Peter,
Forgive me if I come across rudely, but there is a very large market out there for lower cost, lower quality products. Witness the success of Wal-Mart and Mag-Light
Most people consider flashlights to be disposable goods. They are only familiar with the kind you buy at Wal-Mart or Target. The general population doesn't have the experience or information base to appreciate an Arc or a SureFire (unlike us semi-obsessed CPFers). They respond to sticker price at the point of purchase, not total cost of ownership over the life of the light (or just about any product for that matter). They don't expect a 10 year warranty, and probably will lose the paperwork as you said. When the batteries die, they'll replace them if they are easy to find, or toss the light if they are not. Disposable again is the key word. I would guesstimate the cut-off price for disposable flashlights to be around $20. In other words, for under $20, its not worth getting upset over if I lose it. People are price sensitive. Witness the demand for the SLS's. Forgive me for predicting this, but I'm going to guess you sell a lot more SLS's than you expected to.
I love your products and am the proud owner of a CPF edition Arc-AAA.
My other Arc-AAA was given to a friend going on a 3 month round-the-world trip, specifically because I knew it would be indestructible and the battery would be easy to replace. However, I am not convinced that the high-quality flashlight market is large enough to sustain your business plan. You just don't have those Mercedes type profit margins to play with.
Consider your "China" example. A $19.95 overdriven baton light with a one-year warranty and the right marketing might capture that part of the market that has no interest in the total-cost-of-ownership of the Arc-AAA or the luxurious $170 Arc LS with three swappable bodies. They just want a cheap reliable small light that they can throw in the glove box; that they can count on to come on when they click the button or turn the head. So right now they're buying Mag AA's or Mag solitaire's. Currently, Arc has nothing that really competes in this niche.
I understand that a cheaper, compromised flashlight is not the "Arc" way, and I appreciate that and respect it. However, there is nothing stopping you from brand-differentiating, vis-a-vis Lexus vs Toyota. Perhaps two companys: "Arc Flashlights" and "Not-So-Arc Flashlights". Arc can continue on the luxury track, while Not-So-Arc goes after the Mag-AA/Wal-Mart checkout line market. The 300% profits from the Not-So-Arc line can be your cash cow to fuel your relentless pursuit of perfection in the Arc line. Might I suggest a Titanium 5V Luxeon Arc LS to start with
Heck, if you feel really bad, you could put an extra set of N-cells in the Not-So-Arc packaging labelled "Spare batteries included! Limited time offer!".
Sorry, but my old MBA just kicked in. Would you believe I have friends that charge $1000 per day for BS like this?
Example
I'm not trying to pick on TheLedLight.com. In fact, I like the fact you can switch out the N-cells for AAA's. Anyone tried one of these, BTW?
Best regards,
tej