October 16, 2006

Retailer Console Margins

An anonymous CompUSA employee has posted what the retailer makes on various consoles. For the Xbox 360 Premium it is 3.9%, Xbox 360 Core 2.6%, and the Nintendo Wii is 5%. Nintendo is giving a higher profit margin to its retail partners, however if you actually do the math, selling an Xbox 360 gives you a higher absolute profit. - Source

January 01, 2006

Blockbuster Rewards is Actually a Good Deal

We probably can thank Netflix for this, but the new Blockbuster Rewards program is actually a good deal. For $10 a year, you get 1 free non-new release video or game rental a month plus rent 1 and get 1 free on Mondays-Wednesday. $10 for 12 rentals? Not bad.

November 20, 2005

Complete Black Friday List

Here's a complete list on what is for sale for this Black Friday. $1000 42 inch Plasma TVs, $150 computers with monitors, etc. Yum.

October 28, 2005

Delta Dumping Song

Delta raised the white flag and is going to fold Song into their core airline by mid-2006. I liked Song, tried it once and had a pleasant experience. It has a wanna-be JetBlue type feeling, but compared to a normal airline that's not a bad place to be.

Delta, the No. 3 U.S. carrier, said Song would stop operating as a separate unit in May 2006, about three years after it started flying. The decision on Song is the latest sign of Delta's willingness to break with its past as it seeks to reorganize under bankruptcy protection and stem billions of dollars in losses from high fuel costs and competition. Delta has never disclosed whether Song was profitable.

October 10, 2005

Blockbuster Could Have Bought Netflix for $50 Million

In an article in Variety, a former Blockbuster executive talks about how they could of bought out Netflix for only $50 million a number of times. Today Netflix is worth over $1.4 billion and Blockbuster is swimming in red ink. In hindsight, it looks like a huge mistake not to buy the company.

However it's entirely likely Blockbuster would of just ran Netflix into the ground after an acquisition and another internet startup would of taken its place. Blockbuster back then wasn't wild about cannibalizing their immensely profitable land-based video rental business.

“We had the option to buy Netflix for$50 million and we didn't do it. They were losing money. They came around a few times," he recalls. Instead, in 2000, Blockbuster inked a 20-year exclusive video-on-demand pact with Enron as the energy conglom launched into telecom. Blockbuster canned the pact after nine months. Netflix is now worth $1.4 billion. Blockbuster’s market cap is about $850 million.

October 01, 2005

Best Buy Testing Used Videogame Sales

Best Buy has confirmed it is testing used videogame sales in a few markets. Analysts have found four stores in Illinois and California that are trying it out. And it's not limited testing either, one store had 5000 used games for sale. A Wall Street analyst has said it expects Best Buy to roll it out to over 700 stores in the next 2 years. Our sources say the offering has more reasonable prices than EB or Gamestop.

Developers of games are not happy with this new development as it cuts into sales of new games. Publishers may be forced to sell games through digital distribution like the Steam interface Valve has been so successful with in sales of Half-life 2. However in Best Buy's defense, they have little choice but to compete as the merger between EB Games and Gamestop will create a used-game colossus. The used game business is very high margin as it rip offs kids selling stuff who don't know any better or don't want to deal with the hassle of selling games on eBay. The neat benefit of this service is any used games traded in at Best Buy will give you credits to buy other Best Buy merchandise, not just videogames.

Mark Rein, vice president of Epic Games, creators of the "Unreal" franchise as well as the upcoming Xbox 360 game "Gears of War," has vociferously argued against retail sales of used games in the past. The expansion of a major retailer into the field, he said, is disheartening.

"We pay to be in Best Buy's flyers," he said. "We pay market development funds. Publishers drive gaming traffic to these stores. To have them resell the games, with developers having no participation, that's just wrong. That's just fleecing us."

A substantial rise in used game sales may lead to the expansion of digital distribution -- in other words, downloading games rather than buying a disc. Valve Software saw tremendous success with this model for "Half-Life 2" last year. The game was sold two ways: Through traditional retail channels and via a proprietary digital distribution system called Steam. While Valve consistently declines to give hard numbers for Steam sales, founder Gabe Newell has said that digital distribution is responsible for half of Valve's revenues from the game.

April 05, 2005

Best Buy to Carry Mac Mini

Apple confirmed today Best Buy has agreed to sell the Mac Mini. Let's hope this works out better than the last time Best Buy tried to sell Macs in 2003 and pulled out after it failed. If you're in the hunt for Mini, why not wait a month when OS X Tiger comes out. It will save you $129.

