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> Why are companies driving away people who make multi-thousand dollar purchases with scummy behaviour that nets them spare change? Because high-margin goods a
by arkades 6y ago
> Why are companies driving away people who make multi-thousand dollar purchases with scummy behaviour that nets them spare change?
Because high-margin goods aren't spare change. Look at the razor:
I can sell you the razor at cost-plus for $20 on a $19 manufacturing cost. I can sell you each individual razor cartridge at 90% profit for $1. At the end of the year I've sold, say, 5 razors and 50 blades, for a total of $150.
On the one hand, the razors made up the bulk of my gross revenue ($100/$150).
On the other hand, looking at the actual profit I've generated, $45 came from blades and $5 came from razors - that is, 90% of my profit came from those "pennies" that the razors brought in.
If you can strong-arm people into buying high-margin goods, that's a strong bonus to your bottom line, even if the absolute price isn't that high.
Let's plug a fridge into those numbers.
A nice new GE fridge can be had for something in the vicinity of $800 (sears website is showing me stuff $600-$1000, so let's just split the difference). Amazon has GW RPWFE filters up at $50 a pop.
You buy a fridge, what, every ten years? Every twenty? Those filters "should" be replaced every quarter? Let's be generous and say every half a year.
Those filters generate the same profit as the fridge at 16 years out, at the same profit margins. At asymmetric profit margins (say, 30% vs. 5%) they've produced profits equal to that of the fridge in a handful of years.
These aren't pennies.
- erichurkman 6y agoDon't forget to account for planned obsolescence. If a fridge lasts 10 years, what happens when GE stops producing those filters? You start looking at new fridges. The GE fridge pissed you off, so you upgrade to Fisher & Paykel… turns out they are produced by the same company, so they don't care that GE 'lost' a customer. ( https://en.wikipedia.org/wiki/Haier https://en.wikipedia.org/wiki/Haier )
- kube-system 6y agoYeah, here in the US just about every brand at any big box store is from Whirlpool, Electrolux, or Haier.
- xxpor 6y agoIncluding the Korean brands?
- dehrmann 6y agoI've definitely seen more LG and Samsung appliances than I did 20 years ago, and not just some off-brand in the back corner.
- kube-system 6y agoI stand corrected, I forgot about LG and Samsung
- xxpor 6y agoAh ok, I thought it might just be the white label manufacturers went even deeper than I thought :)
- beckler 6y agoI work at GE. They sold off their appliance vertical, with brand rights, to Haier years ago. And with lighting being recently sold off, GE doesn't manufacture any home appliances anymore.
- grogenaut 6y agoGiven I shave every few weeks blades last me 3-5 years.
- arkades 6y agoThat's cool. I go through about two blades a week. I'm not sure either of those facts is relevant to the discussion.
- dreamcompiler 6y agoFridges (and washing machines and just about every other "long-lasting" home appliances) only last about 5 years nowadays. In the case of the fridge, the compressor fails and replacing it typically costs more than a whole new unit. In the case of washing machines and other appliances, it's the CPU board or the main motor which degrades from heat after about 5 years, and a new one costs almost as much as a whole new appliance. This behavior is so consistent in new appliances that I'm convinced companies are designing in the failures on purpose, because they've figured out that consumers will tolerate it and because the dearth of actual major appliance competitors leaves consumers no other choice.