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Newegg CPU price Drama

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July 24, 2007 9:07:20 PM

I have spent thousands with newegg over the past 6 years, so far been happy with them. I have to admit im not pleased with what i saw over past days, that some how we go from $299 to $375 Q6600. There is a simple solution to all this (greed) take all your hard earned money and spend it with another on line e-tailer for the next year or so :ouch: 

More about : newegg cpu price drama

July 24, 2007 9:41:57 PM

"There is a simple solution to all this (greed)"

it's called "the law of supply and demand". demand goes up, same supply, prices go up to meet the demand. also coupled with a little thing called "competition", i bet prices went up in many places. newegg isn't stupid, you do realize there are OTHER places to buy that chip from, right? they know you can find them also, you may find that a lot of places have the higher price today, and if they dont, they may be sold out.

it's not "greed" it's "market economics"
July 24, 2007 11:13:15 PM

valis said:
"There is a simple solution to all this (greed)"

it's called "the law of supply and demand". demand goes up, same supply, prices go up to meet the demand. also coupled with a little thing called "competition", i bet prices went up in many places. newegg isn't stupid, you do realize there are OTHER places to buy that chip from, right? they know you can find them also, you may find that a lot of places have the higher price today, and if they dont, they may be sold out.

it's not "greed" it's "market economics"


:bounce: 

Just try to clear your head and read what you wrote. It's not macro economics we are talking about. When they start to run out of pants in Walmart or Macy's they don't just go on a price increasing spree to lower the demand :whistle:  They give a raise to a bunch of managers (unlikely :(  ) and order more :D 

What Newegg did was low and the reason was greed. They could keep the price low and take preorders like so many other eshops but instead they dicided that it would be best to piss a whole lot of people off :fou: 

I agree with widcard, Newegg will loose custumers over this, one of those custumers is typing this right now :hello: 

==> Newegg is on notice!
==> 3 more days for them to get there act together.. or they are Dead To Me. (pretty sure that not just to me but to a whole bunch of people)

- You can get Q6600 for less then 300$ in a whole bunch of eshops (if you know how to work google :whistle:  )

Edit: To tell you the truth, I don't think that if any other Eshop was doing something like this, it would be such a big deal but many of us build a certain amount of trust and confidence in Newegg so when they start to do something like this, they are really letting thier custumers down. Let's see what next few days will bring us, many of us made complains and there is a good chance that they will listen.
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July 24, 2007 11:30:54 PM

From Newegg's standpoint, if people are willing to 375 dollars then why not raise the price. It's their duty to their shareholders to maximize profits. Dare I say it is capitalist. Newegg does not have a monopoly on q6600's so just go to zipzoomfly or some other e-tailor instead of complaining about simple economics.
July 25, 2007 12:07:43 AM

Wow, this issue is really a non-issue. As someone already sagely pointed out, its called market economics. There is, however, another underlying reason. When something is very highly demanded, ie Q6600, by raising the price they ensure that the customers who truly want them are able to get them, albeit at a higher price. Without a price increase, lots of their customers would be left out in the cold. This is actually a very pro-consumer move by them, although most people seem to be too dense to comprehend this phenomenon. If you want to get a Q6600, you can either wait, or go shop elsewhere where they don't enforce these policies, although they'll likely sell out and leave you high and dry long before Newegg. Why is this so hard to understand?
July 25, 2007 12:14:10 AM

I have also spent many thousands at newegg and I really don't think this isn't anything entirely new. Newegg's prices on super-popular products have been a little un-competitive for a couple years or more. They're trying to milk some extra profit off their reputation on a few select products that are very popular while keeping their other prices low. It's kind of a weird market strategy but they have to recoup the costs for all the money they spend on advertising and over-the-top customer service somewhere I guess... It's not criminal, just annoying (I happen to want some of the super-popular products myself sometimes). Cancelling the orders was also not illegal so long as it's not a bait-and-switch attempt (which can sometimes be a little fuzzy, but simply raising the price on the same product is not bait-and-switch), estores and even physical stores do it all the time (I saw a correction for a sale price posted at Albertsons just yesterday) just really annoying.
July 25, 2007 12:19:40 AM

I don't know about you, but i've been seeing a trend in newegg. They are raising prices, and to me their service is going down. I used to shop there all the time, and never doubted my orders, till my next and newest build. For one, their packaging was horrible (albit the shippers fault too) and even the boxes inside the one huge box i had were slightly damaged. I also read in another topic that there are other place selling the Q6600 at lower prices with 2nd day shipping. That to me is something wrong. Then again, I always look for the best deal (google is my best friend)
a b à CPUs
July 25, 2007 12:36:04 AM

Some one should write a book on this....
July 25, 2007 3:07:39 AM

I agree with Xela, "When they start to run out of pants in Walmart or Macy's they don't just go on a price increasing spree to lower the demand".
July 25, 2007 3:48:59 AM

ZipZoomFly went from 295 to 309 on the Q6600 today.
July 25, 2007 3:50:01 AM

weston said:
I agree with Xela, "When they start to run out of pants in Walmart or Macy's they don't just go on a price increasing spree to lower the demand".


