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> >“Buy mattress at $400. Sell at $1,000. Refund/return 20% of them. Keep $400, on avg. Then spend $290 of that on ads/marketing and $270 on admin (finance, HR,
by mcny 7y ago
> >“Buy mattress at $400. Sell at $1,000. Refund/return 20% of them. Keep $400, on avg. Then spend $290 of that on ads/marketing and $270 on admin (finance, HR, IT). Lose $160. Repeat.”
I don't know much about the business side of things but asuming the $290 on marketing and the $270 on admin don't scale less than linearly (preferably much MUCH more flatlined), then the $160 loss could be closer to a $300 profit. Even if you lower the sale price by $299 (extreme scenario), you still get a dollar in profit.
At the end of the day, I think the product has to be consistently good enough and the branding will "stick". I imagine the goal is to gain enough market share.
I'll share an anecdote: I bought an InstantPot for a decent discount a few years back on Black Friday. I've personally "sold" at least three since to people I know. I'm sure the cheaper brands are likely almost as good as InstantPot but for me to take a chance on them, I'd need to trust they have a no questions asked return policy.
- mrosett 7y agoThe marketing spend actually scales faster than linearly. These companies do a lot of direct response advertising where acquiring the marginal customer becomes more expensive as you scale up.
- wrsh07 7y agoThis is often the case for many companies acquiring the marginal customer, because the ones for whom it is a good fit will find it first (very cheap to acquire - they're looking for you). Then there are customers who only need a trial (or a small amount of information "what is it") before they come on board. Finally you get to tough sells: people who already have a good enough alternative - why would they want to pay the same amount as someone who had no systems in place? The marginal benefit to them isn't as high. As you expand out from your original customer base, each new ring of customers is more expensive to acquire. This is the situation Casper, Blue Apron, and many others face. Meanwhile, their competition has also ramped up - providing other alternatives (which might fit niche customers better)
- PascLeRasc 7y agoSame with Warby Parker, I've "sold" my entire family and 3-4 friends on buying a frame, and everyone's loved them. If you have vision insurance it's typically ~$50 after reimbursement for a fantastic set of frames and great customer service. I've gotten frames fixed a year after buying them for free with no appointment or anything. I'm not interested in trying anything else or hearing about in-network frame allowances, it's just not worth my time. I'll be a Warby customer as long as we're both alive.
- wayoutthere 7y agoWait until you find out about Zenni Optical... they're so cheap I don't even bother with vision insurance anymore. My prescription hasn't changed in decades, and at Zenni prices I can buy a new pair of glasses (frames + lenses) every month for less than a single pair from Warby. I've had my favorite pair (that were originally <$20 with lenses) for about 5 years, so durability isn't an issue. Their customer service is similarly good in my experience. After being a Zenni customer for years, Warby Parker's prices seem really high. I've tried their glasses on at one of their retail stores, and I don't see much of a difference in quality.
- Marsymars 7y agoInstant Pot is a cheap brand already. They basically became popular by being cheap and running frequent sales. Something like the Breville Fast Pro is the non-discount alternative and runs about 2.5x more than the typical Instant Pot.
- asdff 7y agoInstant pot is also a meme at this point. There aren't any subreddits with 150,000 subscribers for the Breville Fast Pro.