ZiNgA BuRgA Wrote:

Assassinator Wrote:As for why I was talkiing about demand at the start... The cost of operation is a fixed cost, how high the prices you need to set to offset that cost will depend on how many sales you make. Low sales » higher fix costs accounted into each sale » forces higher sale price.

Not really.  Shops don't order heaps of these higher end products, and they come shipped along with the lower end products.  If you distribute the fixed costs evenly amongst products, most of it would be on the cheaper goods.  True that they can distribute it more on the expensive products, but that would only work in a monopolistic situation (and thus the issue is a monopoly one, not about fixed costs).

But each descision should looked at seperately, rather than on a whole. It's like the marginal cost vs average cost argument. You order this extremely hard to sell high end item, you would require more premium on it than the normal items, because this thing is harder to sell, thus more risk from both losses due to depreciation and loss due to the unability to sell it (this is exactly what I was saying in the 1st post). And this higher required premium mean it's prices need to be much higher, which means it's even likely to sell, and a negative spiral... That's why most stores won't stock an item like that.

ZiNgA BuRgA Wrote:Really much less of an issue these days, especially amongst tech enthusiasts.
And would you still pay ~$4000 more for this security?

Er.... ... ... ... I have no idea how to respond.

But then again, what normal person spends that much money on a processor anyay...

SchmilK Wrote:From my experience building computers over the past 10+ years.  A physical store can NEVER compete with an online vendor!

Not exactly never.

MSY for example here, comes pretty close. It operates on one of these low profit high volume low cost sort of business model. They have massive lines that take 1/2hr to wait, yet still refuse to hire more than 2 people in the shop. The shop is pretty much a counter at the front where everyone lines up, no displays, no whatever. Crappy customer service and everything, but the prices are quite competitive.

Large quantity of sales lets them make cheap wholesale deals, being super cheap lets them cut operational costs and reduce prices, and low prices pulls sales volumes and allow them to compete with online stores. Especially when none of these online stores are physically located in Australia, and you will incur shipping costs.

(This post was last modified: 26/05/2009 04:26 AM by Assassinator.)

Assassinator Wrote:But each descision should looked at seperately, rather than on a whole. It's like the marginal cost vs average cost argument. You order this extremely hard to sell high end item, you would require more premium on it than the normal items, because this thing is harder to sell, thus more risk from both losses due to depreciation and loss due to the unability to sell it (this is exactly what I was saying in the 1st post). And this higher required premium mean it's prices need to be much higher, which means it's even likely to sell, and a negative spiral... That's why most stores won't stock an item like that.

That doesn't work.  If something's hard to sell, you don't want to make it even harder to sell by upping the price.
This isn't like investing where you demand higher yields to compensate for risk.  You only stock these items if you're really sure you can sell them.

ZiNgA BuRgA Wrote:

Assassinator Wrote:But each descision should looked at seperately, rather than on a whole. It's like the marginal cost vs average cost argument. You order this extremely hard to sell high end item, you would require more premium on it than the normal items, because this thing is harder to sell, thus more risk from both losses due to depreciation and loss due to the unability to sell it (this is exactly what I was saying in the 1st post). And this higher required premium mean it's prices need to be much higher, which means it's even likely to sell, and a negative spiral... That's why most stores won't stock an item like that.

That doesn't work.  If something's hard to sell, you don't want to make it even harder to sell by upping the price.
This isn't like investing where you demand higher yields to compensate for risk.  You only stock these items if you're really sure you can sell them.

But if the items are riskier than normal items, and you don't set a higher profit margin, then there would be no reason to stock them. You would stock normal items instead.

It's exactly like an investment. High risk, high return.

Assassinator Wrote:It's exactly like an investment. High risk, high return.

Exactly..too many computer shops here closed down (i even worked for some) because they were under the assumption that buyers would rather come in and be able to walk out with something that cost more THAT DAY rather than wait a few days for it to come in.  Problem is, you can never sell all of your stock and you sit on ALOT of spoon that no one wants...which is where the high price takes over to compensate for those things that no one buys.