Well, I'm not sure how huge the demand is for pants from Walmart, but I know at Macy's they're always out of my darn size when I need new slacks.

Seriously, I fail to see what the problem here is. No one is forcing anyone to use Newegg. If you're unhappy with the service/policies, then shop elsewhere, even if the reason you're unhappy is somewhat silly.

If the situation were different, and Newegg ran out of Q6600's yesterday and had to wait 2 weeks for more stock, would people be happier about the whole situation? The prices will come down as soon as demand stabilizes, likely within a week or maybe two at most. And guess what? As they often do, Newegg will use the extra revenue they generate by selling at a higher price point when others have sold out to undercut Intel's price, or come very close to it anyway. Will people complain then?
July 25, 2007 4:43:33 AM

Can't we just think of the higher price as "out of stock" or "reserved for corporate customers"?

I suspect that as computerized yield management hits retail after making its arguably successful though ignoble start in airline pricing, we'll start to see more of this on non-advertised items.
July 25, 2007 4:44:36 AM

Actually, the question is: if you order at $375 and then call in for a price match, will they do it?
July 25, 2007 9:11:17 AM

==> Newegg is on notice!
==> 3 more days for them to get there act together.. or they are Dead To Me. (pretty sure that not just to me but to a whole bunch of people)

Good morning everyone :) 

2 days left :( 
July 25, 2007 9:12:22 AM

cb62fcni said:
Wow, this issue is really a non-issue. As someone already sagely pointed out, its called market economics. There is, however, another underlying reason. When something is very highly demanded, ie Q6600, by raising the price they ensure that the customers who truly want them are able to get them, albeit at a higher price. Without a price increase, lots of their customers would be left out in the cold. This is actually a very pro-consumer move by them, although most people seem to be too dense to comprehend this phenomenon. If you want to get a Q6600, you can either wait, or go shop elsewhere where they don't enforce these policies, although they'll likely sell out and leave you high and dry long before Newegg. Why is this so hard to understand?


I bet online retailers start DELETED when they hear stuff like that, this way they can sell product at higher price then it's worth + making loads and loads of cash themselfs = having custumers belive that they are doing them a favor

Seriosly.. with logic like that.. Newegg should pay you 100$ just for that one post?
July 25, 2007 9:34:49 AM

Is simple, dont buy it, if you dont buy it they will sell less, and the price will go down quicker.
July 25, 2007 11:36:11 AM

xela said:
I bet online retailers start j*rking off when they hear stuff like that, this way they can sell product at higher price then it's worth + making loads and loads of cash themselfs = having custumers belive that they are doing them a favor

Seriosly.. with logic like that.. Newegg should pay you 100$ just for that one post?


Actually, they make very little cash when they do something like this. By stifling demand through a price increase, their quantity sold drops, and with it, their profits. As I pointed out before, it's only done for a short while, until demand levels off. So they're sacrificing increased sales in order to maintain stock for customers who actually need the product and are perfectly willing to pay an increased price. Why don't you wait for a week? Or buy somewhere else. Invest the money you save in a class on economics, you need to broaden your horizons.
July 25, 2007 12:29:08 PM

Newegg's price hike isn't really good business. Their success was built on a price and service model and they have seemingly abandon it now that they have had success. It creates the opportunity for some other company to fill the void. That is business too. If they don't value their loyal customer base then take your business to someone who will...eventually Newegg will get the idea or fade back into obscurity.
July 25, 2007 1:27:19 PM

brick88 said:
From Newegg's standpoint, if people are willing to 375 dollars then why not raise the price. It's their duty to their shareholders to maximize profits. Dare I say it is capitalist. Newegg does not have a monopoly on q6600's so just go to zipzoomfly or some other e-tailor instead of complaining about simple economics.

What this guy said!
July 25, 2007 2:11:25 PM

xela said:
==> Newegg is on notice!
==> 3 more days for them to get there act together.. or they are Dead To Me. (pretty sure that not just to me but to a whole bunch of people)

Good morning everyone :) 

2 days left :( 


Statements like these make me lol. Why would you completely stop shopping at a certain website, especially one as reputable as newegg, just because you don't like their prices for THREE products out of the thousands they carry. Just get your Q6600 or Exx50 somewhere else for the time being. One of the best things about shopping online is you can easily check 4-8 places in a matter of minutes so why completely give up on a site is beyond me.

Newegg is unmatched in customer service and that's something you can't put a price on.
July 25, 2007 2:31:06 PM

Just get it from zipzoomfly where it's still 299.00. For a few more in shipping, you should get it in a couple days.
July 25, 2007 2:31:27 PM

Quote:
DELETED. If you have 1000 cpu's to sell, you can sell them at the tray price. If you have 20 of them, and have 100 people that want them, you can and should sell them for more money. Thats the way it works. Take it or leave it. Ive spent 10's of thousands with newegg and I dont complain about it. Just wait a week or two and they will have more at tray price.


