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Retailers Vs. Resellers, Cost Comparison

May 27th, 2007 · No Comments

There are lots of websites where you pay less than retail prices to get your electronic gizmos, sports equipment, digital cameras – well just about anything. There is even a site called Dont Pay Retail though it is for the Australian market. So how do all these merchants that show up in a price comparison at sites like pricegrabber.com actually manage to cut costs so low?

For one, there is a heavy markup on the price by the time it hits the shop floor. If the price the retailer paid for a product is, say $100 per piece, the “retail price” at which it is sold will be a minimum of $160. Yes, that is a 60% markup. And that is the minimum – much higher markups exist in real life. So the resellers who sell stuff after buying them in bulk can still make a profit by selling the same product for $120. However, they might be paying $110 per piece since they don’t buy in the huge volumes retailers do. Add to this the savings resellers pile up in terms of renting commercial space, decorating the store, hiring the foot staff, the cashiers, the parking space etc, as compared to the retailers and it all makes sense. Oh, and I did not come up with this stuff all by myself. I found an article that explains the cost difference between retailers and resellers at the blog for the don’t pay retail website:

You decide where your money is going.
Do you like the flash associated with a retail store?
The friendly floorstaff, the neatly presented product displays?
Is the warm cushy feeling worth the extra money?
We didnt think so.

The common retail myths listed at dont pay retail makes for good reading too.

What would suffer, you ask? Customer service, if the reseller decides to save even more money! So get started with one small purchase with a reseller and call them up and see how they follow up on a request. What is the wait-time on the phone? How courteous are the phone staff? Are they willing to let you customize your order after it has been placed? These are just a few of the things you should watch out for when ordering the first time. I personally have stopped buying stuff offline, especially electronic goods. Earlier today, I wanted a 2.5″ inch hard drive to USB connector to retrieve data from a dying laptop hard drive. I stopped by at Radioshack, willing to pay up to 150% of the price I can get online, but you know what, that cheap piece of equipment – a couple of cables and connectors – was selling for $25 at radioshack, when I can easily find offers that sell the same thing for $6 or less online – this deal on slickdeals for example. So that is a 400% markup. You must be nuts to shop retail anymore, really – unless you are really in a hurry.