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Service or Cost?

Posted October. 06, 2005 07:16,   


“The same TV, but the price gap is 400,000?”

Our coverage team recently visited representative department stores, Internet shopping malls, and outlets that sell major electronic home appliances and surveyed the prices of four product categories: TVs, refrigerators, washing machines, and laptop computers.

It turned out that an LG Electronics 32-inch LCD TV costs 2,780,000 won at Himart but was sold for 2,370,000 won at E-Mart, a discount store.

The two are the same model (32LP1D), but one is 410,000 won more expensive than the other.

As in this case, we can buy the same product for a better price if we look around well enough.

The Internet and Yongsan are Always Cheaper?-

The best feature of Internet shopping malls is the simple distribution process along with no fixed costs such as those regarding employees and shops. Therefore, we expect Internet shopping malls to have the cheapest prices, but actually this was not true.

The price of a 32LP1D TV is 2,388,000 won at Interpark, which is more expensive than that at E-Mart (2,370,000 won). This is because the manufacturing company sets different sales rates.

We compared the prices of the popular products recommended by the department store and the electronics company’s directly managed agency. It turned out that the consumer prices of those products are cheap because the offline distribution company buys the products for a lower price than do Internet shopping malls.

The manufacturing company supplies different products to Internet shopping malls and offline stores.

For example, “PS186DR,” a Winia Mando kimchi refrigerator brand sold in the Internet mall GS Eshop, is an “online priority brand” that is not usually supplied to offline stores.

The place to go for the cheapest home appliances is the Yongsan Electronics Arcade in Seoul. The 32LP1D TV is sold for around 2,250,000 won there. However, most stores demand a separate 10 percent card fee, which means the price goes up to 2,470,000 if one does not pay cash.

The Difference between Discount Stores, Department Stores and Agencies-

Among stores where the prices were the same no matter if cash or card was used, E-Mart was the cheapest. For 2,350,000 won, only the laptop computer was more expensive than Interpark’s 2,320,000 won, and the other three subjects of comparison were the cheapest among all.

The reason: wedding season. Lee Dal-soo, advertising manager at E-Mart, said, “In the fall season when there are bulk purchases of home appliances due to many marriages, we lower the purchase prices and profit margins.”

A 32LP1D TV sold for 2,750,000 won at a department store. The factory price was originally 3,100,000 won but is currently on a wedding season sale.

At LG Electronics’ Hiplaza, an agency under the company’s direct management, this product sold for 2,700,000 won. The agency that we visited was selling this product for 2,500,000 as an independent wedding season sale event. Himart’s 32LP1D was rather expensive, but this store sells many low-cost products from minor enterprises and does AS (after-service) for the companies’ products themselves.

Sang-Hoon Kim sanhkim@donga.com