Wow, I love when posters pick good names, very fitting in this case :wahoo: 

In any case, I think Newegg's inventory system automatically does this. A few months ago a new cooler came out at a dirt cheap price, it gained in popularity pretty quickly, and within a couple weeks, it was selling for 1/3 more. But as people stop buying, it went back down, so yeah simple economics, maximize profits when you can. Like someone said, wait and the price will hopefully come back down.
July 25, 2007 2:39:53 PM

There is a simple solution to this. Shop else where. I am a steady customer of Newegg. I bought all my system components from them, was jsut waiting for the processor. First time i looked it was 325, was tring to make up my mind on the 6850 or 6750 (which was 210). Then the 6850 goes to 335, not 345.

So I just did the logical thing, took my business else where.

I bought from www.antaresdigital.com 275 + 10 shipping, I will have it Friday.

Why get screwed just because you are trying to loyal to a specif company. They jsut sold one less.

They dont have a monopoly. If more people go else where, newegg can keep their stock at that price.
July 25, 2007 2:51:10 PM

weston said:
I agree with Xela, "When they start to run out of pants in Walmart or Macy's they don't just go on a price increasing spree to lower the demand".


Well, why not? If you're running a business to make money, you see that a particular good (that, apparently, isn't in particularly great supply at the moment) is in high demand, and people are paying the higher price, why not charge it?

Nobody's forcing you to get anything from any one particular place... it's a homogeneous good, so if you consider it an apt use of your time to comparison shop, do so. Personally seems like a no-brainer to me, but I am an Econ major, and realize that my chosen field of study isn't known for making you many friends. :) 
July 25, 2007 2:52:19 PM

Its simple microeconomics: Laws of Supply and Demand. In this case, demand has increased (meaning that either consumers are willing to pay more for the product at any quantity, or they are willing to buy more of the product at any price). Since supply has not changed, NewEgg will sell more processors at a higher price level than they would before demand increased. In fact, if NewEgg did not increase its prices, it would experience a shortage of processors - its customers would demand more of the processors than NewEgg is willing and able to sell at that price point.

If you still don't get it, try taking a basic Economics 101 course. You'll learn this stuff on day one.
July 25, 2007 3:13:23 PM

It's Econ 101 against Marketing 101, though. There's certainly a case to be made against raising prices because:
1. It creates customer confusion and consternation.
2. It futzes with your corporate image. "Always low prices" - wait, except for the price gouging ones.
3. If you're selling a necessity, you could get slapped with some windfall profits legislation. I mean, should gas stations be allowed to raise prices arbitrarily in an oil shortage?

I actually like this discussion, except for the name-calling.
July 25, 2007 3:26:17 PM

widcard said:
I have spent thousands with newegg over the past 6 years, so far been happy with them. I have to admit im not pleased with what i saw over past days, that some how we go from $299 to $375 Q6600. There is a simple solution to all this (greed) take all your hard earned money and spend it with another on line e-tailer for the next year or so :ouch: 



Ahh it's also called sour grapes. You can always buy from another place if you are not happy. NewEgg gives you years of satisfaction and now you are not happy with them and you want to throw the baby out with the bath water. With that kind a attitude you will never survive this challenge we call life. Get over it and move on.
July 25, 2007 3:26:33 PM

509eagle said:
There is a simple solution to this. Shop else where. I am a steady customer of Newegg. I bought all my system components from them, was jsut waiting for the processor. First time i looked it was 325, was tring to make up my mind on the 6850 or 6750 (which was 210). Then the 6850 goes to 335, not 345.

So I just did the logical thing, took my business else where.

I bought from www.antaresdigital.com 275 + 10 shipping, I will have it Friday.

Why get screwed just because you are trying to loyal to a specif company. They jsut sold one less.

They dont have a monopoly. If more people go else where, newegg can keep their stock at that price.


People like Newegg because of their customer service and return policies, you buy from some online retailer and you get a defective product or need to make a warranty claim, good luck. One cool service Newegg provides for returns is printing and buying UPS labels very cheap. Just one example of why people like Newegg and are upset at the price. It's a trust thing, but yeah just wait, or if you can't go someplace else.
July 25, 2007 3:35:47 PM

cb62fcni said:
Actually, they make very little cash when they do something like this. By stifling demand through a price increase, their quantity sold drops, and with it, their profits. As I pointed out before, it's only done for a short while, until demand levels off. So they're sacrificing increased sales in order to maintain stock for customers who actually need the product and are perfectly willing to pay an increased price. Why don't you wait for a week? Or buy somewhere else. Invest the money you save in a class on economics, you need to broaden your horizons.


Absolute tosh, Newegg want to make as much profit as possible, and they really do not give a rat's ass if you have to wait a few weeks to get yours. They put the price up to make more money. Period
July 25, 2007 3:36:48 PM

quit whining go else where if its cheaper when i build a PC i generally buy from 3 diff sites dont think that you should be loyal if prices go up go elsewhere they will quickly fall again then start shopping there again.

exploit competition!!!
July 25, 2007 3:38:22 PM

lensman said:
It's Econ 101 against Marketing 101, though. There's certainly a case to be made against raising prices because:
1. It creates customer confusion and consternation.
2. It futzes with your corporate image. "Always low prices" - wait, except for the price gouging ones.
3. If you're selling a necessity, you could get slapped with some windfall profits legislation. I mean, should gas stations be allowed to raise prices arbitrarily in an oil shortage?

