depends on how long Hikvision can continue doing what it's doing.

If Hikvision does, I think most of the smaller cctv camera manufacturers will exit the industry, go bankrupt or collapse to dramatically smaller levels. And the bigger brands, assuming they have some products with some differentiation, will shrink to become more niche premium providers.

But I do not know how long Hikvision can do this. Eventually, they will want to make profits or even have to make profits (if there are real disruptions inside China).

Thumbnail profile pic

Ethan Ace

IPVM | 11/30/15 08:33pm

Update: Despite only being available for the past few weeks, EZVIZ cameras and kits have found their way into features in Amazon's Security 101 guide next to Nest and Canary.

We'll be tracking these to see if they reach the top sellers in Amazon's security and surveillance category, which has been dominated by Dropcam and Nest for some time despite plummeting user ratings.

John Honovich

IPVM | In reply to Ethan Ace | 11/30/15 08:53pm

Also, under video quality, Amazon is recommending the 16 channel Hikvision Ezviz kit:

Undisclosed Integrator #1

12/01/15 10:31am

Proves you cant trust these guys...

The key thing will be in 3 years time when we see how well Hikvision lasts. We get a lot of out the box faults, image sensor issues, reseting back to default issues we don't see with other manufactures. Sure we jumped on the Hik bandwagon, we are about to jump off, when you factor in revisits due to problems you might as well have installed a quality brand in the first place.

The channel is fragmented with grey imports and clones, this is just another fragment which will further confuse the brand.

John Honovich

IPVM | In reply to Undisclosed Integrator #1 | 12/01/15 11:36am

Overall, we are not seeing notable quality problems for Hikvision products. This is based even on our most recent integrator survey, overall member comments and speaking with distributors. Indeed, the general consensus so far is that Hikvision is on the same level of camera hardware quality as the big Western brands.

Michael Goodwin

In reply to John Honovich | 12/01/15 11:54am

we are not seeing notable quality problems for Hikvision products

You know what, we are getting better support from the Hik Sellers in China than the local channel

no questions asked returns, way... and I mean weeks faster returns than local suppliers, we had Geovision take two months to get something back (Went back to local supplier, then local supplier sent it to Taiwan or whatever)

John Honovich

IPVM | In reply to Michael Goodwin | 12/01/15 11:58am

Michael, thanks. Interestingly, the two of you are from outside North America, so that could be a factor. Inside NA, as we discussed recently, Hikivision has built up a formidable, and quite expensive, sales and support machine.

John Honovich

IPVM | 12/03/15 12:40am

Update:

Now, it's also $199 at Sam's Club:

Samsung, time to lower your prices and up your resolution:

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