On May 11, 2005, at 3:36 AM, Tom C wrote:
How can that work. Losing money on every sale means the higher the volume the more money you lose. Unless of course you're being faceatious. ;)
They might end up losing money when sales are slow but increasing volume can cut costs as they get much better pricing on parts and shipping. The whole supply chain becomes more efficient as the scale increases. This does rely on the product being successful.
Or they might do it just to get their foot into the market (eg Xbox). Of course, the razor-blade model doesn't work with digital cameras unless you make the memory interface proprietary, in which case noone will buy your camera.
In the case of digital camera manufacturers the quantities are already huge and they're all major players, so it may be simply capitalism doing its thing with what I'll call the "chicken" model. People seem to be conditioned into buying mainly on price so if the company has iron b*lls they just need to stick it out and hope their competitors go broke first.
Either way, the CEO will be happy as long as you lose less money than market analysts expected you to. Business isn't about profit or loss anymore - it's about meeting growth expectations.
As an aside, I work for an electronics company and I'll tell you now that there is no money in manufacturing. The manufacturer adds the most value and gets the smallest margin (that's the margin that pays for the product development and other overheads). And when costs need to be cut, guess where the cuts have to be made?
Oh BTW I just remembered this article.
http://www.channelregister.co.uk/2005/05/10/jessops_camera/
The article refers to February so my first thought is that it's just a normal post-Xmas slowdown.
Cheers,
- Dave
http://www.digistar.com/~dmann/