I actually like this discussion, except for the name-calling.


No more namecalling then :) 

To jeb1517:

You misunderstood me. The statements were a joke meaning nothing more or less then in 3 days I will surf on a different site and get Q6600 there. I like Newegg and I was planning to upgrate my P4C @ 3.4 Ghz for a while now. Now I have 1500$ to spend and already have a killer case and PSU, I was counting on Newegg to give me some bargain prices to get the best hard for my cash as it usually does.. and then I got screwed over so now I am all pissed off :fou:  ==>
==> because of all the confusion and consternation created by Newegg futzing thier corporate image by violating my "Always low prices" expectation :o 

Anyway when you read statements like "Newegg is "On Notice" or "Dead To Me" (originally from Colbert Report) don't take them @ face value. I was counting on your sence of humor to tell you that but must have hit a snag there :??: 

PS: Suggesting that a Q6600 is a necessity is a bit of an overkill..


July 25, 2007 3:47:50 PM

yakyb said:


exploit competition!!!


:ange:  Can we turn that into a rule and put it in a golden frame? :ange: 
July 25, 2007 3:54:06 PM

xela said:
PS: Suggesting that a Q6600 is a necessity is a bit of an overkill..

I wasn't really suggesting that, but now that you mention it, I do think it's something that I have to have. That might make it necessity to me! Actually, some of the passion I'm seeing in this thread suggests that I'm not the only one who thinks the Q6600 is a necessity.

No really, as I said at the start, I don't really think the Q6600 is a necessity because I think there are viable alternatives available.

As for myself, I am going to:
1. Not buy stuff from the Egg when it's way cheaper elsewhere.
2. Definitely buy stuff from them when they're cheaper than other places.
3. Consider buying from them when they're the same price.

Can I get some excitement and enthusiasm for this radical purchasing strategy?!?! Hoo hah!
July 25, 2007 4:14:00 PM

Quote:
DELETED


You're absolutely right, it has little to do with macroecon, it's actually micro-economics, which is a completely different subject. I never claimed it was macroeconomics, though I do hope you have the capacity to understand that they're almost completely different subjects. I love how in lieu of putting forth a decent counter-argument you resort to name-calling and red herrings. You're a real class act, and your intelligence is illuminating all of us. Keep on keeping on.

I'm glad that most of the people on this thread seem to understand simple market dynamics and aren't trying desperately to blow this out of proportion. The intelligence level in these forums seems to have dropped severely in recent months, but this thread has at least somewhat restored my faith in the "forumz".
July 25, 2007 4:19:15 PM

lensman said:
As for myself, I am going to:
1. Consider buying from the Egg when it's way cheaper elsewhere.
2. Definitely buy stuff from them when they're cheaper than other places.
3. Definitely buy from them when they're the same price.


FIXT
July 25, 2007 4:27:06 PM

GSTe said:
Absolute tosh, Newegg want to make as much profit as possible, and they really do not give a rat's ass if you have to wait a few weeks to get yours. They put the price up to make more money. Period


Again, by increasing the price they actually lose profit. Instead of selling, for example 100 cpu's at 285 they will sell 10 at 375. Total profit for 100 sold cpu's (take selling price - tray price of 266) = $1900. For 10 sold cpu's: $1090! Plain and simple, right? As price increases, demand decreases EVERY TIME. 9 times out of 10 they are able to maximize profit by keeping overhead low and by moving massive amounts of inventory. This is one of the few occasions when they sacrifice potential profit to maintain availability. Don't believe me? Wait a week or two. Their prices will drop down to very close to the tray price as soon as they have sufficient inventory.

And what, pray tell, exactly is "tosh"? Please, english only! I'm kidding.

July 25, 2007 4:31:20 PM

cb62fcni said:
Wow, this issue is really a non-issue. As someone already sagely pointed out, its called market economics. There is, however, another underlying reason. When something is very highly demanded, ie Q6600, by raising the price they ensure that the customers who truly want them are able to get them, albeit at a higher price. Without a price increase, lots of their customers would be left out in the cold. This is actually a very pro-consumer move by them, although most people seem to be too dense to comprehend this phenomenon. If you want to get a Q6600, you can either wait, or go shop elsewhere where they don't enforce these policies, although they'll likely sell out and leave you high and dry long before Newegg. Why is this so hard to understand?

