Amazon and Google are undermining mobile pricing, and that may hurt everyone

[FormerSlacker]

So no one here in familiar with the concept of dumping and how it can kill an industry?

Android vendors, aside from Samsung, were already bleeding out. Loss leader pricing is going to accelerate the race to the bottom that was already well under way.

Except Asus has actually been making a nice little profit on the Nexus 7. There is absolutely nothing wrong with decreasing margins in an effort to drive sales and make it up through volume.

http://www.zdnet.com/asus-q3-pc-note...ts-7000006613/

[desidealer49]

Except Asus has actually been making a nice little profit on the Nexus 7. There is absolutely nothing wrong with decreasing margins in an effort to drive sales and make it up through volume.

http://www.zdnet.com/asus-q3-pc-note...ts-7000006613/

There isn't. ASUS can definitely survive or even flourish with their model. The only thing wrong is assumptions by others that other vendors will simply die because of it because everyone has different needs/wants and taste.

[ceredon]

What Amazon and Google have been doing is what should be done, Google especially with the Nexus 4's pricing and sales model. Just look at how well the wireless carriers in this country have trained customers to accept terrible, money-sucking plans because they're getting a pittance of a hardware subsidy. There is no reason for phones to cost more now than what a compact digicam did a years ago, and if more customers are willing to just buy the product up front for it's full price and demand a reasonably-priced plan things will improve for everyone.

I can't believe this author went on record to make the "Think of poor Apple! They might have to lower their profit margins! Look what you monsters have done with your expectations!" point.

The intent article wasn't at all about 'poor Apple' given Apple's content deals worldwide and infrastructure they are better positioned than anyone to enter the loss leader business if the chose to. They are actually in a better position for it than google and even Amazon in some ways. They also have a customer base that is loyal so they have a cushion before they would be forced into that position. Apple might eventually have to cut margins but that isn't at all the main thrust of the editorial.

The companies the writer feels bad for, if feels bad is the right term, is every other hardware maker that won't make enough to survive. It's already difficult for them now many barely hanging on. How much worse will it be when they compete against companies willing to scortch the earth and kamikaze everyone? And once the weaker makers are gone, will the larger companies that had the resources to ride out the initial massacre have the margins to push R&D? Or will the try to squeeze every dime and trim R&D, their largest expense. If they all borrow from everyone one else, why invest major money for small returns, especially if the other guy is just going to copy you?

I agree with your hope that this might help soften the carriers. The problem is that it is just moving the subsidy up the chain from the carrier to the manufacturer. The manufacturers can't all afford to carry that kind of load and basically none of them have their own content deals and infrastructure to recoup the subsidy later. It's not viable for most of them. Only amazon, google, Apple and maybe have the bank accounts, content deals and infrastructure to do it and hope to make some money.

[b166er1337]

There isn't. ASUS can definitely survive or even flourish with their model. The only thing wrong is assumptions by others that other vendors will simply die because of it because everyone has different needs/wants and taste.

Exactly, didn't Asus's Q3 earning beat the expectation? This Engadget article is pure crap; ever heard of free market economy?

[aeobikes]

I don't know about anyone here, but I certainly don't care if companies like Acer, HP, lenovo or sony get smacked down in the tablet market.
Their tablets sucked, still suck and will suck.

[kwanyeung20]

I don't know about anyone here, but I certainly don't care if companies like Acer, HP, lenovo or sony get smacked down in the tablet market.
Their tablets sucked, still suck and will suck.

sony's tablet is pretty good... just over-priced

[ceredon]

I don't know about anyone here, but I certainly don't care if companies like Acer, HP, lenovo or sony get smacked down in the tablet market.
Their tablets sucked, still suck and will suck.

Only way they will improve their offerings is if they think there is enough money in the business to justify spending more of development of better product.

[Aznsilvrboy]

So no one here in familiar with the concept of dumping and how it can kill an industry?

Android vendors, aside from Samsung, were already bleeding out. Loss leader pricing is going to accelerate the race to the bottom that was already well under way.

Like who exactly?

[ceredon]

Like who exactly?

