New Business Model, Or Smoke And Mirrors?
from the gee,-that-sounds-familiar dept
Jonathan Schwartz of Sun is out giving his talk again about how subscription fees are the way of the future for buying anything. One of his favorite examples (he’s used it for quite some time) is that people will buy cars the way they buy mobile phones, where the device/car itself is free or close to fee, but there’s a regular subscription fee that’s locked in (he also likes to talk about how people will download “horn-tones” for their car, but that’s a different story). He goes on to point out that for a car, this fee would be $220 — noting that the carmakers have already thought about this. Beyond asking the obvious question (um which car are we talking about here — because I imagine that a BMW is going to cost me more per month than a Hyundai), isn’t this already how many people buy cars? It’s called a loan or a lease. They buy the car with a little bit of money down, but pay regularly to cover the rest of the cost of the car. In fact, I’m sure, for some people and some cars, the amount is somewhere around $220. So, this isn’t particularly amazing. It’s not even new. It’s just taking an existing business model and changing what you call everything. Who knew it was so easy to be considered a visionary?
Comments on “New Business Model, Or Smoke And Mirrors?”
Just silly
There are so many reasons why the comparison doesn’t work. Cheap cell phones are giveaways (or near) with service because it is so cheap to make them now. As cars get increasingly more complicated, it is unlikely production costs will fall off anything like phones did. Service lock-in for a car also seems more iffy than a phone.
Further, constant raising of the bar on safety devices and design in cars adds not only cost but require bulk and reliability. A cell phone isn’t expected to protect you in a crash with another 4000 pound rolling machine.
The biggest difference is that when you are done with a cell phone it is already considered obsolete and needn’t have any value. Unless you drive the piss out of a car it had better have some value left in it when you are done, or else someone is losing money. That requires factoring in residual values and such. As the posting said, they already have that arrangment. It is called a lease.
Makes Sense
Actually, it totally makes sense. My cell phone probably cost a few billion to design (adding in all the components that went into it and the service operating it). So the car is no different. Sure, the costs are different, but so are the dollars involved. Do I think a car will ever get to free? Maybe not, but I don’t think that’s Schwartzies point. His point is subscriptions change basic economics, which I think they do.
Re: Makes Sense
So for the past few hundred years, basic economics has never heard of subscriptions?
Subscription Cars....
Maybe this guy has never heard of zipcar or flexcar. They are both being used by a lot of people I know who live in DC and NY.
No Subject Given
Mike,
I think what you’re missing here is that the car guys are trying to figure out how to get MY money. You see, I don’t make a monthly car payment … because my car is paid for (I bought it used, for cash). Millions and millions of people don’t make monthly car payments, because they bought inexpensive used cars for cash.
If you could get a brand new car, for about the same amount as you pay on a loan for a used car, wouldn’t you go for the new one? Even if it meant perpetual monthly car payments?
I’d never do it, but then again, I can afford not to get sucked into that horrid model (crappy service once you are a customer, constantly ever-inching upward prices even AFTER you sign a contract stipulating a price, lots of expensive addons “horn tones” … puleeze).
But for a lot of low-income workers, this might be their only entry into a new vehicle.
Only problem is, there is an entrenched dealership base that will hear none of this. These people have money, power, and a desire to see the status quo unchanged
Namely, the ability to sell Average Joe a car for one price, but sell the exact same car to Mohammed or Dnetia at a wildly inflated price because, you know, they’re “credit risks.” Oh, and you have to take the undercoating, or you don’t get the car.
Won’t. Ever. Happen.
Re: Leasing
Tell him that business model is called: ” A LEASE ” … duh
Re: No Subject Given
If ” Mohammed or Dnetia ” ARE credit risks, THEY should pay higher for a loan, not me.
I’m not into subsidizing welfare momma’s ride to the crackhouse …