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The Race to the Bottom

Writer's picture: TeleportTeleport

3D printer surrounded by filament

There's a conversation that has been circulating in the 3D printing world about the so-called "race to the bottom." It's a term that some manufacturers use to describe a scenario where businesses engage in price wars, continually lowering their prices to stay competitive, potentially to the point where they can no longer make a profit. This idea was highlighted in an editorial on 3DPrint.com, where George discussed the race to the bottom, and how it's something that many in the industry are trying to avoid. I’m not here to rehash that article but to offer my perspective.

The concept is simple: when companies compete solely on price, it leads to a cycle where one company drops their price, the other follows suit, and the race continues until both companies are selling below their cost of production, with the only difference being the raw material cost. The result? Both companies go out of business. However, this view is far too simplistic. It assumes that price is the only thing that matters when it comes to consumer choices, and that simply isn't true.

Take, for example, Tangled filament. It’s priced at $10, which many would say is part of the race to the bottom, as it’s a U.S.-made filament cheaper than overseas alternatives. But here's the thing: instead of engaging in a price war with the competition, we decided to embrace it. We went to the bottom of the market, accepted it, and found ways to make it work.

How? By focusing on operational efficiencies, branding, and exploring other ways to benefit from our position. The 3D printing industry is often led by engineers, who are not always the best business minds because they tend to prioritize product features and quality, both of which can be subjective and overblown. What the industry misses is the need to think like a retailer: sell a cheap item that gets customers in the door, and then upsell them on something else with higher margins.

This is exactly what we’ve done with Tangled. Filament itself is not immediately profitable, but it helps us move through inventory faster, and it gives us goodwill with the community. Additionally, we’ve created an efficient internal process that leverages Tangled filament in our own production. It essentially pays for itself by allowing us to keep a quick turnaround time.

Moreover, while Tangled filament isn't highly profitable, we use it as a stepping stone to more profitable avenues. We’ve added complementary products, like desiccant drying packs, and we’re looking into membership programs that offer benefits like free shipping. These strategies help us balance out the low margins from filament and make the entire operation more profitable.

The key takeaway from the race to the bottom discussion is this: it’s not a doomsday scenario. Yes, it can be dangerous if you’re only competing on price, but there are ways to turn even a low-cost product into a sustainable business model. Just look at Amazon, which subsidizes their free shipping with their highly profitable data center business. If you’re facing a price war, it’s not about simply lowering your price and hoping to outlast the competition. You need to find other ways to monetize, differentiate, and structure your business for long-term success.

As for 3D printing, it's easy to get caught in the trap of thinking about cheap machines as a "race to the bottom." But if your products are truly differentiated and have value, you can avoid this race altogether. If you’re competing in a commodity market, however, you need to focus on making your production more efficient or figuring out how to add value in other ways. In the end, if you’re making the same thing as everyone else, the only thing left to compete on is how efficiently you can make it.

At Tangled, our production process is highly efficient, which allows us to produce filament at a lower cost than our competitors. We’ve also found ways to make money from the business model, even if the filament itself doesn’t generate huge profits. It's about sustainability and strategic planning. The race to the bottom isn’t inevitable, but you need to be smart about how you approach it.

Ultimately, if you’re in a position where you think you’re entering a race to the bottom, your options are simple: either differentiate your product, build a brand, or figure out how to be incredibly efficient at producing it. And if you’re in a commodity market, just embrace the bottom, accept that it's going to be tough, and find ways to make it work.

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