How Is a Case So Cheap?

Tuesday, December 9, 2014

I recently purchased a cell phone case for the grand price of $2.99. This princely sum covered not only the case itself, but also shipping and handling. Given that most stores sell such products for ten times the price, people were shocked by my online shopping prowess. How could the manufacturer make any money at that price? Wouldn't it go broke?

Maybe, but maybe not.

When I received the case, I discovered that the build quality was good. The materials utilized were strong, and the product was carefully stitched together. That is not to say that it was perfect. There were clearly some design flaws. I immediately noticed a few oddities:

• A row of four tiny holes had been drilled in an odd location
• The magnetic closing mechanism was attached in a rather non-ergonomic way
• The imprinted logos were nearly impossible to read

While these oddities did not offend me at the $2.99 price point, a higher price would have certainly quashed any interest on my part. My working theory is that the product was manufactured correctly, but the designs and specifications were either misinterpreted or poorly thought out. The problem only became apparent after many units had been produced.

The company was then faced with a decision. It could either pay a disposal company to destroy the imperfect cases, or it could try to sell them for whatever it could. After all, the production costs for these cases were already sunk. Any income over and above the cost of shipping would benefit the company's bottom line. So the firm made the only choice that was economically rational and sold the cases at bargain basement prices.

Everyone in the transaction came out ahead. I received a well constructed (but imperfect) case at a low price, and the firm was able to get rid itself of poorly-designed cases without having to contract with a disposal company.