dslreports logo
site
 
    All Forums Hot Topics Gallery
spc

spacer




how-to block ads


Search Topic:
uniqs
1373
share rss forum feed


DigitalRain

@teksavvy.com

Cable modem costs in Canada...

I was just at Amazon.com, and I noticed that cable modems are far less expensive in the United States than they are in Canada. Could somebody tell me what the Hell is up?



JCohen
Premium
join:2010-10-19
Nepean, ON
kudos:11
Reviews:
·Start Communicat..
·TekSavvy Cable
·Rogers Hi-Speed

Everything is cheaper in the US.

It's the same reason that the cell phone carriers in Canada offer 3 year contracts and US carriers offer 2 year contracts and exact same subsidies on new phones as in Canada.

ANSWER: Because they can and people will continue to buy them.


yyzlhr

join:2012-09-03
Scarborough, ON
kudos:4
reply to DigitalRain

I just looked and the difference is minimal. For a DOCSIS 3.0 modem you're still looking at $70-100.

Even if it was cheaper there is a much larger market in the US, as it is more common for MSOs there to allow their customers to bring their own modem. In Canada generally only TPIAs allow customers to activate modems from other sources.



elitefx

join:2011-02-14
London, ON
kudos:2
reply to JCohen

AND there's a 300% retail markup so the average $100 modem costs $25 from the wholesaler.



DigitalRain

@teksavvy.com
reply to yyzlhr

We should make it so that these things are required by law. And if they fail to push the firmware update for TPIA clients, we should allow Maude Barlow to forcibly nationalize their infrastructure. Come to think, it's pretty moronic for the state to control the sale and distribution of a consumer good like alcohol while the private sector is allowed to monopolized essential infrastructure within sectors of the economy where the principles of perfect competition do not apply.



Mike2009

join:2009-01-13
Ottawa, ON
kudos:3
Reviews:
·TekSavvy DSL
reply to JCohen

said by JCohen:

Everything is cheaper in the US.

It's the same reason that the cell phone carriers in Canada offer 3 year contracts and US carriers offer 2 year contracts and exact same subsidies on new phones as in Canada.

ANSWER: Because they can and people will continue to buy them.

Everything? Definitely not. Try pricing DSL modems and you'll see we pay less.


Teddy Boom
k kudos Received
Premium
join:2007-01-29
Toronto, ON
kudos:21
reply to elitefx

said by elitefx:

AND there's a 300% retail markup so the average $100 modem costs $25 from the wholesaler.

I hope you are joking.

The retail markup at discount computer stores maxes out at 15-20%. The ISPs selling Docsis 3 at $100 are getting a little more, maybe 30-40%.

The manufacturing cost of a Docsis 3 modem is probably higher than $25 before factoring in the distribution channels (shipping and markups).
--
electronicsguru.ca


elitefx

join:2011-02-14
London, ON
kudos:2

2 edits

said by Teddy Boom:

The retail markup at discount computer stores maxes out at 15-20%. The ISPs selling Docsis 3 at $100 are getting a little more, maybe 30-40%.

The manufacturing cost of a Docsis 3 modem is probably higher than $25 before factoring in the distribution channels (shipping and markups).

Well, I've had an independent retailer tell me he paid $25 for a $100 part and if you Google "retail 300% markup" you see it's a common practice. Take the AMD HD7970 - $619 at release, $379 now and the retailer still makes a profit. IMHO It's a racket. Always has been.

I mean, when you open up a modem, what could possibly be worth $100 inside?

Maybe you're right. Maybe it's not the retailer but somebody is hauling in the bucks. Buy a mattress set and get a 48" LED TV Free? Somebody is getting something for nothing.

mediajedi

join:2011-12-23
Toronto, ON

I've worked in manufacturing, distribution/wholesale, and retail in both the computer and pro video industries and I wish this "300% at retail" mark-up existed. In all honestly if a product (like a cable modem) cost the manufacturer $25 to make they would probably sell it to a distributor or wholesaler for roughly $50-$60. They would in turn sell it to the retailer for $75-$85, would would then sell it at $100.

The manufacturer usually makes most of the profit. They need to cover not just the cost to build the product, but the cost of development, support, certifications, and other misc costs.

Most retailers in Canada strive to secure themselves a %20 profit margin (most don't even get that high).

In the case of a product where the price has gone down dramatically it usually means the retailer is now purchasing the product from the wholesaler (or direct sometimes) at a lower price. Sometimes the wholesaler or manufacturer will give money back to the retailer in order to facilitate this lower price.

Niche products like super high end video cards may have a higher profit margin across the board but no retailer is making %300 on most computer equipment.

Cables and accessories are usually a little higher margin.



Teddy Boom
k kudos Received
Premium
join:2007-01-29
Toronto, ON
kudos:21
reply to elitefx

said by elitefx:

Well, I've had an independent retailer tell me he paid $25 for a $100 part and if you Google "retail 300% markup" you see it's a common practice. Take the AMD HD7970 - $619 at release, $379 now and the retailer still makes a profit. IMHO It's a racket. Always has been.

