Value of Starbucks 2006 City Mugs  - Architecture Series

Option 2 – Go to the source:

You don’t need a doctor degree to figure out that the best way to get all mugs at once is to visit the factory located at the south side of the China which manufacturing all high quality Starbucks mugs in a dark, dusty, cold-in-the-winter and hot-in-the-summer concentrate camp. However, the friendly cheap labor won’t just sell you those mugs because you flash them your Starbucks Duetto Visa Card or you have a Chinese character tattoo on your neck. But life finds a way. You soon realize that even under Starbucks’ strict business policy to prevent those mugs flow to the gray market; as long as you can be a friend of the factory manager, you’re the king of Starbucks mugs.

The factory manager has all your answers and he is the gate keeper. The question now is how to be a friend of a Chinese factory manager. Well, it’s easy. Take him to a night club which happens to have a lot hot girls working there. Treat him like a king for 3 to 4 consecutive days and you’ll be his brother. Now, we’re going to build a model based on this approach:

The cost per night in a night club with wine and special service is roughly $460 (based on U.S. Dollar to Chinese Yuan Exchange Rate 1:7.8). So the total cost to access the goldmine will be $1840. Don’t forget to add the off season roundtrip ticket you bought from UA with Economy Class which is about $700,  plus the living expense 1200 for about a month. So the total is $3740.

Wait, that is freaking higher than the first option! Wrong, don’t think by using your brain if you don’t have one. Once you have the access to the goldmine, you will have unlimited resource to those high quality yet low cost mugs whatever you want. All you need to pay to your new brother is the cost of the mug which is around 99 cents. So you do the math, if you take 3 sets, the total cost per sets will be:

($1840 cost at the night club + $700 round trip ghetto flight + $1200 living expense + $102.96 cost for 3 sets of mugs) / 3 = $1298.15

Damn! Is that why everything is made in China? What you should learn that the difference between this model and the previous one is the fixed cost vs. variable cost advantage. Once you build up the relationship with a huge overhead, the more you buy, the less you pay for a set since your variable cost is less than a buck. So if you increase the purchase to 10 sets. The price per set would drop to $425.48

Gee! that’s an awesome deal! No wonder online schools keep on enrolling students and wireless companies keep on dropping price. But is there a catch? Yes, life is not perfect.

First of all, you probably forgot that you don’t really speak Chinese. To overcome the barrier, you have to spend from as little as $1.98 (download illegal copies of Self-Learning CDs) to as much as $2000 (a complete 2 moth class taught by a native speaker who unfortunately is a Vietnamese but you can’t really tell) depending on how smart you are.

You also have to consider the additional cost that you might spend on shipping after you purchase over 5 sets. In China, the airline will allow you to carry 70 pounds per bag. Two bags per person plus hand carries. It sounds awesome compare to the restrictions we have here. But keep in mind when your luggage transferred to USA, they will be weighted and you will be charged if you’re over the limit. So if you consider doing large quantities to drive down the fix cost, you may want to ship those mugs back to USA. The price range for shipping is wide. If you’re cheap, you can do the Cast Away style which would cost you literally nothing assuming you have the skill to build a raft. Or you can ship by air which low-cost DHL will charge you a fortune.

Finally, it is very likely soon or later your new brother finds out that you’re selling his mugs on eBay for about $20 and decides to have his 50% cut. So the million dollar question is, is it worth it to do this way?

To answer that question, we have to exam the risks that are involved.

1. You might get killed in a tribe on the way to the factory
2. The moose you rented at the airport doesn’t really equip with GPS like they advertised
3. After spending two grand, factory manager still don’t think you’re his brother
4. The mugs you safely packed in your luggage were damaged due to the sign “handle with care” you intentionally put on.
5. The mugs were taken away by the US custom
6. You can’t find the factory since you thought China is on the Yahoo map North America
7. You found the factory but they produce fake Gucci and Prada along with fake mugs as side business
8. Nobody understands your Chinese
9. Chinese government captures you in the airport coz they think you’re one of the terrorists
10. You are not as lucky as Tom Hanks. Your raft was dissembled 3 miles away from the China.

It seems riskier than dealing with eBay. An economist will tell you this; there’s no free lunch. The riskier the higher return. And that’s how this world is created. If you’re a risk taker, buy some IPO. If you’re not, stick with bond. So you are right this time. It is risky business and has a huge barrier. You might tell yourself that it sounds so stupid and inefficient and I really don’t want to sleep on a raft with whales swimming and singing next to me. And why would I want to take foreigner’s shitty attitude especially we’re great Americans? Why can’t I do it in an old American way like driving a 92 Ford Crown Vic and pick those mugs up one by one? How hard could it be?

Yes, it is possible you actually go to each physically locations and pick them up with your own hands. No more freaking Chinese learning and raft building. But we still have to have a plan before we actually do it. By just looking at your own garage, you may have several options already, a 92 Ford Crown Vic, a Yamaha 50cc scooter and Bambi, a pony grew up with you. That makes you really think which option is the best. Keep in mind that your goal now is to find a way which involves less risk and less cost. All of sudden, you realize that there’s a train station about 5 miles away from where you live. Why not throw in this option before killing your pony? The analysis on different vehicles is extremely complex. But hey, that’s why you need education. You need to think and analyze before you leap.