Well... it IS market economics, but not really because you are under the false assumption of two things:
1: That there is NOT enough chips to meet the demand. :heink:  Bullshit. There are more than enough chips flooding the market right now or else the manufacturer would not have dropped the price to begin with. The demand for these chips OBVIOUSLY does not match the supply, or else Intel would have an almost dominance of the market for cpus (which it does not) and they could keep the prices as high as they wanted for as long as they could balance on the head of that proverbial pin.
2: That customers are somehow benefiting from price-gouging. Get real man... That's like saying that it's justifiable that a 24hour shutdown at a refinery in Kansas due to flooding is grounds for a .30 price hike from Montana to Kentucky when gasoline supplies are at an all-time high. :fou:  All this does is pad the profits for the companies that engage in this shameful behavior. If your whole montra is low prices and good service, then how is it good for your image to gouge people when you are actually paying LESS now for the chips than you were a week ago? If the wholesale pricing had increased because of shortages, then there would be justification for a price increase. Since it hasn't, then it's not: It's price gouging, plain and simple. You can hide behind the "Pure Economics" approach, but it's only one part of the equation when you run a business. If you are purely for profit, a company will usually die in this environment because bad news travels faster and farther than good news does (Marketing 300 or so) and if you gouge people, your brand is hurt irreparably. (Brand Management 300) Just think: the word "Nike" and the trademark swoosh is worth almost 2 billion dollars on Nike's Income Statement alone. That being said... your brand image IS everything. This marketplace is flooded with competitors with extremely low barriers of entry into the computer part e-tailing business. (Study up on your Porter and his Five-Forces model for more information), so Newegg had better protect the one thing that a LOT of etailers lack: their image. As a manager, how are you going to justify selling LESS of something at a higher price point when you could be selling them ALL and having even more sold through pre-order? I'll explain: if you gouge and your loyal customers cry "foul", then it's your ass as a manager because you are now going to be selling LESS of them at ANY price point because your image is ****. You can focus on the short-term and grab the profit in this environment or you can stick with who took you to the dance and be loyal back to your customers by staying true to your principles. That's more of a Strategic Manager thing, about a 470 level class.

With those facts in mind, how are you going to try to justify an obviously unjustified price spike just because Newegg has the rep to get some people before they really know what's going on? Technically, it's not predatory pricing, but it's just as outrageous as $3 bottled water after Hurricane Katrina. The only thing that's "dense" in this is your statement that people don't understand when they're getting it up the ass that it's just "market economics". The fact is that you can go find a 6600 SOMEWHERE at any given time right now IN STOCK for under $300 ANYWHERE else but Newegg. So, oh wise one, how in the hell is that market economics and not price-gouging???? Call a spade a spade and say what it is... it won't hurt... I promise.
July 25, 2007 4:38:49 PM

The whole supply and demand thing is true and I agree with it since the prices will be fine when everyone stops buying them BUT!!!!! When I click on the buy now for 320 and when i fill out my credit card info and go to click complete order on the next page and it says $345. THAT MAKES ME MAD!!! That is just plain WRONG! Or as someone yesterday stated. They canceled his order saying there were none in stock BUT they had them in stock for 375 which was more then he originally paid for it. That is a total f.....n SCAM!! and poor BIZZ.
July 25, 2007 4:39:38 PM

cb62fcni said:
Actually, they make very little cash when they do something like this. By stifling demand through a price increase, their quantity sold drops, and with it, their profits. As I pointed out before, it's only done for a short while, until demand levels off. So they're sacrificing increased sales in order to maintain stock for customers who actually need the product and are perfectly willing to pay an increased price. Why don't you wait for a week? Or buy somewhere else. Invest the money you save in a class on economics, you need to broaden your horizons.



I still do not see your logic. This is in NO WAY beneficial to anyone other than Newegg. People who HAD to have this chip probably already bought one at the higher price. Some will say there must be a shortage since prices are now going up at other sites, well possibly, and it is more probable that others are following suite (why should Newwegg get all the cream, still see this as "Beneficial"). Many are mentioning about the limited supplies which will equal out but I have checked just for fun at over a dozen sites over the past 3 days and not found a single vendor who is out of stock (some are getting deliveries every two days so while they are out on a day there is NO shortage in the supply lines). All of the supply chain saw this rush coming and Intel has more than enough supply, this is after all part of their plan to get as many Intel chips sold before AMD's next release (while it certainly will not be a Intel breaker Intel wants a much market share as possible). Can they charge what they want? Absolutely. Can people buy else ware? Of Course. Should people be allowed to complain? Also Absolutely. If it hurts Newegg so be it is their choice and NO ONE offered them a free pass (if you get your costumers pissed they can tell others and that could hurt your sales this is also "basic economics". They way people are jumping in to defend this you would think someone called their children pigs. Newegg has every right to sell at a point they want AND ANYONE who wants to has the right to complain anywhere they want to. By the way if Newegg does cancel part of your order call them up and they had better match their price and send you a cpu if you live in New York, Our consumer protection laws state that a vendor CANNOT UNILATERLY change a order. Submission (NOT CHARGE) IS the point of sale. They CAN contact you, and if YOU want you can cancel the ENTIRE order, or wait or except the increase but THEY CANNOT pick and choose.
July 25, 2007 4:54:51 PM

cb62fcni said:
Actually, they make very little cash when they do something like this. By stifling demand through a price increase, their quantity sold drops, and with it, their profits. As I pointed out before, it's only done for a short while, until demand levels off. So they're sacrificing increased sales in order to maintain stock for customers who actually need the product and are perfectly willing to pay an increased price. Why don't you wait for a week? Or buy somewhere else. Invest the money you save in a class on economics, you need to broaden your horizons.


OK, time for Econ 101.

