Written by Christopher on Tuesday, September 29, 2020.
Online prices are cheaper because their cost to do business is cheaper. This allows online stores to sell products at a lower markup and makes it harder for your local retail stores to “price match”. They also have to spend minimal time to sell something and provide almost zero customer service before or after the sale. Answering emails is completely different than face to face interaction. Certain industries get hit harder than others but in a day of the internet websites, you can compare prices quickly and efficiently and the price war will almost certainly be won by the websites. I will go into depth the problem for local retail stores and explain further why local stores almost have to charge more.
As a local retailer we face the criticism about our pricing on a regular basis. I figured I would write this up to explain our point of view to help people with this question understand why. It is done out of necessity versus “price gouging” like most assume. Let me go deeper.
For starters the price per square foot between a store in a city area versus a warehouse in the middle of nowhere are significantly different or a storefront period. Lots of these online stores do not even have warehouses or storefronts so they already have a significant advantage when deciding how to price an item. Without these extra costs they can certainly afford to sell it at a lower mark up. If an online store and retailer are selling the same thing at the same price, the online store is making significantly more per sale than the retailer. I do think its important to understand all the factors a retailer considers when deciding how to price an item. These are what we personally consider.
When deciding how we price an item we start but looking at our cost for the item and potential volume of sales. If we aren’t going to sell very many of a certain item it may get priced higher than a high-volume product. It costs money to have a product sit on the shelf in a retail store whereas it does not for online websites. We consider how much square footage the part will take up and also how much “customer education” is involved. There are items that require a fair amount of set up and are not a “plug-in and go” situation. The amount of time someone has to explain how to use it can be a huge factor. We consider every other competitor locally and we do consider online prices. All these factors tie into the pricing decision but it still leaves questions.
“Our cable is different than what you are seeing online.” Why?
Not all cables or parts are made the same way with the same materials. Small material differences increase our initial cost and while some may not be apparent nor matter to certain customers, we are always shooting for a reliable middle ground. It’s a tough conversation to have as a retailer with the customer because there is validity to arguments on both sides. Trying to explain our POV can be tricky to do without offending the customer in some way. In short, a lot of the things we are trying to compare aren’t fair because they are not “apples to apples”.
To summarize the pricing differences, it’s just more expensive to run a retail store versus an online store. This along with factors listed above make for price differences. Each industry has its own problems with pricing but our Electronic industry has been hit especially hard as we have watched almost all our local competitors go out of business to online competitors. We watched as our entire industry has been blasted in reviews with words like “price gouging”. We cannot speak for every circumstance but we can shed light on the necessity to not be judged so quickly and to understand what local retailers go through. Not a day goes by that someone comes in with a purchase from an online retailer and wants our help to set it up. Its just not fair nor will it ever be but we can’t tell you how much we appreciate the people that understand what we actually provide versus just price. We have been serving our community for over 20 years and have donated our time to various local organizations. I am ranting at this point so let me leave you with this one last thought… Supporting local business while being more expensive doesn’t just relate to price. If price is everything, local retailers won’t be around. Think about that the next time you need help and are shooting emails to some random online company requesting help and that local store you used to go get it from is GONE.