InfiniteCompetition.com

Consumers today have almost infinite choices where to buy goods and services.

Customers in high volume ‘discount’ stores are no longer just those with low incomes.  Consumers with plenty of disposable income choose to shop at stores like Sams and Costco.

Millions of web sites like Amazon.com compete with brick and mortar stores for your business.

What has this done to margins?  Not surprisingly, margins on the actual goods and in many cases services too are tiny.  This is a great win for consumers and is what Capitalism is all about, bringing the best products for the lowest prices in an efficient competitive marketplace.

Smart retailers have found ways to add margin back however.  Best Buy is a great example.  So you buy that flat screen TV for a great price.  You’re psyched to go home and hook it up.  Oh wait, you need a new type of cable to connect it.  Hmm… it says $20 for a cheap one, $30 for a good one, and $50 for a supposedly great one with thick insulation, gold plating and some patented shielding.  Cables are one of the HIGHEST MARGIN ITEMS in Best Buy’s stores.  Their cost of goods is tiny, the margin is HUGE.  So they don’t mind the low margins on other items.  Same with batteries, ‘adapters’ (such as connecting an iPod to your car audio system), fashion cases for iPods and cell phones, and much more.  These impulse items are where the big profits are! Read the rest of this entry »