Hello class, my name is Professor Andrew, and I will be teaching you the basics about supply and demand today. When we talk about supply or demand, we are referring to the range of prices that producers are willing to sell corresponding quantities at and consumers are willing to purchase corresponding quantities at. To simplify our study, let us imagine a very small economy - one that contains only six consumers (lets call them Al, Ben, Carl, Dave, Ed, and Frank). Each of these people wants a Widget, but are willing to pay different prices for one. Al will pay $1, Ben will pay $2, Carl $3, Dave $4, Ed $5, and Frank $6. Given this, we can create a schedule of how many Widgets will be purchased at each price point:

Price | Quantity
$1 6
$2 5
$3 4
$4 3
$5 2
$6 1

The manufacturer of Widgets, Thingamagigs Inc., is willing to manufacture and sell any number of Widgets, but it will only sell a given quantity if the price is at or above some minimum. These minimums increase as the number of units sold increase (due to a number of factors beyond the scope of this introduction). We can create a schedule of prices and quantities for supply, which would look something like:

Price | Quantity
$1 0
$2 1
$3 2
$4 3
$5 4
$6 5

These schedules can be graphed (economists always graph with price as a function of quantity, not the other way around as most non-economists assume - you can think of the graph as "at what price will this quantity be bought or sold?") to get the supply and demand curves (which happen to be straight lines in this example, but are usually not in the real world). The supply curve is positively-sloped, while the demand curve is negatively-sloped. These two curves intersect at the "equilibrium point" - the point at which consumers are willing to pay the same price that suppliers are asking for the same quantity of goods. This is almost always the price that prevails in the marketplace (the notable exceptions are when the government imposes price-controls, which almost always totally screw things up for everyone - see rent controls and agricultural price controls for the big ones). In the example given here, the equilibrium occurs at 3 Widgets at a price of $4.

If there is a change in the supply or demand - that is, a change in anything other than the price and quantity along either curve - it manifests as a change in the curve (or curves) itself. Let us examine two cases, an increase in supply and an increase in demand. Let us say that Thingamagigs Inc. comes up with a new manufacturing process for Widgets, which allows them to double their production at each price point. The new supply schedule looks like:

Price | Quantity
$1 0
$2 2
$3 4
$4 6
$5 8
$6 10

After Thingamagigs Inc. implements the new technology, the market adjusts and a new equilibrium is reached at 4 Widgets at a price of $3. Notice that the quantity sold increased and the price decreased.

Now lets say that Widgets become the new craze, and everyone wants one even more than they did before. In fact, they each want one so badly, that they are willing to pay up to $3 more to get one. The new demand schedule looks like this:

Price | Quantity
$4 6
$5 5
$6 4
$7 3
$8 2
$9 1

The new equilibrium point is at 6 Widgets at a price of $4 - the quantity sold *increased* at a higher price level.

This is the effect we are seeing at this time concerning the Q6600. Demand increased, the price went up, and NewEgg will sell more processors.
a b à CPUs
July 25, 2007 4:56:53 PM

At work so I haven't read all the way thru the post yet, so sorry if some one already posted this.

Yes, newegg's prices are a little high on the Q6600, but they have the Xeon version of it for $315.
~ $15 more than the other e-tailors gets you a higher quality chip.

http://www.newegg.com/Product/Product.aspx?Item=N82E16819117127
July 25, 2007 5:05:36 PM

lensman said:
I wasn't really suggesting that, but now that you mention it, I do think it's something that I have to have. That might make it necessity to me! Actually, some of the passion I'm seeing in this thread suggests that I'm not the only one who thinks the Q6600 is a necessity.

No really, as I said at the start, I don't really think the Q6600 is a necessity because I think there are viable alternatives available.

As for myself, I am going to:
1. Not buy stuff from the Egg when it's way cheaper elsewhere.
2. Definitely buy stuff from them when they're cheaper than other places.
3. Consider buying from them when they're the same price.

Can I get some excitement and enthusiasm for this radical purchasing strategy?!?! Hoo hah!


Passion: :love:  :bounce: 
Excitement = :bounce:  :bounce: 
Enthusiasm = :bounce:  :bounce:  :bounce: 

cb62fcni said:
Again, by increasing the price they actually lose profit. Instead of selling, for example 100 cpu's at 285 they will sell 10 at 375. Total profit for 100 sold cpu's (take selling price - tray price of 266) = $1900. For 10 sold cpu's: $1090! Plain and simple, right? As price increases, demand decreases EVERY TIME. 9 times out of 10 they are able to maximize profit by keeping overhead low and by moving massive amounts of inventory. This is one of the few occasions when they sacrifice potential profit to maintain availability. Don't believe me? Wait a week or two. Their prices will drop down to very close to the tray price as soon as they have sufficient inventory.

And what, pray tell, exactly is "tosh"? Please, english only! I'm kidding.