Still I only buy from a retail store in emergency situations...such as a server has a failed harddrive, motherboard, cpu, heatsink...otherwise its all newegg and tigerdirect.  They have by far the cheapest prices (here in the US) and i can get the parts in a day or 2.  I used ot build computers and go on pricewatch and streetprices and find the cheapest retailer selling the parts, and then pay shipping for 6 seperate orders...and now that doesn't make sense to do.

(This post was last modified: 26/05/2009 04:15 AM by SchmilK.)

SchmilK Wrote:Still I only buy from a retail store in emergency situations...such as a server has a failed harddrive, motherboard, cpu, heatsink...otherwise its all newegg and tigerdirect.  They have by far the cheapest prices (here in the US) and i can get the parts in a day or 2.  I used ot build computers and go on pricewatch and streetprices and find the cheapest retailer selling the parts, and then pay shipping for 6 seperate orders...and now that doesn't make sense to do.

But that's mainly for the US and possibly Europe. Here in Australia, if I try to order something from Newegg, I would incur an extremely large amount of shipping fees.

Cheapest deal is probably from these physical store chains I was talking about in an earlier post. (Assuming you live close to such a store). There are Australian based online stores, but they don't seem to be any cheaper.

An example: http://www.msy.com.au/
They're too cheap to hire any web design, so if you can't find the price list, it's here -» http://www.msy.com.au/Parts/PARTS.pdf

But you can't really compare prices here directly with prices in the US. Shit here is just more expensive (not that much more for computer parts, but stuff like food are MUCH more expensive). Stuff needs to be shipped a long way to end up here, and even if everything else is the same, I'm pretty sure wee also get taxed more.

(This post was last modified: 26/05/2009 04:36 AM by Assassinator.)

Assassinator Wrote:But if the items are riskier than normal items, and you don't set a higher profit margin, then there would be no reason to stock them. You would stock normal items instead.

It's exactly like an investment. High risk, high return.

It works differently.  In investment, you pay less for the higher yield.  For stock, when you get the money, the risk is already over.
If you don't expect anyone to buy your stuff, you just generally don't stock it, just like you don't invest if the expected return is negative.

ZiNgA BuRgA Wrote:

Assassinator Wrote:But if the items are riskier than normal items, and you don't set a higher profit margin, then there would be no reason to stock them. You would stock normal items instead.

It's exactly like an investment. High risk, high return.

It works differently.  In investment, you pay less for the higher yield.  For stock, when you get the money, the risk is already over.
If you don't expect anyone to buy your stuff, you just generally don't stock it, just like you don't invest if the expected return is negative.

Ofcourse you won't stock if you don't expect anyone to buy it - and that's not an investment, that's stupidity.

Investments involve chance. Lets use some maths, since explaining this shit using words will be really really gay. So for your situation, for every price p, lets say you expect an x likelihood of selling it. If your required return is r, you would only stock the item if you can find a price such that p*x - e(x) > r. where e is lets say a risk premium which is a function of the probability of selling it, x.

And for selling stuff, when you get the money (sell the stuff), it's also over.

(This post was last modified: 26/05/2009 05:43 AM by Assassinator.)

Ahh, but the risk premium is inversely related to the chance of selling the item.  So if you push the premium up, you may in fact be lowering your expected return.

ZiNgA BuRgA Wrote:Ahh, but the risk premium is inversely related to the chance of selling the item.  So if you push the premium up, you may in fact be lowering your expected return.

Oh spoon, I fudgeed up on my formula. Fixed now.

That
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Assassinator Wrote:... you would only stock the item if you can find a price such that... [equation] ... works

So yeah, your expected return needs to account for the risk premium, thus the minus sign in front of the risk premium.

And that applies to everything the shop stocks, not just the risky stuff.

(This post was last modified: 26/05/2009 05:52 AM by Assassinator.)