revjim.net

bq. Brad Anderson, chief executive officer of Best Buy Co., is embracing a heretical notion for a retailer. He wants to separate the "angels" among his 1.5 million daily customers from the "devils."
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The devils are its worst customers. They buy products, apply for rebates, return the purchases, then buy them back at returned-merchandise discounts. They load up on "loss leaders," severely discounted merchandise designed to boost store traffic, then flip the goods at a profit on eBay. They slap down rock-bottom price quotes from Web sites and demand that Best Buy make good on its lowest-price pledge. "They can wreak enormous economic havoc," says Mr. Anderson. –"Wall Street Journal online":http://online.wsj.com/article_email/0,,SB109986994931767086-IVjgoNglad3oJutbHqGa62Jm4,00.html

Let me do you a favor, BestBuy. You can fire that entire team of people that you employ to determine which products you'll offer a rebate on, what the rebate will be and which products you'll jack the price through the roof on and, instead take this advice.

People will always look for the lowest price. Sure, there are some customers that like to be able to go into one store, get what they need and they don't even think about the price. If want to design a store to cater to these people, then, please, do it. Your store will be void of "deals", you'll get a reputation for price gouging and then, even your customers that seem to not care about price will find another place to shop. Eventually, you'll change your practices or go out of business. And that's fine with me; one less place for me to check the prices on every week.

I don't like having to shop around. I don't like dealing with rebates and price matches. I don't like wondering if I got a good deal or not. There is a better way.

Instead of setting up some products to take a loss on, and others to make BIG profits on, just be fair across the board. You don't have to have *deals* when *everything* is the best possible deal you can offer. The obvious simple way to do this is to select an overhead percentage and stick to it. Take your cost of the product, determine how much it costs you to run your business, including paying your employees, add a little extra so that you make a profit, and figure out, on average, what percentage of your costs for products that that amount is. Now, and here's the easy part, sell *every* item in your store at cost plus that predetermined percentage. No rebates. No price matching. No buy one get one free. No specific products to push.

Sure, this means that buying power becomes an even bigger factor for you. If Wal-Mart, for instance, were to employ this same practice, then, surely, their products will be cheaper than yours since they can buy MORE of the product and therefore, sell it at a lower price. But, that's okay. Wal-Mart isn't exactly known for their service or the expertise of the people they employ. On top of that, Wal-Mart doesn't have the selection that you do since you specialize in electronics. This means that, in the long run, you may sell less of the items that Wal-Mart also carries, because some of your customers will be looking for the best deal and will buy products whereever they can get the best price. But, many of your consumers will respect your fair pricing, appreciate your service, and admire your selection. Therefore, these customers would perfer to shop for everything in one place and get a decent deal on all of it, than to shop around, compare prices, and, ultimately, get some great deals coupled with a bunch of terrible deals.

I used to shop almost exclusively at Fry's Electronics because they had the biggest selection and, what I felt, was the lowest price. I could shop there without having to think about getting a good deal. I could browse and buy without having to call my Dad and ask him to look up the price of a product to make certain that I wasn't paying too much. As Fry's became more popular, they began to shuffle prices in order to make more money. Not that they couldn't have afforded to continue doing what they were doing, but, they just wanted more. And, with that, came the end to the days that I didn't have to think about where I would go to shop for electronics.

As one final example, I'd like to present Sam's Club and Costco to you. These two warehouse clubs offer, basically, the same products. However, Sam's Club, with the buying power of Wal-Mart, sets their prices according to what they believe the market will bear. Costco, on the other hand, operates with less buying power and a fixed profit margin. Where do I shop? Costco. I don't even bother to check if Sam's has a cheaper price because I know that Costco is selling products to me at the lowest price they can afford to do so at. And that means a lot more to me than saving another $0.20 on a can of beans.