Keep in mind that not everyone is aware of the wholesale price of Q6600 and Exx50 models. Newegg has a huge fanbase that doesn't read review sites/forums and will gladly buy a 375$ Quad core (they ran out of stock this morning again BTW). Newegg is known for it's agressive pricing and many will simply get thier CPU's from them without giving it a second thought.
I don't belive for a second that they will sell 10 CPU's @ 375$ for every 100 @ 285.. Not a giant like Newegg with a clientcase and advertising investments of thier magnitude. They will manage to fool a lot of people and there is no justification for thier actions. It doesn't mean that we all have to start hating Newegg all of sudden, it just means that they are just as greedy as the rest of us :o 
Your attemts to put some sence in their new pricing model are an overkill m8. They are screwing people over and I am sure that they are making a good profit of it.


PS: Yes, the price will go down at the end.. Newegg invested to much money and labour into thier image and it would not make any sense to ruin that.

July 25, 2007 5:06:33 PM

Actually, I kind of thought about this another way: If you sell 100 processors at $80 profit, you gain $8000. If you sell 1000 processors at $10 profit, you gain $10,000. I know that the numbers are greatly skewed, but with the market in it's current state, Newegg's not going to sell more than 100 or so of these at their prices.
It's really a lack of demand forecasting/price gouging by Newegg that's to blame here. Granted, as a supply specialist, it would be next to impossible to accurately gauge your increased demand from a round of price decreases due to the complexity of the task. You'd have to answer correctly which chips are going to sell less and which more and by how many and how it affects the sales of non-affected items in your inventory. The reality is that someone somewhere should have anticipated the price drop and had more stock on hand of the hottest selling processors that also were dropping price (significantly in this case).
My judgement: BAD BAD BAD BAD -HORRIBLE Management by Newegg. It is going to ruin them? No. Will most of their lost customers come back after a few bad run-ins with some of their competitors? Yes. But, another few of these incidents and it won't matter how bad the competition is because customers aren't going to care anymore because Newegg will be no better than they are. Horrible to think about because I always loved the 'Egg.
July 25, 2007 5:22:00 PM

asgallant said:
OK, time for Econ 101.

Hello class, my name is Professor Andrew, and I will be teaching you the basics about supply and demand today.

The new equilibrium point is at 6 Widgets at a price of $4 - the quantity sold *increased* at a higher price level.

This is the effect we are seeing at this time concerning the Q6600. Demand increased, the price went up, and NewEgg will sell more processors.

Nice theoretical discussion and an A+ on your test, but it doesnt assume competition, dude. Most 101 micro/macro economic models are based on one supplier models. While it explains the basic concept, it doesn't really answer the question. The reason that it doesn't is because you don't address the issues I stated earlier about Business Management. If the new equilibrium pricing was what Newegg was charging, then why is it that the rest of it's competitors were so far lower? Answer: because Newegg got it wrong for the sake of making profit and in the process screwing it's customers. If Newegg went purely off the economics approach, they'd concede that there is NO demand for an athlon 3200+, but there it is on their website. If someone actually wanted it, shouldn't they price it at $1 just to save themselves the added expense of storage and having it on the books for another 3 years before they throw it away? I mean... they are just applying pure economics, right? Wrong. There are so many other factors that MUST be taken into account in this paticular situation. You can't just throw out some economic theory and expect it to stick for those of us who have actually been to business school, because if successful businesses only relied on economics for pricing decisions, then there would be no managers, just economists. That's a scary prospect, to tell you truthfully.
July 25, 2007 5:36:51 PM

DJ_Jumbles said:
Technically, it's not predatory pricing, but it's just as outrageous as $3 bottled water after Hurricane Katrina.

BTW, just to make sure people don't become misinformed, predatory pricing is the practice of lowering prices below your competitor's cost in order to drive them out of business and be able to raise prices later once you've re-established a monopoly (or just market dominance). The only firm that could be accused of predatory pricing in this situation is Intel. :) 

You've mentioned price gouging elsewhere in your post, so I know you know the right term and just misspoke here. Apologies for being pedantic and posting a correction.

Overall, I suspect that you're right in that this pricing experiment has probably gone bad. I still think that we're going to see more of this kind of yield management in e-tailing.
July 25, 2007 5:37:57 PM

valis said:
"There is a simple solution to all this (greed)"

it's called "the law of supply and demand". demand goes up, same supply, prices go up to meet the demand. also coupled with a little thing called "competition", i bet prices went up in many places. newegg isn't stupid, you do realize there are OTHER places to buy that chip from, right? they know you can find them also, you may find that a lot of places have the higher price today, and if they dont, they may be sold out.

it's not "greed" it's "market economics"


Ding. Supply and demand. If the resource is limited its price goes up so that it goes to the best use (err, gaming pc, lol).

Unfortunately there are no alternatives to Intel Quad cores (WAKE UP AMD).
July 25, 2007 5:41:17 PM

I don't see anyone complaining when prices go down due to low demand / higher supply.
July 25, 2007 5:42:19 PM

DJ_Jumbles said:

My judgement: BAD BAD BAD BAD -HORRIBLE Management by Newegg. It is going to ruin them? No. Will most of their lost customers come back after a few bad run-ins with some of their competitors? Yes. But, another few of these incidents and it won't matter how bad the competition is because customers aren't going to care anymore because Newegg will be no better than they are. Horrible to think about because I always loved the 'Egg.


Totally.

