What does the Gillette Safety Razor Company and my totaled Lexus LS430 (see my previous blog for the gory details) have in common? This is not a trick question. In 1901 King Gillette took out a patent on the Gillette Safety Razor, a device that made him into a millionaire before the stock market crash of 1929 turned him into a pauper. The basic idea was to sell people something that they would use up and have to replace. The safety razor fit the bill to a (safe) T. The razor you kept. The blades you kept on replacing.
In the beginning Gillette even gave away the razor hoping to hook its user on the blades. Business schools refer to it as the razor and blade business model. It was and is an incredibly successful model. Think cheap printers and ink cartridges that cost more than the printer. Or every battery operated device you’ve ever owned: LED watch, laptop computer, portable GPS, hand held frother.
What has that got to do with my totaled Lexus? Apparently, car parts are just great big razor blades.
When I went to the body shop where my car was holed up, the manager showed me the gap where the driver’s side rear door used to be.
“We could repair this car,” he said wistfully.
“Why don’t you?” I asked.
I loved the car. It was the perfect car for me. For the first time in my life I was threatened with the vanity of becoming attached to an inanimate object.
“It’s not worth it to the insurance company,” he shrugged.
“I don’t get it,” I replied. “Surely, it would be better for them to have you repair the damn thing that have to pay me to buy another one.”
He shook his head. “We looked all over the country for a used door. Couldn’t find one. That meant a new one. It’d cost $8,000. The black leather on the inside of the door is another $2,000. That’s $10,000 just for the door. By the time we added in the trim, straightened the paneling and repainted, the cost would have been close to double that. It was cheaper for the insurance company to pay you than repair the car.
That’s when the high cost of replacing a part on an automobile began to sink in.
“How much,” I asked him, “Would it cost if instead of buying a Lexus I were to buy the parts and put it together, not counting labor, of course.”
He said that the rough rule of thumb was 4 times the cost of the car. Today a new Lexus LS460 goes for roughly $70,000. So we are looking at a replacement value of $280,000. The car is the razor; its parts, the blades.
He told me that this is not just a head game. Apparently 30% of Toyota’s business is in replacement parts! Must be the same with other manufacturers as well. They sell the cars cheap. Then they pound the hell out of the inevitable need for replacement parts, whether from accidents or normal wear and tear.
No wonder my insurance company totaled an otherwise perfectly fine car.
I went to a Lexus dealership in Sharon, Mass. to see if I could find another LS430. The dealership is near the Patriot’s football stadium, now called Gillette Stadium.
When you drive up to the dealership, right out front barely twenty feet from the sign that says Lexus is a road sign that says Gillette Stadium. The juxtaposition of those two signs has new meaning for me.