Let’s take Samsung for example. Buying the S23 ultra from samsung’s website (Kuwaiti region) costs around 417 Kuwaiti Dinar (≈350 after discount). However, buying the same exact phone from a vendor in Kuwait costs only 220KD. Almost half the price.
I understand that large vendors benefit from economies of scale but the difference is huge! Why is that?
In: Technology
Vendors buy in huge bulk so they get massive discounts savings for their purchase. Now for a single phone it doesn’t make sense to give such a huge discount.
Yeah, that’s not how it works in the rest of the world. Either it’s smuggled past customs fees and taxes, it’s stolen, used sold as new, or it’s fake. I don’t think tax avoidance alone is going to cut it to sell S23U for 715USD
hey I want to buy a thing. Sure, here is the cost to produce it plus the cost to ship one thing and also make a profit
hey I want to buy 5,000 of the thing. The material and labor costs are the same but shipping is less and it is likely that the selling entity will offer a discount
Samsung needs to have good relations with vendors, so they agree to not undersell them. Usually the prices offered by the manufacturer are MSRP and can’t be lower.
When you say a vendor, do you mean a cell carrier? Or an electronics retailer? Cell carriers often discount phones to lure in customers and make back the money through the service over time. Retailers can sometimes offer discounts/sales that the manufacturer won’t themselves offer because they don’t want to compete with their channel vendors they depend on.
If the vendor is legitimate, the vendor is purchasing a large quantity of a product (bulk) and gets a reduced price per unit. The reducing in price can very depending on the negotiated quantities and estimation of sales.
Simple example:
If an individual product sells for $100 through the distributor (company), the assumption is made that direct sales from the distributor will be infrequent (lack of incentives, marketing, etc). The cost to produce the item could be as cheap as $20 per, so due to infrequent direct sales, you maximize the profit and gain $80 per sale. So maybe they sell 100 units, that’s $8,000 in profit. If said product is now bought in bulk by a vendor, the distributor might sell at $80 per unit because the vendor estimates it will sell 1,000 units. The vendor then prices the product at $90 (price incentive), so the vendor makes $10 per unit, and the distributor made $60,000 from the bulk sale. The hope for the vendor is selling their inventory to make $10,000 in profit, but again the distributor already made (or was promised) $60,000, so they make more by distributing large quantities to vendors rather than individual sales.
Your local vendor might have agreements with local cellular networks in order to further subsidize the phone price. Without subsidies, it doesn’t seem like 220KD is possible, regardless of economies of scale.
Most manufacturers need a distribution network and don’t really sell that much direct to customers.
In those cases, their own website is simply there to provide a price umbrella for their distributors.
You have now in mind that the “real” price is 417 Dinar, and any vendor is cheaper.
There are a couple possibilities.
1. The Vendor is offering a promotional price, possibly in conjunction with requiring the purchase of a secondary, more expensive product or recurring subscription for a certain period (like a phone plan). Essentially they’re offering to sell the phone at a steep discount and make it up on the backend of the deal with a higher priced ongoing service.
2. The Vendor is purchasing a significant quantity of the product and receiving a steep discount, which they are then passing on to you as the customer as a way to increase business.
3. The vendor has excess inventory and is anticipating the release of a newer phone that will significantly reduce sales of the current product, so they have slashed the price to clear inventory.
4. Some retailers will disguise “Open Box” returned items and sell them at steep discounts to get them out of inventory. They may have defects ranging from minor cosmetic to major functional.
5. Regional/Non-Regional Pricing – some producers might sell to certain regions at a reduced price to try and secure more sales even though incomes in the area might be lower. So the vendor might be getting a much better (Regional) price, but the manufacturer might be offering a higher (Global) price.
6. The Vendor is doing something illegal or scammy.
I’m going to stop there because the longer I think on this the more possibilities I think of.
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