Author Topic: Bargain Culture  (Read 1676 times)

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Offline kimmy

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Re: Bargain Culture
« Reply #60 on: December 09, 2017, 11:48:39 am »
The need to generate recurring revenue from existing customers is a imperative for any business today no matter what their distribution model. These guys have one product that they sell cheap and provide no added value other than price.

The recurring revenue will come from cloud services associated with their device, as with other network-enabled security cameras.  The low price will help build a customer base of which at least some portion will want to subscribe to the optional cloud services.  This is similar to the model of video game companies who make "massively multiplayer online" games. They give the software away for free, but you pay a monthly subscription fee to play or buy in-game extras. That's basically what Wyze is doing. Nest and Blink are getting people to pay for the subscription and the in-game extras, but they're also charging a large up-front fee for the game itself. Wyze is clearly thinking that Nest and Blink are turning off a lot of potential customers with the large up-front fee, and gambling that they can get more subscribers by selling the camera itself very cheaply.  You're convinced there has to be some kind of secret angle here... I think the angle is pretty apparent.

And once Wyze has established a customer base for their security camera and cloud-based services, that would be a good starting point to expand into other smart-home services. "Know what would work great with your Wyze security cameras? Wyze smoke and CO2 detectors! Works with your existing Wyze account! Get alerts on your smart-phone if something is wrong in your home."

If they establish that there is a market for cheap cameras then the market will be flooded with me-too competition and they will find that building a brand based on being cheap means your customers are very quick to switch to the guy you sells the same thing for dollar less. A 20 dollar camera does not provide a lot of revenue to justify premium service.

The "me too" competitors might be able to offer a security camera with an SD card for less than Wyze is selling their product for. But if a "me too" competitor wants to compete with Wyze or Nest or Blink then they'll be starting at the same place Wyze did, which is to take the cheap hardware and find a way to value-add to put it in the same league as its more expensive competitors. Maybe it can be done, but whichever competitors want to try will be playing catch-up.

This is a completely different business model because they are charging premium prices to cover the cost of warranties and other things that build brand loyalty. The Wyze business model is based on selling cameras cheaper than everyone else.

It is worth noting that Vizio televisions use the Wyze model. They have carved a niche for themselves branding Chinese made televisions and selling them cheaper than everyone else. And guess what: they got  caught selling data collected from their SmartTVs:

I guess they realized there are limits to how profitable a company can be selling cheap hardware and Vizio has the advantage over Wyze in that they selling products with a price point in the hundreds of dollars.

With Wyze, the subscription services make that a bad comparison.  Anker would be a better comparison, because like a TV you just buy a USB hub once and there's no recurring fees.

Can Anker continue to make money doing what they're going?   ... I dunno, can Kershaw?  Anker and Kershaw are essentially doing the same thing here. Kershaw takes a higher margin, but Kershaw needs a higher margin to stay in business. Anker, for all I know, might be one college kid who checks his email a few times a day while he's studying for his classes.

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