Does anyone think selling products at cost is a good long term strategy?
After seeing the cost of the Nexus 4, like most people, I was amazed at the value for money. I also write this post from my Nexus 7 with a G.Nex to my side. So as you can no doubt guess, Android (currently) suits my needs.
But with anything I like, I hope it will be around and improving long term. With that, I have to question the wisdom of selling products at near cost, at cost, or at a loss. While we may rejoice as consumers it's a practice that makes no business sense unless you plan to anhilate the market till you are the only vendor left. We all know how good that is for consumers in so many ways. Not every company competing has multiple revenue streams.
Then we come to profit margins. We all know Apple makes such stupendous amounts of profits that drug dealers are reconsidering their profession. But in reality, how many of us know how much profit is needed? I mean real numbers. How much advertising can you do if you sell things with very low, or none existent margins? The S3 is destroying the One X but that's not because it's majorly better. For the first time in a while, the average buyer knows a device other than the iPhone without knowing anything about the device. And we know how good Apple (and other companies like Sony in the Playstation days, Guinness, Coca Cola, etc) are. Can you put your name in people's minds without money to advertise? Palm had the greatest thing we will never see in webOS.
What else may be affected? Hiring top guns? Hiring lawyers? Component quality? Ecosystem branding? R&D?
Exactly how much profit is needed and is selling things with such fine margins really good in the long term?