81–90 of 338 posts
I sold a very limited run electronics once. Less than 1,000. Most of this is true. The key is to make something niche enough that you can justify that fat margin. Pre-pandemic, it was quite cheap to produce even proof of concept products in Shenzhen IF you knew where to go for quality. Not anymore. 2016-19 was a special period for hobbyists.
> The cost of building a consumer audio product is generally no more than 30% of retail. 30% COGS (cost of goods sold) is virtually a maximum for items sold at mainstream retailers. There’s nothing wrong with this. These are standard ratios, not some dirty secret. The cost of goods sold is only a fraction of the costs that go into getting products all the way into the customers’ hands and supporting them (customer su…
Source: 2021 Annual report
https://ir.mi.com/static-files/b85f34c0-0010-4a8c-94b9-269d8...
In addition to "secrets" there are "mysteries" - like why doesn't anyone make an "Amp" except Sonos, and why is it that one so darn expensive? I guess because they are the only one. https://www.sonos.com/en-us/shop/amp
If I were looking to undercut it, I'd look for a two-part combo, like a $99 WiiM Mini streamer coupled with something like the $329 Emotiva BasX stereo amp. That's not going to get you any of the Sonos-specific ecosystem woo, of course.
I guess I'm the worst type of customer for audio retailers. I recently switched from buying $50-$100 gaming headphones to $5 wired earbuds with a built in microphone. They are still working perfectly after months, and I got a spare for another $5. The reason I decided to try that is because the wires in my headphones always get partially broken after a few months and so I end up with only one channel. And the cheap B…
I luckily realized very quickly that they had gone out of production, and managed to find a case of 24 of them on Mexican Ebay. Each pair probably lasts a little more than a year, so they'll get me through this stage of technology (for around $100.) So instead of buying $100 gaming headphones, buy $100 worth of those (hopefully with a bulk discount.) If you get sick of them one day, they'll make great gifts.
I sold a very limited run electronics once. Less than 1,000. Most of this is true. The key is to make something niche enough that you can justify that fat margin. Pre-pandemic, it was quite cheap to produce even proof of concept products in Shenzhen IF you knew where to go for quality. Not anymore. 2016-19 was a special period for hobbyists.
This sounds interesting, why is this no longer true?
> The cost of building a consumer audio product is generally no more than 30% of retail. 30% COGS (cost of goods sold) is virtually a maximum for items sold at mainstream retailers. There’s nothing wrong with this. These are standard ratios, not some dirty secret. The cost of goods sold is only a fraction of the costs that go into getting products all the way into the customers’ hands and supporting them (customer su…
There's a lot wrong with this, but not in a moral sense.
For all his faults, Elon Musk made a good point about the space industry near the beginning of SpaceX. He asked a team of "rocket scientists" how much a rocket cost. They said something like $100M. Then he asked them to sum up the material costs. Sheetmetal, tubing, rivets, etc... They said something like $500K.
Where did the other $99.5M get spent on, you ask? Inefficiencies such as having PhDs doing welding and riveting instead of hiring contractors with more experience. Even if you say you need aerospace-grade rivets, Boeing and co hire thousands of people with those skills at a much lower cost.
Similarly, if you look at retail prices, the majority disappears into having staff stand around the store while there are no customers, lighting, cooling, retail shopfront rents, etc, etc...
You're not paying for an "HiFi amplifier model X", you're paying for a "storefront in a shopping centre with a HiFi amplifier model X thrown in almost for free."
This issue is most obvious when in some industries, returned items are simply discarded, because they're not even remotely the majority of the total cost! Repackaging and restocking the item would cost more than manufacturing it half way around the world and shipping it across an ocean. That's nuts.
Even EBay and Amazon have only just started chipping away at this problem. There is still enormous inertia.
For example, I recently purchased a flagship TV that costs $5,995 retail. Nobody had it for more than a $500 discount, including online stores that are just warehouses! The actual TV probably cost about $800 to $1000 to manufacture and ship internationally.[1] Where did the other $3500-$4000 go!?
What's happened here is that traditional retail has forced the prices up, and then Amazon -- a near monopoly -- doesn't feel the need to compete on price because they win sales even if they're just a little bit cheaper.
True competition would be if I could buy the TV for manufacturing cost +30%, not manufacturing cost x3.
This won't happen while traditional retail is propping up prices and has no real competition. We need a "SpaceX" to shake things up. Unfortunately, Amazon wasn't it.
[1] This isn't the cost of running the machines in a factory. It's everything up to the point of getting the goods into a cardboard box and on a ship. Design, profit, staff costs, material costs, energy costs, capital, etc...
> The cost of building a consumer audio product is generally no more than 30% of retail. 30% COGS (cost of goods sold) is virtually a maximum for items sold at mainstream retailers. There’s nothing wrong with this. These are standard ratios, not some dirty secret. The cost of goods sold is only a fraction of the costs that go into getting products all the way into the customers’ hands and supporting them (customer su…
Articles like these make me appreciate my business degree, because this list is the basics of any business. 30% COGS, high shipping costs, outsourced manufacturing, big box focusing on low end market, etc is all very normal for almost any industry.
Earlier quoted context omitted.
That's an unfortunate name for a company...
Oh no, they very very very much lean in to it.
> The cost of building a consumer audio product is generally no more than 30% of retail. 30% COGS (cost of goods sold) is virtually a maximum for items sold at mainstream retailers. There’s nothing wrong with this. These are standard ratios, not some dirty secret. The cost of goods sold is only a fraction of the costs that go into getting products all the way into the customers’ hands and supporting them (customer su…
In contrast in 2021 Xiaomi's Cost of Sales (COGS?) was 82.3% of their annual revenue Source: 2021 Annual report https://ir.mi.com/static-files/b85f34c0-0010-4a8c-94b9-269d8...