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Newegg’s IPO reveals the numbers behind A $2B Electronics Retailer
- hyperbovine 17y ago1.4% margins. Yowza.
- falsestprophet 17y agoLast I heard, they were outsourcing their fulfillment to UPS. I suspect that means forfeiting a great deal of their possible margin.
- potatolicious 17y agoI don't think so - I recall reading many articles on Newegg's novel fulfillment system (nearly fully automated warehouses). Sure, they do shipping through UPS, but which online retailer doesn't?
- falsestprophet 17y agoUPS does supply chain management. At one point, they were running the warehouse. Yeah, it looks like they don't anymore.
- sireat 17y agoThere are industries where 1.4% margins are acceptable(for example, supermarkets) and they might even be acceptable for computer parts, problem is that Amazon has ~5% margins.
- Dilpil 17y agoI don't understand. Why does Newegg have to be as big as amazon? Is the IPO being done at a market capitalization near Amazon's?
- Nwallins 17y agoLarger players tend to have a competitive advantage over smaller. This can be things like economies of scale or supplier bullying. Having Amazon as a competitor will make it hard to make a buck, but if they do, they will clearly be a very strong operation. I think staying private has helped them compete with Amazon up til now. Things like SOX compliance costs and disclosure requirements will add overhead.
- DannoHung 17y agoWow, uhh... I actually thought Amazon had acquired Newegg a long time ago and kept the stores separate because of the very different product and customer focuses or something... Tells how much I was paying attention. edit: OH, I was thinking of Egghead.
- ALee 17y agoI heard from a friend recently that NewEgg came from EggHead from the Pre 2001 days, anyone know?
- scythe 17y agoNewegg was never connected with EggHead; it was originally a subsidary of ABS. For future reference, wikipedia is that way ---> http://en.wikipedia.org/wiki/Newegg#Name http://en.wikipedia.org/wiki/Newegg#Name
- vicaya 17y agoThey need to move to Nevada like Zappo did to avoid incurring the exorbitant CA retail tax and electronics recycle fee. I often picked Amazon even if Newegg is slightly cheaper and faster in shipping.
- immad 17y agoI agree. Sales tax kills newegg for me though I prefer shopping their because there search is way better.
- psranga 17y agoI was visiting folks in Washington by car for a holiday and I happened to be thinking about buying a comp at the same time. As a micro-optimization, I had Newegg ship the parts to WA and transported them back myself to CA. :) Btw, I was surprised to find that even with premium parts, assembling a desktop yourself is cheaper unless you want the exact configs Dell etc sell. I'm rooting for Newegg to succeed. I guess it's the Zappos for nerds. :)
- davi 17y agoArticle raises a good question. IPO --> pressure from shareholders to increase short term profits --> raise prices to increase margins --> slower growth + customers migrate to Amazon --> company plateaus, stock tanks (no longer a growth stock), but founders/early investors rich. Any reason this is not going to happen?
- potatolicious 17y ago"slower growth + customers migrate to Amazon" Who is also a public company. You're trying to say that a public company will lose to another public company because it's public...
- davi 17y agoNo -- given equal profit margins, a small volume retailer will usually lose out to a large volume retailer, since the larger company can buy in bulk and sell at a lower price. Assuming that Amazon's volume is greater than Newegg's, if they operate with equal profit margins, Newegg will probably lose to Amazon. --- edit: though I see from your comment above that they have automated warehouses, etc. So maybe they can raise margins and still beat larger competitors on price. I buy from Newegg all the time; it will be interesting to watch over the next few years.
- CWuestefeld 17y agoWhy is it universally assumed that corporate shareholders are incapable of looking at a big picture? If there were such a systematic error in the market, then a smart investor could really make a killing by investing in the artificially-cheap stock of long-planning corporations. And, of course, such an investor would have a very impressive history after a while, and be able to command quite a bit of money managing investments for others... which of course leads to greater sums of money being invested more intelligently. The market fixes itself.