The other day, I went into a large store with a big car park that had everything on sale on display indoors in a nice fashion, this setup is pretty common across multiple different retailers so which store it was does not really matter. I then did what I always do, being from MLN, compared computer prices. Low and behold as always I noticed the standard shelf price was about 20-40% more expensive than us. It bothered me for years that these large format retailers with hundreds of stores have been able to do this and get away with it. Speak to the average Joe and the answer always is, “they must be cheaper they have huge buying power”, everyone forgets about their huge running costs though as they must need to make more to cover their huge costs. I mean we the customers are paying for that TV advertisement.
To add to that, the huge buying power idea, not sure if it’s true. I mean technically speaking for example, if we all wanted to buy a car and if we all went to Holden all at once and said, I want to buy a Holden for every Australian, the price should get cheaper and cheaper with each order, and with this logic by the time we hit ten million orders the car should be $1. While I have exaggerated this, I think you get the idea. The reality is, after a certain number of units ordered the product doesn’t get cheaper as there is a set production cost regardless of how many cars you buy. The same applies to computers.
So after a retailer reaches a certain level of buying power, it’s going to come down to its running costs as to whether they can actually be lower priced or not. So the retailer with the lowest running cost technically can pass on the biggest savings to the consumer.
Hold on, this means e-tailers and online stores win. Well again this is not entirely true, online stores need armies of web administrators, warehouse people and huge head office costs. While it is cheaper to be big online, it’s still not exactly cheap.
So logic says a beautiful, sweet combination of large buying power with low operating costs, in a physical retail store combined with a strong e-tail presence will win. Exactly, the perfect balance of an online store with a small retail footprint will offer the needed buying power and low operating cost. Hang on; did I just explain what MLN is?
Back to me walking around inside this large store comparing pricing again. I thought you know what; I am going to ask for a discount on this overpriced computer and see what happens. After speaking to two different salespeople it was clear they couldn’t do the prices we were doing at MLN, so they called the big guns in, the manager came up to me and said “where did you see this laptop cheaper?” I couldn’t help myself and said MLN. The manager very calmly and confidently said yes that’s because they sell imported products, dodge taxes and don’t carry an Australian warranty. I was furious. I replied, I tell you what that’s not true, for which he replied, I can assure you it is, very confidently. To this I said, I can guarantee you this is not true and I will tell you why and how I know. I am the managing director of MLN. To this, the store manager of Harvey Norman Maribyrnong’s computer divisions face turned white and the man went into shock. I then proceeded to threaten him with legal action for which he apologised.
Anyway I am not petty enough to chase this man in court or whatever, as I always believe the court of public opinion is what truly counts and it is pretty clear that most Australians have realised that having large buying power means nothing if you have large operating costs. My company MLN speaks for itself and thankfully our customers love having us as their place to procure computer equipment.
True story by the way.