This post was mentioned on Twitter by zachbunn: Posted a blog this morning on the awesomeness that is @Newegg and why they are winning against giants like Best Buy. http://bit.ly/9gADFE...

If we use the “So What” question Zach posed earlier, we can dig deeper into the real problem, which in my mind is a management decision. Why has upper management not given floor level sales employees the right to do a simple task such as override a normal policy in a case such as Zach’s? Best Buy does discount big purchase packages. For example, if you purchase a new $2,000 LED TV, a 300 Monster power supply, $50 HDMI cable, and whatever else, there’s a good chance that if you ask, the employee will discount a fair amount of the total. But why not on an Flip camera?

The obvious answer here is margin. They make way more profit on the TV package purchase than one measly camera. Or do they? Many of us know the principal of 80% of a company’s business comes from 20% of its customers. And while this may not always be true, I’m willing to bet Best Buy’s percentage is right around there. So a repeat customer is way more valuable than a new one. So if a dissatisfied customer such as Zach decides to not shop there anymore, they may have lost a lot more than a one time purchase. Also on the subject of margin, I’m pretty sure Best Buy isn’t going to sell out of every single Flip camera, trust me. So if they would have price matched Newegg, they probably still would have made a profit, even if it was only a few dollars, which is much better than zero dollars.

Fhew almost done I promise… The final area I’d like to comment on is that fact that Best Buy said that online only retailers were “non-competitors.” In my mind, this is not an actual term. I began to understand this a few weeks ago after reading “Why We Buy: The Science of Shopping” by Paco Underhill (great book I might add – Thanks Dr. Greene). Anyways, the basic foundation for this idea is based on the fact that every company competes with every other company because of a customer’s time and money. Maybe a customer has in mind that they either want a new pair of shoes or a Flip camera. After much consideration, they decide to go with the shoes. Well, Best Buy just lost a sale to Journey’s, a “non-competitor.” This close-minded thinking must end, or like Zach said, Brick and Mortar stores will continue to lose.

Also, you seem very dismissive of “the cost of the brick and mortar” of retail stores. There’s a lot more to overhead than that. You have factors such as: rent, electricity, shelves, security systems, and perhaps most costly: employees. Sure, online retailers have those systems as well, but you’re talking about a handful of warehouse locations around the country, while Best Buy probably has more stores in southern California than Newegg and Amazon have distribution centers around the country. It all adds up pretty fast.

Don’t get me wrong, you’re absolutely correct about savvy consumers being able to save more by buying online. I’m a member of Amazon Prime myself and absolutely love it, and I’ve probably spent close to $10,000 buying from Newegg over the last 5-6 years. I’m just saying that you’ve oversimplifying a bit.

But, on the flip side, Best Buy is offering a free compare/contrast service for customers who then buy items cheaper online. And assuming that if the TV makes it through the shipping process from Newegg, the chances of it needing to be returned for defects are probably fairly low. That fact may overrule the safety net of having a local brick and mortar for product returns.

I have to admit, I looked at Newegg when I was looking for a new TV. But I don’t trust UPS with large deliveries after experiencing several incidents of damaged goods over the past few years. I ended up buying from a local electronics shop, not Best Buy. However I wouldn’t even consider buying computer components (or an entire system for that matter) from Best Buy, Newegg gets my dollar every time.

Some business just don’t understand who their competitor’s truly are.