Newegg, one of the largest online retailers that cater to the IT and gaming crowd is an interesting company. According to its director of transportation, the company distributes about 30,000 packages a day and more than 15 million annually. In terms of revenue, it’s about a $3.5 billion company. Profiled in Ti’s 2012 North America Ecommerce Logistics report, I decided to take a look at what’s been going on with Newegg since they were last profiled.
Delivery Services and Options
Just in time for the holiday season, Newegg is OnTrac’s first customer for its latest service, DirectPost. Much like UPS’ hybrid solution, SurePost, DirectPost also utilizes the USPS. The difference is that DirectPost services OnTrac’s 8-state delivery service area.
In addition to taking advantage of OnTrac’s new service, Newegg is also testing the delivery waters itself. Still in trial, customers in the Los Angeles area (actually within 50 miles of the company’s City of Industry warehouse) can place orders by 10:00 am and for $20 extra, a vehicle from the Newegg Express fleet will deliver the purchase before 6:00 pm same day. The trial will run through the holiday season and if successful, Newegg will expand the offering to Indianapolis, Edison and Memphis – all Newegg warehouse locations by the way.
Another option for customers is its Premier Service. Much like Amazon Prime, Premier is a $50 annual subscription service that provides free expedited shipping, guaranteed arrival within three on days, along with discounts on two-day and one-day shipping. It also offers free returns with no restocking fees, and a dedicated customer service line.
Alternative Payment Options
In a nod to its IT customers, Newegg now accepts bitcoin as payment. Alternative payment options are a growing trend for many e-retailers as they expand globally. Bitcoin, while maybe controversial to some, is a recognized option for many in the IT/gaming community. For now, Newegg is using BitPay as the payment processor and is available to US and Canadian customers.
The successful platform model created by the likes of Amazon, Alibaba’s T-Mall and Taobao and Ebay has resulted in Newegg launching its own version. Its B2B subsidiary Newegg Business, introduced a marketplace that provides business products across 25 categories, from industrial-grade construction tools and equipment to office supplies and consumer electronics. The site’s targeted audience includes large e-retailers, manufacturers and brick-and-mortar businesses.
Newegg Business charges sellers fees ranging from 10% to 15% of each sale, varied by product category. However, it charges no payment card processing or other fees. The company also guarantees against damaged or undelivered goods up to $1,000, as long as the buyer meets certain requirements.
In June of this year, Newegg announced plans to expand into six new countries – India, Ireland, Netherlands, New Zealand, Poland and Singapore. Already operating in the US, Canada, UK, Australia, Taiwan and China via its Taiwan website. However, its last global attempt failed which the company attributed to the use of a third-party vendor.
This time, however, they’re doing it differently. The company will ship orders from the US first and then once local demand is sufficient, it will build a physical presence (i.e. warehouse) in the country. This may be beneficial to Newegg but for customers it means higher prices such as import taxes, administration fees and so on which could mean the price doubling. But, according to one blogger, Newegg will charge the consumer in advance for taxes and duties so that items will not be held in customs and delivery targets can be met. It seems to me that there are better ways to handle this and perhaps Newegg should do a bit more research on this if they want to succeed globally. Perhaps seek the advice of an international logistics provider for options?
Newegg will continue to be successful here in the US and Canada thanks to its loyal customer base. But, its cross-border strategy is a bit concerning and one that it needs to think further on or else run the risk of another failed attempt to truly globalize. Its B2B subsidiary and B2B marketplace are good ideas along with a subscription service that it is currently testing. However, these models are very similar to its primary competitor, Amazon.
It’s a tough market to compete in and one needs to be innovative and nimble to win. I’m not sure if Newegg is there yet. There’s too much “Me Too” and a company is going to need more than low prices to win.