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Comment by hershel | Hacker News Reader

Business wise, one interesting thing about the G is that it's launched online-only only(or online mostly) ,without big investment in marketing(since the product is so good it markets itself).Those savings are a big part why it's so cheap.

Usually ,in electronics products are priced around 3.5x of their components costs, with most of the cost difference going towards marketing and offline retailers(who than dictate online price). This is usually done in order to get a large volume of orders.

Hopefully the model will shift to online only, offering consumers much lower prices and better products,and a much easier entry point for makers - since getting access to retailers is really hard.

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There must've been a tipping point with regards to consumer savviness and free internet-based promotion by 3rd parties (bloggers, forum commenters) purely on the merits of the device (including its price) that allowed Motorola to decide to release a phone online like this and let it speak for itself.

You're probably right, and maybe smartphones are unique in that case.

I wonder what will happen if amazon would decide to strongly promote online-only (or even amazon only) products, offered at a lower price ?

The problem is that phones actually do not market themselves. Samsung have put out some very nice devices but they're not necessarily any better than the competition from e.g. Motorola, HTC and the Nexus line.

Their dominance is clearly due to superior marketing and saturation advertising.

"Usually ,in electronics products are priced around 3.5x of their components costs, with most of the cost difference going towards marketing and offline retailers" - That's a tad inaccurate. The cost of components is just one cost the manufacturer has. You've forgotten all the other costs around labor, overhead, sales and marketing, storing and moving product. THEN that manufacturer needs to actually post a profit and thus sell the good at a higher price than the costs of its components and sales and marketing/G&A etc.

I think Google's online model only with no advertising would be a cheaper go to market than the traditional way. But no where near the degree you imply. To the point, that isn't responsible for the price difference alone. This phone was being subsidized.

AFAIK, motorola does make a small profit over the moto-g.They're not subsidizing it.

And online only without marketing can offer 35%+ decrease in price, which fits my comment.

It doesn't fit it at all Hershel. 35% makes a lot of sense relative to sales and marketing and channel costs. 3.5X the price of components with most of that being made up in marketing and offline retailer costs is a completely different statement.

35% is half of what's left after cost of components. i consider 51%(35%+) as most.

I think i missed something. I just looked at the book "from concept to consumer" and they give an example of a real product that sold at retail for $50(went to retailer through a distributor) while the manufacturer got only $19 ,i.e. 38%.

If it was online only, it could go for half the price , while offering 24% margin($6) for online sale and logistics(excluding shipping), which i believe is pretty reasonable for that market.

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