Retail in general is nothing like the computer parts business in particular. Growing up, I was always told that the average retail markup is 100%. However, once you start looking at specific sectors, you'll find vast variation. The markup on clothes is often 1000%. The retail markup on that AMD CPU though, 15%.

Quoting the price range over the life of the product is completely pointless. There are a hundred different factors influencing that pricing (recouped development costs, manufacturing process refinements, changing market conditions). Irrespective of why the price changes, it certainly has nothing whatsoever to do with markup at the retail level.

As for where the money goes.. I'd guess at $10+ for the CPU, another ~$10 for the RF section, another $10+ for the other electronics (RAM, flash, PCB, other board level parts), and another ~$10 for the plastic box, cardboard box, power adapter and network cable. Call it a little under $40 in manufacturing costs. Then give the manufacturer $10 profit, and the distribution channel another $10 in costs/profits.

But hey, if you know where I can buy DCM476 for less than $50, I'm all ears. I could sell thousands of them
--
electronicsguru.ca


Teddy Boom
k kudos Received
Premium
join:2007-01-29
Toronto, ON
kudos:21

2 edits
reply to mediajedi

said by mediajedi:

Cables and accessories are usually a little higher margin.

Ya, it is worth distinguishing that. Lots of accessory stuff is 300% margin markup. That comes from the same store, but it is a completely different business.
--
electronicsguru.ca


elitefx

join:2011-02-14
London, ON
kudos:2

Well, thanks guys. Just thought I'd throw it out there and see what the real deal was.............



somrandomguy

@distributel.net
reply to elitefx

said by elitefx:

AND there's a 300% retail markup so the average $100 modem costs $25 from the wholesaler.

I like your unrealistic view of the world. That's not how electronics work. Clothes? Sure. Electronics? HAHAHA oh my sides.


random

@teksavvy.com
reply to elitefx

Apple being one of the most profitable "lifestyle accessory" electronic manufacturer and they don't even make 300% margin on their iCrap.

There are all kinds of "teardown BOM" analysis on consumer electronics that shows the price estimate and they show you an idea of what the profit margin is instead of your baseless speculation.

e.g. iPad mini here: »www.isuppli.com/Teardowns/Market···als.aspx
Cost breakdown with detailed component values: »www.isuppli.com/PublishingImages···ipad.jpg

Retail: $329, Bill of Material + manufacturing: $198. The difference is made up of profit, distribution, marketing, business overheads etc.


Cloneman

join:2002-08-29
Montreal
kudos:4
Reviews:
·TekSavvy DSL
·Bell Fibe
reply to DigitalRain

amazon.com is a price leader in the U.S. and they have a lot of variety.

It's usually possible to obtain similar pricing (+/- 15%) for many products in Canada via other retailers. There are some exceptions:

- special promos
- niche or hard to find items (like cable modems for purchase directly by consumers, premium products like headphones and camera lenses)

- things like Advil, toothpaste, clothing, shoes, cars where manufacturers and retailers just take advantage.

There's also higher sales taxes (and more sales tax enforcement), and generally higher shipping fees, and perhaps less convenient warranty /RMA policies in Canada.

However, the lesson to take away here is its generally possible to get similar pricing and service if you know where to look, and when possible, don't encourage companies that charge 20% or more on a regular basis to Canadians, or severely limit their catalog of products available to us.



Davesnothere
No-BHELL-ity DOES have its Advantages
Premium
join:2009-06-15
START Today!
kudos:7

4 edits
reply to DigitalRain

 
Too much generalizing going on in this thread.

Ya can't ALL be right.

Actually, the markup on different commodities can be (and usually is) VERRRRY different, and in MY experience as a former computer store operator, complete computers and major parts have the slimmest markup, sometimes less than the sales taxes (which were 15% for most of MY tenure), and the less expensive that an item is at retail, the larger of a markup is acceptable.

Cables, at the opposite end of the spectrum of what we sold, were one of the few things on which we COULD make a decent margin (sometimes 3 or 4 times our cost), but we had to sell an awful lot of them for the DOLLARS of profit to add up to something significant.

As for modems, or other computer parts and accessories recently priced around $100 retail in Canada, I would say that the final retail merchant may make 20 to 25 dollars of that 100 these days, but some in larger cities, stores are very willing to settle for less margin, hoping/praying to make it up on volume.

If they do not make make it up on volume, they'll often be gone before your mfr's warranty is finished.



DigitalRain

@teksavvy.com

You sure they're making so little? By that standard they'd be making nothing in the United States. Moreover, why doesn't amazon.ca leverage its volume to undercut the high prices in Canada by reducing their prices to amazon.com levels?


Eug

join:2007-04-14
Canada

said by DigitalRain :

You sure they're making so little? By that standard they'd be making nothing in the United States. Moreover, why doesn't amazon.ca leverage its volume to undercut the high prices in Canada by reducing their prices to amazon.com levels?

They still have to bring in, store, market, and ship the product. Canada is a huge country, bigger than the US, but with 1/10th of the population. The economists say that Canada will always be more expensive than the US for stuff like this on average. It shouldn't be 30% more expensive, but pricing won't be identical.
--
Everything Apple