Page 12 - Simply Electronics Case

Retail Price

This is the price that the ultimate consumer of the product pays when a

product is purchased.

Simply Electronics is an online site that sells items below competitors’ prices.
SE acts like a "cut-out shop" meaning that they look to purchase unsold
inventory from brands at a discount. The logic is that if at the end of the
season, the manufacturer holds excess inventory – SE comes to the brand and

says “hey, we like your stuff. We are going to host a sale.” Because they
agree to retail inventory that is slow moving or older models SE looks for a
50% discount off of Wholesale. For example:

Wholesale Price: $150.00
SE-Offer Price: $75.00 (50% off Wholesale)

If SE acquires the product for 50% less they can mark it up 2x and sell it for
the original Wholesale Price. For Example:

SE-Offer: $75.00
SE-Customer-Price: $150.00 (2x Markup yielding a 50% margin to SE).
Also Note: If the Original Retail (from above was $300) and SE’s Customer

Price is $150.00 then the customer who purchases the product on SE received
a net savings of 50%.

Part of the reason why SE could engage in this type of pricing lay in the
costing it provided in terms of the functions it incurred compared to other
supply chain elements (See Table 1):

Wholesaler Functions Retailer Functions Grey Market Vendor

Buying the product Buying the Product Buying the Product

Promoting/Contracting with Promoting/Contracting with Contracting with