Wednesday, April 23, 2008

New NewEgg Developments vs. Amazon

To further prove the Competitive Landscape analysis that I performed on NewEgg recently, I just read this post:

http://www.dailytech.com/Newegg+Guns+for+Amazon/article11566.htm

The new NewEgg site is http://www.neweggmall.com and it is in beta at the moment. Currently I don't think it is anywhere near as usable, friendly, or product-rich as Amazon. But NewEgg has been very successful in the consumer electronics segment and they will probably exit their beta phase as a pretty interesting competitor.

Amazon should keep close tabs on NewEggMall as it could potentially shuttle standard NewEgg customers into NewEggMall, purchasing more than just electronics. Here is a breakdown of their strengths/weaknesses. The NewEgg strengths and weaknesses will probably transfer into NewEggMall, although hopefully they will improve their weaknesses.

NewEgg strengths:
  • Excellent customer service
  • Powerful rating system
  • Powerful search function that "homes in" on the item qualities you care about
  • Fast 3-day shipping at good prices

NewEgg weaknesses:
  • Mostly deal in electronics, unproven "non-tech" e-tailing
  • No auction systems / user selling systems
  • **70%+ of revenue comes from repeat high-tech buyers

Amazon strengths:
  • Powerful rating system
  • User learning with"Personalized Recommendations" after you purchase items
  • Large user base
  • Free shipping over $25

Amazon weaknesses:
  • Low margins already, so can't drop prices much lower
  • Not all items are sold "in house" and free shipping doesn't apply to everything

An important thing to realize is that Amazon does not generally make a lot of mony. NewEgg has continually been profitable since their inception. Amazon is relying on eventual volume sales and if NewEgg erodes even a portion of that, it can be very painful for Amazon.