Originally Posted By: Gary Allan
The problem I had with the whole deal is that there typically isn't "competition" for a given product ..it's the presumed limited production of given products that the herd stampedes for.
For example: Somehow whomever produced "Tickle me Elmo" created a mad drive for the thing. You were willing to kill for it regardless of price. You had to get out early and with a vengeance to get one.
It's was the same with Nintendo ..Xbox ..PS2 ...all competing for your choice ..but not truly competitive for the price of those offerings across the whole retail sector.
So essentially the demand is infinite and the price is fixed by the guys who ordered the production about 9-10 months earlier.
Do you guys recall Teddy Ruckspin? I forget the retail price ..but it was LARGE for 1984-85. If you looked at the fine print on the warranty, you merely sent your broken Teddy to some address ...with a $35 processing fee. This paid for the warehousing and shipping of all the unsold Teddy's. Essentially they gave you another brand new Teddy R ..and made a profit off of that too.
I don't think Teddy R. ever went on sale. He was just superseded by another "new must have if you love your child" product.
Welcome to Marketing 101. The time to market factor is the most important part of money making for toys, gadgets (toys), cars (cars are toys), electronics (also toys), cell phones (toys), fashion (toys), and other toys for young and old early adopters who are willing to pay for it.
Typically the profit margins are very very high at the first several months/weeks of the product introductions. If you miss that window, you are making bread crumbs or losing money.
Take hard drives for example. When a new model/capacity/speed first came out, they usually make 80% more profits, then it gradually lower to the typical profits, then in the end when you are behind your competitors or no longer hot. You have to do rebates to get them off the shelfs.
All when they cost the same to make (or about the same).