Are retail stores jacking up prices or is the internet just getting cheaper?

[Mr Slugger]

I've been looking for some stuff lately especially computer stuff. And I'm actually getting amazed at how much different the prices at a store are compared to buying them online. For instance a 1TB hard drive in the store around here is $109, amazon it's $89. The 8 port switch I bought was $24 online $45 in a store. Computers themselves aren't that different, especially after shipping. I even bought some cables, which I could have got anywhere for $6, but online including shipping it was $3. Found a refurbished processor which I found a store locally selling one for $40 got it online for $15. Now a couple of years ago the internet and stores were closer to each other. I mean if the item cost $40 in the store in a store it was maybe $35, but not jeez.

So I'm curious on what you guys think? Do you think it's because there's less stores to buy things from so they're jacking up prices because if you want to shop for it your gonna pay for it. Or do you think that the internet is getting increasingly cheap, or a combination of the two?

[jackfaire]

If stores are selling less product their prices have to go up to compensate. It's part of why it costs you more to buy something like a couch than say toilet paper. The more you replace something the less they can charge.

Also stores still have to pay overhead including, pay for the location, hire their own employees, pay for training and insurance etc.

Online stores as they get bigger can afford to hire outsources (not all outsources means exporting jobs).

It can be cheaper for a company to rent warehouse space and hire a company that does call center work to handle their business minimizing the financial impact they themselves have. Essentially turning themselves into a broker that connects various companies and the consumer.

Less employees are needed in online stores and hours can be more easily determined. Also as such stores make more of a profit and are more established they can afford to cut costs in ways that brick and mortar stores cannot.

Returns can also be more complex at online stores so people who would normally drive down for a minor issue won't necessarily do so with online stores.

The amount of SCs being able to convince a weak manager to let them return something the store doesn't carry anymore also is more complicated. Returns likely being lower would mean less loss thus lest cost.

Also with online stores you have completely taken shoplifting out of the equation thus yet another factor that would lower costs.

If I think of anymore I will add them.

[Boozy]

It's so easy to comparison shop on the internet. It takes five seconds to go to another site, whereas it might take an hour to get to another brick-and-mortar store. Naturally, that competition between websites is going to drive internet prices down.

It's also expensive to operate stores. You need more staff and pricier real estate, for example. So that will drive retail prices up.

And then there's the other point you raised: The price of an item is perhaps more closely related to what the consumer will pay than the marginal cost of production and delivery. Internet shoppers tend to be savvy, and just want the best deal with no extras. Many brick-and-mortar customers are looking for a shopping "experience" (browsing through the aisles, admiring displays, chatting with a salesperson face-to-face).

In the end, you do get what you pay for. It all depends on how much you want.

[Mr Slugger]

Ok I think I need to clarify myself. I understand why stores are more expensive than online. But like I said the gap used to be so much smaller. Is it moreso because the internet has pretty much organized so it can lower prices, or is it because stores are going out of business, or a combination of the two.

Like for instance around here when Circuit City went out of business it did seem like the price of higher end electronics and computer stuff by about 5% same pretty much happened when Compusa went out, and in some cases stuff went up even further. And now in this area if you want high end electronics you can only go to Best Buy because there's nothing else. If you want office supplies sure there's a couple Office Max in the area, but staples are all over the place. Cheap stuff luckily now there's walmart and target, but when there was just walmart prices on that stuff was actually higher.

Then on the other side amazon isn't just amazon now, it's Joes electronics, John's computers, etc. They're all selling under the amazon name, so yeah they've got to be cheap.

As far as which side is causes the biggest part of the gap though I think is the dwindling amount of store options. Because like for instance computers are pretty much the same, but everyone is selling computers. Mid range electronics are pretty much the same because everyone is selling it. A 500 GB hard drive everyone is selling them. 1TB-1.5TB well around here walmart and target haven't gotten into that game yet so it's Best Buy and Staples are your choices, and 2TB Best Buy is your only option, and they've got the biggest gap in price by far. But yet online again everyone is selling them.

[HYHYBT]

I'd guess that some of it is that people are now used enough to shopping online that they know to take the shipping cost and delay into consideration, as well as being better able to compare among online stores. And what people (well, me anwyay) want out of the transaction is different. For about the first ten years I had internet access, I preferred to buy most anything I could that way, but now I only do so if I know precisely what I need already and don't mind a wait. I think it was Firewire and earbuds that did it for me: before USB 2.0 came along, I ordered a Firewire external drive. It had two ports so you could daisy-chain FW devices to the one port on the computer. This is how it's supposed to be; it's not like USB where you use a hub. So when I needed more space, I ordered two more... which only had one port each. This was not mentioned in the description, nor could you tell it by the picture, and I'd have gladly paid an extra $10 or so at a store to have seen it first. Smaller things like cables and adapters, too, I feel better being able to actually see that it's right, and besides, usually if I'm buying a cable it's for something I was already trying to connect and found the one I already had was missing, damaged, or the wrong kind and I want it fixed *now.* And, though $8 instead of $5 is a large percentage increase, it's a small dollar amount for having it done with.

On a more sinisterish angle, I saw an article the other day about the large percentage of people who for whatever reason have no bank accounts. Which means they *can't* order online. In that case, the extra the store charges is much like having to pay to cash your paycheck: part of the cost of doing business when you can't or won't do business through a bank. But it means that, once the price difference is large enough that most people who can shop online are doing so, you might as well get as much as you can from the (I think it was somewhere around 25%) who can't.

[Imprl59]

I think what you are seeing is that Internet Sellers have grown to a size where they can buy at better prices than the traditional stores. Add that to the inherent lower overhead and you can beat the stores price hands down. I worked in a computer store for a number of years and we paid about the same if not more for stuff than what I could buy it for on New Egg. We then marked it up a good clip to cover the staff, store and all the other stuff.

Cables are another thing all together. Staples is paying a dollar for that $30 USB cable. People will price shop a printer down to cost but they won't think twice about blowing all that money on the cable for some reason.

You also have a large number of stores failing right now so there is a tremendous amount of stuff out there that can be had for pennies on the dollar if you can buy it in bulk.

Steve B.