Wednesday, March 27, 2019

Replacing with the Same Model

I think it has become a trend: consumers replacing broken appliances and computing devices with the same model they had.

This is hardly the behavior that manufacturers and retailers expect. They expect shoppers to be looking for the latest, most advanced designs. But this isn’t always what shoppers want. The same way that you might postpone the purchase of a replacement for a device until the device actually fails, you might choose to replace the device with the design that you are already used to.

The purpose is to minimize the disruption. You don’t have to learn something new when you replace a device with another one that is exactly the same. There are no new processes to learn, no working habits to change.

There can be emotional reasons to keep things the same. In a world of constant change there is some relief when even one small change can be postponed. On two occasions I remember making a dumb mistake that destroyed a kitchen device. I bought a replacement that was not just the same model but the same color so that I could pretend that the error and damage had never happened.

It is the resistance to learning that seems to be the deciding factor, though. Since last year, iPhone sales have been sluggish because potential buyers were put off by the large number of new features. When combined with an ultra-high price and a high degree of uncertainty about the usefulness of the new features, people decided to hold on to their old phones for a few more years.

The same effect can be seen with devices as prosaic as coffee makers. I just today sold a coffee maker online, and I got a higher price than I would have guessed, comparable to the prices shoppers paid for them when first released five years ago. It surely helped that I am not a coffee drinker and had never used the machine I was selling. The most likely reason for the purchase is that the buyer wanted to replace a broken machine with a new one that was just like it.

I can relate to that kind of thinking when I look at my desktop computer, a Mac Pro made around 2010. That makes it nine years old as I write this. A more efficient Mac Pro was introduced just three years later, but the difficulty in configuring it, along with a new higher price, dissuaded me and most of the computing world from buying it. Instead, millions of computer users are waiting for the new-generation Mac Pro to be introduced next, probably this year.

When the 2013 Mac Pro came out, I was working on one of the original 2006 Mac Pro designs. Those became obsolete around 2015, and I have upgraded by buying old machines on the used market. It was an easy adjustment for me to make. I could literally slide the hard disk drive out of the old Mac Pro and into the new one, then carry on almost as if I were working on the same computer as before.

This approach has its limits. Eventually, Apple’s macOS will no longer support the 2010 Mac Pro I currently use, and it has the other problems you would expect in a nine-year-old computer. Last week I had to replace the optical drive after it failed. One of the chips, a memory chip I think, has become unreliable when the computer is cold, and I am working around that problem by never turning the computer off or allowing it to sleep. That is hardly an efficient strategy, but the energy costs are lower than those of buying another computer, even another 9-year-old computer on the used market.

Similar problems arise with the old coffee makers. A coffee maker is not so sturdy that it is likely to keep running for another five years, but if it does, it will eventually become hard to find the supplies for it. But even a few years of postponing an inevitable change may be worth it if it allows the user to skip an entire generation of technology, so that a whole set of skills never has to be learned.

Manufacturers gain more sales by introducing new models and new features every year than they lose by turning away potential buyers who would rather have the same thing as before, so the regularly scheduled design upgrades are not about to go away. Buyers who want to replace a broken device with something identical will mostly have to navigate the used market. In the bigger picture, this is a good thing. Fewer raw materials are needed for factories and old equipment is delayed in getting to the landfill.

In some cases there are market opportunities to provide devices that mimic popular designs that are no longer available. The most popular iPhone form factor ever was that of the iPhone 5, 5c, and SE. Now that the iPhone SE has been discontinued, there is an opportunity for a manufacturer to provide a product that resembles the discontinued phone as closely as possible. Consumers might choose that product if they believe they can avoid the learning curve that goes with finding their way around a new design.

Or maybe not. Maybe phone users who break their iPhone SEs will buy used iPhone SEs as replacements. Maybe Apple will fill this niche itself with a new model that copies much of the look and feel of the iPhone SE.

Products are more diverse and complicated than ever, and the complexity is a burden on consumers. It is no surprise if they are responding by looking for ways to reduce the complexity.

Wednesday, March 13, 2019

Lumber Liquidators Settles Over False Statements to Investors

At the height of its formaldehyde scandal, Lumber Liquidators issued a blistering public denial. It said that its flooring materials passed tests. It said workers at the factory where the flooring was made had nothing to do with its manufacturing. It said it had stopped purchasing flooring from the factory at issue. The denial sounded unlikely at the time, and we now know none of it was true. Virtually the entire statement contradicted what company officials had known all along. The lies were intended to mislead investors, the SEC ruled, and the company has now agreed to pay a $33 million fine.

The fine is nearly the same amount the company paid in settlements with consumers who faced a risk of various illnesses including cancer from the chemical exposure. The proportions reflect the priorities of U.S. law, under which misleading investors is every bit as serious as intentionally harming public health.