The Economics of Nerdy Retailers

by JT McGee

So you may have heard that the popular bookseller Border’s is going under. Apparently there just aren’t that many people wanting to buy books, or are there?

We’ve witnessed the fall of a number of retail giants since the 2008 financial crisis. These include Circuit City, Sharper Image, Border’s UK (now the rest of them), and a number of other companies are on the brink; RadioShack, and Barnes and Noble will probably be next.

Each of these huge retailers has one thing in common: their core customer is nerdy.

Now look, I’m not trying to rail on the electronically inclined, nor the literate. I’m just going to rail on the companies that market to them. Selling to nerds via brick and mortar is dead. You can thank the internet.

There is a very good explanation for why nerds don’t buy stuff in stores: we already know what everything should cost. If we shop in your store for a particular product it’s because we want to hold it, feel it, or because we want to verify that what we read in Amazon’s review section is actually true before returning to our dark corner of the world and making a purchase, with confidence, over the internet.

retailers, online, offline, comparison

We’re not much for paying for convenience, and frankly, having Amazon Prime enables us to get everything within the next two days without paying one red cent in shipping costs. Besides, I can shop the virtual aisles reaking of man-stench without making an ass of myself; how can you put a price on that? And what about the fuel efficiency of shopping online?

Mass market retailers shouldn’t worry just yet. Only the nerds know the better deals are online; everyone else is content to pay too much for what is essentially a commodity—and having it today, to many shoppers, is still worth paying a price multiples higher than the online price.

But times are changing. You see, we’re nerds, so we’re early adopters. We’ll still engage in a HD-DVD vs. Blu-ray debate if you’re so inclined. Being early adopters, we’re also early adopters in the “go shop for stuff offline and buy it online” method of making consumer purchases. But beware. I’m training my parents, and soon enough I’ll have converted my brother, pending I can get him out of the must-have-it-right-now mentality. These falling retail giants are just an indication of what is to come; and smaller stores simply won’t cut it.

There are very, very few things that I cannot buy without first seeing it, and a great deal of things that I can buy start to finish (research to purchase) completely online, with maybe the exception for food, some clothes, and services, of course.

Impulse buys? Forget it. According to several studies, 17-59% of shoppers used their cell phones to enhance their 2010 holiday shopping experience, according to the Star Tribune.

So, start a new business to sell to nerds at your own risk; we’re already going online. If you do happen to start a business then sell wheelchairs, canes, eyeglasses, or anything else grandpa would prefer to buy at “Sears Roebuck.” That’s the only way to enjoy at least some brick and mortar longevity. (Think of the up-sell potential in caskets and gravestones…!)

{ 10 comments… read them below or add one }

brokeprofessionals March 1, 2011 at 21:18

Love this post, I will have to remember it for my roundup this weekend. I am a nerd but I still do most of my shopping in brick and mortar (but not my banking) because we live in an apartment. I think that will change once I get a good address (other than work) to ship stuff to. My friend who works at Borders blames Kindle. I still think there is room for at least one giant book chain in the U.S., but Walmart and us nerds may say otherwise.

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JT McGee March 2, 2011 at 11:55

Haha, yeah, I think us nerds have said otherwise. Borders down, Books a Million already shrunk and just barely eeks out profitability, and Barnes and Noble is up for sale, but I’m not sure they’ll be profitable for much longer.

I really wonder how bad the Kindle was beating up on brick and mortar retailers. I don’t think I know a single person who has one…but with that said, I’m sure the people who do own such a thing are the kind of people who order a TON of books.

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Bogey March 1, 2011 at 22:11

I actually rarely buy things from the internet, but I would totally consider myself nerdy. I never buy books, but my office is about a half mile from the library, so that is very helpful.

I am still waiting for some sort of subscription based book service (similar to net flix), where it’s all digital. Basically, have books streaming to an iPad or something along those lines.

The internet just provides so much free and useful information that physical media (books, CD’s, etc.) really have almost become obsolete.

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JT McGee March 2, 2011 at 12:00

I have a feeling that that kind of book subscription service isn’t too far off. I think that was the ultimate goal of Google Books, and I’m sure that Amazon has its sights set on a similar model, given it’s already made agreements with a ton of publishers.

You are right on the availability of information. You can even get class lesson plans, and video teacher lectures online from MIT, Yale, and others. You could probably eek out a whole degree online with what is freely available. Insane. I love it though.

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Invest It Wisely March 2, 2011 at 12:41

Online isn’t always cheaper; what I sometimes do is research everything online and then go into a local store to get it, such as a video card or something like that. For many other things though especially books I don’t know why someone would pay 50% more to buy it in retail. Must be for the experience, I guess.

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JT McGee March 2, 2011 at 12:52

Yeah, not always cheaper, but usually so. The economics of it (Warehouse vs expensive commercial real estate) necessitate that prices are generally higher offline than online. Add in labor, it is even more true. Of course a lot of companies require that retailers use their pricing, so they throw a screwball in the generalization.

I like to browse the bookshelves, but I know I’m not going to buy there. Securities Analysis, for example, is like $65 offline and $45 new online, or $25 used. Not much competition there. 😀

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The SIngle Saver March 2, 2011 at 13:16

Borders is going under? Yikes! I have a gift card I had better use up!

Thanks for visiting my site, TheSingleSaver.com. Through your comment I was able to find your site and I am really impressed. I’ll be back!

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JT McGee March 2, 2011 at 22:22

Oh snap! Get to movin’, that’s free money! Thanks a bundle, I have a lot of fun here. 🙂

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Robert @ The College Investor March 2, 2011 at 21:38

I am such a huge fan of the internet for buying stuff, especially Amazon.com and Costco.com. Even when we remodeled our house, we bought a vanity and bathtub online from Costco, and bought our appliances from Appliance.com. They were all cheaper, including delivering.

The best thing about Costco.com is that they never charge for shipping, ever. Plus, you can return the item to your nearest store, even if it is something crazy like a kitchen sink!

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JT McGee March 2, 2011 at 22:22

That’s a good deal. We don’t have a Costco here, only a Sam’s but I haven’t really explored their online stuff. I wouldn’t have even thought of buying appliances online ROFL.

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