Sony has laid off thousands in the last year, and no they can't all be blamed on the SE acquisition or streamlining of the product line. HTC is closing offices and layoff staff. Google is gutting it's Motorola division, already terminating 4000 and more to come. LG was rumoured to be making some cuts but I've not heard what became of them. These are all cuts in wireless divisions. Sure, some of these can be blamed on moving away from feature phones, or mergers, buyouts or whatever. The fact is that their Android lines are not saving the companies. The profits from Android are not growing or even sustaining these companies.

Every estimate I've read says Samsung and Apple together own about 99% of the profits in the wireless sector. That just doesn't leave enough for the rest to fight over and retain a sustainable business. This will be made all the worse by Google and Amazon undercutting everyone to grab marketshare at the expense of profits. Those vendors fighting for scraps of the profit pie will now be fighting against companies willing to lose money intentionally.

[psyko514]

Like who exactly?

I wouldn't say they're bleeding out, but tablets by both LG and HTC were failures. I doubt Sony is doing all too well with their tablet sales either.

[Aznsilvrboy]

Sony has laid off thousands in the last year, and no they can't all be blamed on the SE acquisition or streamlining of the product line. HTC is closing offices and layoff staff. Google is gutting it's Motorola division, already terminating 4000 and more to come. LG was rumoured to be making some cuts but I've not heard what became of them. These are all cuts in wireless divisions. Sure, some of these can be blamed on moving away from feature phones, or mergers, buyouts or whatever. The fact is that their Android lines are not saving the companies. The profits from Android are not growing or even sustaining these companies.

Every estimate I've read says Samsung and Apple together own about 99% of the profits in the wireless sector. That just doesn't leave enough for the rest to fight over and retain a sustainable business. This will be made all the worse by Google and Amazon undercutting everyone to grab marketshare at the expense of profits. Those vendors fighting for scraps of the profit pie will now be fighting against companies willing to lose money intentionally.

Neither Sony or HTC were engaged in dumping. Most of Sony's losses came from the TV division which has taken more than a beating from Samsung and LG. HTC's phones simply didn't sell well, not because they were selling their phones for too cheap. LG actually posted a profit in 3Q so they're not cutting anything. Keep in mind that these companies have VERY deep pockets and aren't going anywhere any time soon.

[Aznsilvrboy]

I wouldn't say they're bleeding out, but tablets by both LG and HTC were failures. I doubt Sony is doing all too well with their tablet sales either.

Don't think they made too many of those anyways. Whatever little inventory they had they can write it off.

[ceredon]

Neither Sony or HTC were engaged in dumping. Most of Sony's losses came from the TV division which has taken more than a beating from Samsung and LG. HTC's phones simply didn't sell well, not because they were selling their phones for too cheap. LG actually posted a profit in 3Q so they're not cutting anything. Keep in mind that these companies have VERY deep pockets and aren't going anywhere any time soon.

I am actually talking about without dumping. They have been trying to sell and make a profit, but Android has not been their savior. The dumping or otherwise selling without a profit engaged in by Amazon and Google is now going to make matter worse than they were. That is the point of the original article. If they were not able to make much of a go of it before, how will they thrive or even survive with normal undercutting taken to extreme levels?

[Aznsilvrboy]

I am actually talking about without dumping. They have been trying to sell and make a profit, but Android has not been their savior. The dumping or otherwise selling without a profit engaged in by Amazon and Google is now going to make matter worse than they were. That is the point of the original article. If they were not able to make much of a go of it before, how will they thrive or even survive with normal undercutting taken to extreme levels?

So if originally you tried to sell for $600 at all and it doesn't sell and you lose money, but then you realized you can sell for $350 and make $20/handset and actually make a profit, why wouldn't you? No one is selling at a loss yet.

[WontonTiger]

If Honda, Toyota and Kia started selling at or below cost, you would see the rest implode and those doing it would find they cannot sustain it forever.

What about Honda, Toyota, and Kia? Would they not implode from operating at a loss for long periods of time?

They are just taking profits away from conglomerates, and this often forces companies to operate more efficiently, and hopefully trim margins off the top.