Kevin Cockett, a Best Buy spokesman, said the retailer was "excited" to begin carrying the Mac Mini in all of its stores. "It's the latest innovation from Apple and strengthens Best Buy's assortment of computers." Source: News.com

Consumer Reports Disses Ionic Breeze Again

Consumer Reports continues to attack Sharper Image's Ionic Breeze line of air purifiers. If you don't know, Sharper Image sued the magazine for libel because of a negative review on its prized product that generates a huge chunk of its sales. Of course the magazine won that case and it just wrote another article saying the Ionic Breeze does little to clean the air and actually releases "unhealthly levels" of ozone. Ouch.

Over 2 million units have been sold at $350 each. What a major rip-off if Consumer Reports is on the ball, which I don't doubt it is.

The magazine reports in its latest issue hitting newsstands Tuesday that Sharper Image's Ionic Breeze Quadra Silent Air Purifier and four other similar machines fail to significantly clean the air but also release potentially unhealthy levels of ozone.

April 02, 2005

Best Buy to End Rebates

After giving disappointing financial guidance which killed their stock, Best Buy also announced it will phase out mail-in rebates over the next two years. Instead the company will focus on its rewards program, which forces customers to pay an annual fee to earn points toward future discounts.

I have a sinking feeling this is not a good sign for us bargain hunters. Rebates were awesome in getting products for $0-10 for us enterprising folk who actually didn't mind filling out the forms. Without rebates and the roughly half of people that never filled out the forms, I doubt we'll see deals like that again.

The rebates will be phased out over the next two years to give vendors time to adjust, Jackson said. He said Best Buy is still looking at how to get rid of the mail-in rebates without putting itself at a disadvantage with competitors who might still use them. Some vendors, such as tax software makers, have used rebates extensively. Jackson said others vendors have struggled to fit rebates into their business models. "I think if we're quiet for a minute, we can hear them cheering," he said.

January 04, 2005

Walmart Hits the High end of its December Forecast

After a bad start to the holiday shopping season, Walmart announced it will hit the high end of its Decemeber sales forecast thanks to a nice post-Christmas shopping rush. The company expects to hit 3% same-store growth vs. the 1-3% guidance they had given. Analysts say the surge came as people wanted to use their gift cards and take advantage of big markdowns.

December 27, 2004

Toys R Us Losing the Battle

The New York Times reports that Toys R Us may shut down its toy division or sell it off to focus on its Babies R Us stores. Toys R Us used to be the dominant toys category killer in the 1990s with a peak market share of 20%. Now Walmart is at 20%, Target is at 18%, and Toys R Us is rapidly declining at 17%. Analyst are expecting the company to close down hundreds of stores in early in 2005.

December 20, 2004

Retail Sales and Traffic are Weak

Retailers are starting to get nervous as the AP reports store traffic has been weak. The Chief economist of the International Council of Shopping Centers said, "We are not getting the kind of lift we need. Traffic and sales were below expectations." This firm tracks the sales figures for 30,000 retail stores. Total sales on Saturday was down 7 percent vs. the same day last year. Luxury stores have out-performed the middle and working class stores this Christmas as discount shoppers got hit with higher oil and heating costs. Moreover there hasn't been a "must have" item this Christmas, especially since there is a Playstation 2 hardware shortage.

December 14, 2004

Blockbuster Getting Rid of Late Fees

In an effort to stem the tide to online video rentals, Blockbuster has decided to kill one of the largest complaints against them. Starting January 1st, the company will drop late fees and give customers a 1 week grace period. After one week, Blockbuster will charge the full price of the DVD, VHS tape, or videogame on the credit card. The customer has 30 days to return the product less a restocking fee. It is reported Blockbuster made $250 to $300 million a year from late fees alone.

December 09, 2004

Amazon UK Starts DVD Rentals

Netflix actually cancelled plans for UK DVD rentals and I bet Amazon had something to do with it. Amazon UK has started two DVD rental plans of 7.99 pounds for 2 DVDs at a time with a 4 per month limit and 9.99 pounts for 3 DVDs at a a time with a 6 per month limit. Notice the different business model vs. Walmart, Netflix, and Blockbuster of limiting DVD rentals to a set number each month. We probably can expect more of the same when Amazon decides to start their US service.

December 07, 2004

Circuit City Post Weak Same-Store Sales

Circuit City, the number 2 consumer electronics retailer, reported weak November quarter sales due to lower discounting on CDs and DVDs. The company also blamed changes on how it sells cell-phones and satellite TV services. Analysts were expecting same-store sales to be up 2-4 percent; the company announced it would be -4.3 percent year over year. It makes sense however, as whenever I go to Circuit City the videogame inventory is an absolute mess vs. Best Buy.