MobileRead Forums - View Single Post

jbcohen · 03-15-2011, 08:08 AM

To understand this issue I need to explain what I am told about how a Kobo reader gets to you, the customer, and the many hands its passes through in order to get to you. At the conclusion of this dicussion you will understand why there is a Kobo from Kobo and one from Borders and why they sell at different prices.

The life of a Kobo reader begins at a factory where it is assembled from a group of parts that are bought on the open market. The finished readers are then sold to anyone who wants to buy them at a set price per unit, among these companies are Borders. The readers sold are then shipped by Kobo to the warehouse for that buyer who then adds on a percentage to the price as a profit then sells the readers to the customer. Both Kobo and Borders will decide what their profit margins, the percentage of markup, will be independent of each other then re-sell the readers to you the customer.

What this means for you, the customer, is since each company (presumably) makes an indepnedent decission on how much their profit margins need to be each company (presumably) will come to a different decission. Together with the fact that customers tend to buy from the lowest cost re-seller (the one with the smallest margins) the prices will differ a lot.

Some things that are driving the differences in the prices in Kobos are:

1) The finiacial positions of the re-sellers: gvien the fact that one of the subcompanies of Borders Book Group has declared chapter 11 the company doesn't have the ability to widen its profit margins as much unless chapter 11 officals are going to pay a lot more atention to the company's balance sheets. Kobo by comparison has not declared chapter 11 and instead is a one product company and therefore needs to and has the ability to widen its profits more then borders can.

2) Prominance of the company: Some companies are more visiable to the consumer than others and therefore can not widen profit margins as much as they would like to because customers will simply take their business elsewhere. Borders is a much better known company then Kobo is, how many times do you tell friends that you bought this book at Kobo (you will get funny looks) - probably not you are more likely to tell that you bought it from Borders. If borders raises its margins too far its more likely for customers to abandon them in favor of Amazon or Barns and Nobles while Kobo can raise margins becuase they are not as well known and customers that have decided to buy a Kobo are not as likely to take business elsewhere, such as Amazon or Barns and Nobles.

3) Nature of the product - A electronic reader is not the sort of thing that you buy every week or so, perhaps once a year if you are not lucky. So since Kobo's business is the electronic reader customers will put up with more price hikes since they buy the product less frequently. Borders main business is books which tend to be bought more frequently and prices are more visable. So borders needs to keep margins slim.

All this means that Borders needs to keep profit margins slimer then Kobo and you the customer are more likely to get a better price with them then Kobo. However, before you buy I would recommend that you query several price engines to get the best price such as nextag.com, mysimon.com and shopping.google.com.

03-15-2011, 08:08 AM	#7
jbcohen Wizard Posts: 3,025 Karma: 11196738 Join Date: Oct 2010 Location: Piper College Device: Samsung A21	To understand this issue I need to explain what I am told about how a Kobo reader gets to you, the customer, and the many hands its passes through in order to get to you. At the conclusion of this dicussion you will understand why there is a Kobo from Kobo and one from Borders and why they sell at different prices. The life of a Kobo reader begins at a factory where it is assembled from a group of parts that are bought on the open market. The finished readers are then sold to anyone who wants to buy them at a set price per unit, among these companies are Borders. The readers sold are then shipped by Kobo to the warehouse for that buyer who then adds on a percentage to the price as a profit then sells the readers to the customer. Both Kobo and Borders will decide what their profit margins, the percentage of markup, will be independent of each other then re-sell the readers to you the customer. What this means for you, the customer, is since each company (presumably) makes an indepnedent decission on how much their profit margins need to be each company (presumably) will come to a different decission. Together with the fact that customers tend to buy from the lowest cost re-seller (the one with the smallest margins) the prices will differ a lot. Some things that are driving the differences in the prices in Kobos are: 1) The finiacial positions of the re-sellers: gvien the fact that one of the subcompanies of Borders Book Group has declared chapter 11 the company doesn't have the ability to widen its profit margins as much unless chapter 11 officals are going to pay a lot more atention to the company's balance sheets. Kobo by comparison has not declared chapter 11 and instead is a one product company and therefore needs to and has the ability to widen its profits more then borders can. 2) Prominance of the company: Some companies are more visiable to the consumer than others and therefore can not widen profit margins as much as they would like to because customers will simply take their business elsewhere. Borders is a much better known company then Kobo is, how many times do you tell friends that you bought this book at Kobo (you will get funny looks) - probably not you are more likely to tell that you bought it from Borders. If borders raises its margins too far its more likely for customers to abandon them in favor of Amazon or Barns and Nobles while Kobo can raise margins becuase they are not as well known and customers that have decided to buy a Kobo are not as likely to take business elsewhere, such as Amazon or Barns and Nobles. 3) Nature of the product - A electronic reader is not the sort of thing that you buy every week or so, perhaps once a year if you are not lucky. So since Kobo's business is the electronic reader customers will put up with more price hikes since they buy the product less frequently. Borders main business is books which tend to be bought more frequently and prices are more visable. So borders needs to keep margins slim. All this means that Borders needs to keep profit margins slimer then Kobo and you the customer are more likely to get a better price with them then Kobo. However, before you buy I would recommend that you query several price engines to get the best price such as nextag.com, mysimon.com and shopping.google.com.