I stopped at Walgreens last week to get some new blades for my razor. Usually when I go in to buy new blades I end up just buying a new razor with blades, since it usually costs about the same. This time was different…I bought an electric razor instead.
It’s an Eltron brand electric razor… a cordless rechargeable razor, which actually holds a charge quite well. It includes a flip-out beard trimmer, and a separate nostril trimmer came with it too. The price was $9.95. It was not on sale by Walgreens, although the standard Eltron packaging said “normally $49.95 now specially priced” (or something to that effect.)
I figured it was going to be junk, but it works just fine, and it even has some nice features like being wet/dry so it can be used in the shower. Now, I would guess that Walgreens likes to make around a 35% margin, which means they probably purchase them for $6 or $7 dollars. The manufacturer needs to markup cost of goods by at least 3x to make a profit, cover shipping, assembly, support and testing, so that means the actual cost must be no more than $2 (or if a distributor is involved it could be a lot less!)
How can Gillette, Norelco, Braun and others compete? They sell electric razors for $50-$150…are they really that much better? I guess the answer must be features and quality, but it wouldn’t surprise me if these companies weren’t hurting pretty badly from such low cost competition.
It’s not so hard for low cost manufacturing companies to copy features and then compete on price. It’s a lot harder to make the investment in R&D to develop differentiating features. I just saw some numbers from Gartner that shows Apple’s success with smartphones. Apple is king when it comes to creating high margin, high feature products with AWESOME user experiences. They are now #3 in the smartphone market with the fastest year over year growth BY FAR of any player.
Apple isn’t resting on its laurels. I’m sure they are determined to be #1, and at the rate they are growing it could happen within a few years. Why are they growing so quickly? They keep adding value to their products. For instance, Apple hasn’t been afraid to change the user interface on their consumer electronics. They were one of the first to embrace touch technologies and now they are embracing voice technologies. Their iPhones are not just phones, but media players, video cameras, navigation systems, and much more as well…and this will continue to grow. Apple will be responsible for taking the smart phone and turning it into a consumer appliance for every room and every purpose imaginable. There are already 85,000 apps in the iPhone store and it’s growing by thousands every month. I don’t think low cost competitors can steal away this business!
Watch out Eltron…when my iPhone has a built in electric razor, I’m throwing you out!