They guy who copied a chapter from a talmud of economics wasted the time as Newegg doesn't manufacture CPU (gets them @ a fixed price from Intel/AMD) but only retails them and as they are not the only seller on the market they can try to control the demand/supply all they want but it would seem that the result is a whole load of pissed or disapointed people.
They plainly (as DJ_Jumbles put it)
- Horribly mismanaged the situation (screwed up is the more common term and that is where this thread started)
* It will not ruin them unless they keep it up.
* We have a reason to be pissed and disapointed.
* They will sell CPUs (in my opinion) @ a ratio closer to 4/10 then 1/10 @ 375$ vs 285$ (It's Newegg for crying out loud) meaning that they will turn a heavy profit of it.
* They are out of stock @ 375$ already.
July 25, 2007 5:42:21 PM

cb62fcni said:
Again, by increasing the price they actually lose profit. Instead of selling, for example 100 cpu's at 285 they will sell 10 at 375. Total profit for 100 sold cpu's (take selling price - tray price of 266) = $1900. For 10 sold cpu's: $1090! Plain and simple, right? As price increases, demand decreases EVERY TIME. 9 times out of 10 they are able to maximize profit by keeping overhead low and by moving massive amounts of inventory. This is one of the few occasions when they sacrifice potential profit to maintain availability. Don't believe me? Wait a week or two. Their prices will drop down to very close to the tray price as soon as they have sufficient inventory.

And what, pray tell, exactly is "tosh"? Please, english only! I'm kidding.


First of all, price increases do not decrease demand - they shift the equilibrium point between supply and demand along either or both curves, depending on the factors involved. Demand is the whole range of prices and quantities that consumers are willing to buy and pay for a good. A change in price has absolutely zero impact on the demand for a good! All it does is move consumption to a different point on the curve.

Second of all, the change in revenue that a given change in price causes is entirely dependent on the elasticity of demand for the good between the two price levels (the original and the new). If a good has a highly elastic demand (it's a non-necessity, there are close substitutes, and changing to the substitutes is not cost-prohibitive), then revenues will fall if the price goes up due to a change in supply. Revenues rise if the good has an inelastic demand (think oil and gas) and the price goes up due to a change in supply. The opposite is true if prices go down, again, due to a change in supply. If prices rise due to a change in demand, then revenue goes up. Period. Exclamation point, even!

Nothing has changed NewEgg's supply. They aren't paying more for the cpu's from Intel; they didn't have any massive lawsuits (that I'm aware of); no sudden increase in salaries, marketing costs, labor costs, or storage costs (that I'm aware of). If they had any of these, it would be reflected in all of their prices, not just one cpu's. NewEgg perceived a change in demand (that is, a shift in the whole curve) from its customers, indicating that they want Q6600's more than they did before. In response, NewEgg raised the price. Not. Hard. To. Understand.

If your whole montra is low prices and good service... said:
If your whole montra is low prices and good service...


If their whole mantra is low prices and good service, and 99.99% of the time they deliver, then the 0.01% of the time they "screw up" (which I would not classify this price increase as) should not harm them significantly.

If you are purely for profit, a company will usually die in this environment because bad news travels faster and farther than good news does (Marketing 300 or so) and if you gouge people, your brand is hurt irreparably. (Brand Management 300) Just think: the word "Nike" and the trademark swoosh is worth almost 2 billion dollars on Nike's Income Statement alone. That being said... your brand image IS everything. This marketplace is flooded with competitors with extremely low barriers of entry into the computer part e-tailing business. (Study up on your Porter and his Five-Forces model for more information), so Newegg had better protect the one thing that a LOT of etailers lack: their image. said:
If you are purely for profit, a company will usually die in this environment because bad news travels faster and farther than good news does (Marketing 300 or so) and if you gouge people, your brand is hurt irreparably. (Brand Management 300) Just think: the word "Nike" and the trademark swoosh is worth almost 2 billion dollars on Nike's Income Statement alone. That being said... your brand image IS everything. This marketplace is flooded with competitors with extremely low barriers of entry into the computer part e-tailing business. (Study up on your Porter and his Five-Forces model for more information), so Newegg had better protect the one thing that a LOT of etailers lack: their image.


1. All companies are in it purely for profit. Every single one of them, even the ones that look like philanthropists or environmentalists, is in it for profit - every move is calculated to bring in the most money. They don't always guess correctly, but that doesn't change the goal. A business that is not in it for the profit first, foremost, and always, attracts little to no capital investment and usually dies in early life. The notable exceptions one might point out are the "non-profits," which usually survive based upon charitable contributions from individuals with similar concerns, not because the business earns enough money to cover its own costs of operation.

Businesses engage in a constant public-relations war. NewEgg doesn't have excellent customer service because it really wants you to feel good about your purchase - it wants you to come back and buy more; the customer service is calculated to achieve that effect without negatively impacting the bottom line. If NewEgg suddenly saw that its customer service was no longer generating the same level of repeat purchases, you can bet that it will cut back on the department, and service will suffer - all in the name of the bottom dollar.

2. Is one cpu priced higher than other retailers offer it (even significantly so) cause for tarnishing NewEgg's image? I think not.
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