Spare Parts Pricing

• I recently received an email from a friend of mine in the UK (who has a very good website by the way). He'd recently read that a replacement headlight bulb for his recently acquired Audi A2 can cost as much as GBP 66, yet the cost of the bulb is only about GBP 4.
  
  Spare parts pricing is extremely different from the pricing of the products they go with. Here are some of the reasons why:
  
  Spare parts typically have a more complex mix of channels & intermediaries (such as distributors, dealers, wholesalers and consumers)
  
  Spare parts and accessories have different price elasticities (compare the cost of the part vs the cost of downtime )
  
  Spare parts and accessories have different inventory requirements (there are typically 20 times more SKU’s for spare parts compared to the products manufactured)
  
  Spare parts can have a significantly longer or different life cycles. There may be little or no price sensitivity during the warranty period, the lower priced, generic substitutes become popular in the post-warranty period, as repairs & parts cost more than the original good. Then, towards the end of the Product Life Cycle, some parts become coveted, hard to find & can therefore command a premium
  
  If you are in the spare parts business, they can become a ‘gold mine’, but you need to carefully consider the carrying cost of such inventory.