I can’t leave this out there without presenting a more comprehensive commentary about product cost and pricing. I was involved in planning and delivering manufacturing cost, including manufacturing value add overhead and materials procurement, and my compensation was based in part on the earnings per share of a Fortune 500 company. I also worked with “below the line” cost when assigned to product development, and I eventually became able to discuss and argue most any P&L entry with the corporate cost accountants. I am an engineer who retired as a senior operations manager with international scope. Cost was just one element that had to be understood as we developed five year business strategies and annual tactical plans.
In fact many of the statements made here serve only to confuse in that terms like “loss” and “cost” are not sufficiently defined. It seems that what I know as “base manufacturing cost” is presented as “cost”, and the difference between that and sale price are termed “markup”, and mostly in exaggerated fashion. It’s been awhile and I can’t remember the material differences between base manufacturing cost and cost of goods sold, but I’m thinking they’re pretty much the same, At this level, cost captured includes what is paid to suppliers for materials and subassemblies, depreciation on capital for manufacturing, manufacturing engineering and quality support, packaging, transportation to distribution point, factory facility expense, and direct labor, along with every other dollar needed to keep the factory running or otherwise acquire salable product. I can’t think of an instance where williampierce1 is wrong in that I know of no product in our business ever sold at less than this base manufacturing cost, but it could have happened.
“Volume discount” comes about from “economy of scale” and is savings per unit realized when indirect manufacturing cost not directly volume dependent can be allocated over a larger number of units. The cost of the building, the maintenance tech, the quality manager, and the cover mold don’t change whether you make 100 pieces or 1000, so higher volume lets cost for these indirect resources to be assigned at a lower cost per unit, up to full capacity. Suppliers of salable product are expected to pass this savings along to volume buyers like retail chains. Yes, every company does it. I would have fired any of the purchasing agents who worked for me 30 years ago if they had not negotiated for it.
In any case, it’s unreasonable to treat what is spent beyond base manufacturing cost or COGS to get product to a customer as “huge margin”. Cost beyond “cost of goods sold” is said to reside “below the line” on a P&L, or profit and loss statement. Would there even be a business without executive management, advertising, product planning and development, advertising, and sales? Taxes? Compliance cost? Corporate counsel? Employee Relations? Accounting and other professional services? All are real cost that must be recovered before paying dividends to shareholders, which is the whole point.
A common healthy business might generate an annual operating income or “profit” of 5-10%, and the high end of that is very successful. Once ALL cost is captured, loss leaders ARE real, and sometimes entire divisions lose money to be carried by others…once again, if ALL costs are captured and depending on accounting methods. Such businesses are sometimes termed “razor blade businesses” after Gillette, who is known to sell razors under cost to make net profit from sale of razor blades, which are indeed sold for much more than base manufacturing cost. I worked in the printer business, so I’ll let you figure out how I know this stuff.
BTW, I see that Lowe’s earned $692 million on $22.3 billion in sales in 3Q for a profit margin a little over 3%. It was considered a good quarter, and without a perceptible huge margin.
The Wyze hardware looks like a great value to me based on my experience with 1 cam, right up until I got here and seem to be learning that it is inseparable from their servers. It seems entirely possible that this hostage taking is critical to their business model and that the hardware profitability is insufficient to sustain the business, which would be unfortunate. I agree with timothynott in having a desire to acquire a standalone system based on Wyze product independent of their servers. I, also, would pay more.
As it is, I’m thinking deal breaker for expansion beyond my one, particularly given no PC functionality. I don’t expect to ever get over how presumptuous it is of Apple and Amazon and Microsoft and Google to sell us products that become mainstream critical but that cannot be used without having them all up in our business. It suits me fine if all the non-monopolies who try this crap get boycotted and go belly-up…not wishing for you current Wyze customers to find yourselves holding a dozen paperweights.
Can anyone point me toward a system uninterested in my perpetual devotion…and Windows capable?
Sounding like Elevation now…
Quoting a Wyze rep stating their profit margin and that they do NOT lose money on their hardware sales. If I were merely speculating I would have said so.