Should companies explain how they arrive at a gadget's cost?

[Renoktation]

There was a time not too far back when smartphones used to cost not more than 500 dollars. Today, it costs more than 1500 dollars to get a flagship smartphone. I tried to understand the rationale behind such an abnormal increase in prices and found that a typical flagship smartphone should not cost more than 400 dollars

The only valid explanation might be the added cost for R&D & patents. And if that is the case, then it should be made clear as how such costs are affecting the total cost.

We need to push these companies to be more transparent with pricing part. The thing that affects me most is that we have stopped asking questions.

 

[garisa]

People are paying that much for smartphones, and thus the companies make phones that they are going to charge them this much. Simple as that. Capitalism. A company is here to make money, not to make us happy for a fair price.

 

[Renoktation]

A company is here to make money, not to make us happy for a fair price.

I am not asking them to reduce price. I am just asking them to be more transparent about pricing because it has shown an unnatural increase over the last few years.

 

[me just saying]

There was a time not too far back when smartphones used to cost not more than 500 dollars. Today, it costs more than 1500 dollars to get a flagship smartphone. I tried to understand the rationale behind such an abnormal increase in prices and found that a typical flagship smartphone should not cost more than 400 dollars

The only valid explanation might be the added cost for R&D & patents. And if that is the case, then it should be made clear as how such costs are affecting the total cost.

We need to push these companies to be more transparent with pricing part. The thing that affects me most is that we have stopped asking questions.

why??? do you quesion and want transparancy for the high prices of cars and other consumer products? why shoulds phones be any different? besides, most actual prices of parts are considered confidential because of competition.

 

[tgp]

I don't see why they should be transparent. The price is set. I decide to buy or not to buy. Retail 101 says that a product is worth what we're willing to pay for it.

In any given store, some products are sold at 1,000% markup, and others are sold at break even prices or even a loss. It's what the market will bear.

 

[Renoktation]

why??? do you quesion and want transparancy for the high prices of cars and other consumer products? why shoulds phones be any different? besides, most actual prices of parts are considered confidential because of competition.

Can you name one car whose price has tripled in the last 5 years.

 

[Renoktation]

I don't see why they should be transparent. The price is set. I decide to buy or not to buy. Retail 101 says that a product is worth what we're willing to pay for it.

In any given store, some products are sold at 1,000% markup, and others are sold at break even prices or even a loss. It's what the market will bear.

Ideally, market should balance it out out and price should return to an optimal level. The problem here is that the number of players are less and they have kind of become monopolistic. So a 1000% MRP should not sell in an ideal economy. The reverse is happening here.

Status quo can always be shifted. Things can always be improved. But first we have to start questioning.

 

[tgp]

Ideally, market should balance it out out and price should return to an optimal level. The problem here is that the number of players are less and they have kind of become monopolistic. So a 1000% MRP should not sell in an ideal economy. The reverse is happening here.

Status quo can always be shifted. Things can always be improved. But first we have to start questioning.

Sure, but that has nothing to do with pricing transparency. I really don't care why a certain product is priced the way it is. If I agree to the price, I buy it. If I don't, I don't buy. Me knowing the cost and the manufacturer's and/or vendor's profit margin has nothing to do with it.

If enough people decide not to buy, then the price comes down and/or the product gets taken off the market. If it sells like crazy, then the price goes up. It still has nothing to do with pricing transparency.

 

[Renoktation]

If enough people decide not to buy, then the price comes down and/or the product gets taken off the market. If it sells like crazy, then the price goes up. It still has nothing to do with pricing transparency.

May be if companies are more transparent about prices, many people won't buy an overpriced product like "crazy". It's all about empowering consumers with information. That's all I am asking.

 

[tgp]

May be if companies are more transparent about prices, many people won't buy an overpriced product like "crazy". It's all about empowering consumers with information. That's all I am asking.

Assuming this is true, why would a company do something that would cause their customers to not be willing to pay a higher price? That is counterproductive, and goes against every law of retailing. On the contrary, retailers try to get their customers to pay as much as possible.

Products like airplane tickets can easily have different prices for the same product. If you were to ask every passenger on any given commercial flight how much they paid for their ticket, you would probably get almost as many different answers as how many passengers you asked. For products like iPhones on the shelf with sticker prices, pricing differently depending on a customer's means is not feasible. However, Apple (and other manufacturers) have figured out ways to get wealthier customers to spend more money. Here is how they do it:

Look at the difference in price for an iPhone model with 64GB of storage and one with 512GB. The iPhone 11 Pro Max 64GB retails in the US at 1,099 USD. An iPhone 11 Pro Max 512GB is 1,449 USD, or 350 USD higher. A person with less means who wants an iPhone will get the 64GB version because that's all they can afford, even though they know that the limited storage may cause them grief down the road. A well heeled customer doesn't care as much about the price, so they'll spring for the 512GB version to ensure they'll never suffer from insufficient storage. From what I've read, the actual cost to Apple for that extra storage is 109 USD. However, the wealthy customer is willing to pay 350 USD for it, so why should Apple charge less?

Let's test your theory here. I'm going to give you some inside information here: grocery stores typically sell toilet paper, milk, and eggs below cost. Now, report back in a month or two and let me know if you started buying more of these items now that you know you're getting a bargain.

Either way, there is absolutely no reason for a business to be transparent to customers about costs. Sure, I can understand why you would be interested. I would be interested too. But at the end of they day, I don't really care. It is up to me to decide whether or not I buy.

 

[Renoktation]

It is up to me to decide whether or not I buy.

It will be a lot easier to decide if you have information. Laws of retailing is not theory of relativity. It can and should be modified.

 

[tgp]

It will be a lot easier to decide if you have information.

In that case, I'm sure you'd buy a Surface Duo if you're comparing the cost to the sticker price. R&D cost is spread out over the resulting devices. The devices from the first round of the Surface Duo will bear the entire cost, which I'm sure is high. It will likely also be low volume. Microsoft is probably losing a lot of money here.

As more and more devices are sold, the R&D cost per device will go down. But right now, that cost alone is probably astronomical.

Sometimes you read articles about how an iPhone selling for $1,300 costs Apple only $450. Those are totally false. They generally are including only component costs. They ignore the costs in assembly, handling, packaging, storage, distribution, advertisement, R&D, and probably many more costs that I don't even know about. Many costs are "hidden".

 

[Renoktation]

In that case, I'm sure you'd buy a Surface Duo if you're comparing the cost to the sticker price.

I would never ever buy a 1400 dollar phone when I can get a decent smartphone today with comparable perfomance for less than 400 dollars.