

Newegg’s IPO reveals the numbers behind A $2B Electronics Retailer - dzlobin
http://www.techcrunch.com/2009/09/28/neweggs-ipo-filing-reveals-the-financials-behind-a-2-billion-electronics-retailer/

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davi
Article 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?

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potatolicious
_"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...

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davi
No -- 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.

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vicaya
They 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.

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psranga
I 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. :)

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cdr
" _even_ with premium parts"? The more the components cost, the more you save
building it yourself. Dell makes the most sense for cheaper machines.

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psranga
Good point.

In case it wasn't clear, my premium-ish parts (e.g., 80plus power supply) were
cheaper than Dell's low-end-ish parts.

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Dilpil
I 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?

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Nwallins
Larger 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.

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hyperbovine
1.4% margins. Yowza.

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falsestprophet
Last I heard, they were outsourcing their fulfillment to UPS. I suspect that
means forfeiting a great deal of their possible margin.

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potatolicious
I 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?

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falsestprophet
UPS does supply chain management. At one point, they were running the
warehouse. Yeah, it looks like they don't anymore.

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DannoHung
Wow, 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.

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ALee
I heard from a friend recently that NewEgg came from EggHead from the Pre 2001
days, anyone know?

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scythe
Newegg 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>

