Monoprice takes on Amazon in trade of cheap electronics

Apr 20, 2014

You'd only have to drive by the empty shells of Circuit City stores, and soon RadioShacks, to see why a company in Rancho Cucamonga, Calif., represents a nightmare for the retail electronics industry.

Off the 15 freeway is the 173,000-square-foot distribution facility and headquarters of Monoprice, an online store which aims to thrive by selling the electronic esoterica that carry a hefty markup at brick-and-mortar retailers.

Stuffed into one corner of the facility is a small physical store where you could pick up an HDMI cord - the critical component everyone needs to connect modern TVs to a set-top box - for $3.61. A similar cord from Best Buy or RadioShack is about $20.

But it's online where Monoprice.com has made a name since 2002, largely by word of mouth among tech-savvy geeks.

Last year, Monoprice grew to $145 million in gross sales. It was purchased last August for $180 million by Blucora, a Washington state-based public company that owns several Internet businesses, including tax preparation service TaxAct.

Monoprice goes direct to Asia in search of factories that can make products that stand up against leading store brands. Its goal is to find categories where it can undercut major retail prices by 30 to 70 percent.

The company's strategy is "whatever product category we're in, we offer the highest quality at the lowest price," said Barrington Research analyst Joe Janssen.

Think Amazon, but much smaller, and only selling its own products.

"We're just cutting off all the margins," said Monoprice CEO Ajay Kumar.

The company has received praise from tech sites CNET and Gizmodo in head-to-head tests that showed its cables performing on par with far more expensive brand names available at retail stores.

Monoprice sees its advantage in selling a limited set of options for a specific kind of product it's tested itself, rather than selling everything, as does Amazon or a site like TigerDirect.com.

While Amazon offers its own brand of low-cost electronics accessories, called Amazon Basics, with prices in the same ballpark as Monoprice, the Seattle tech giant also sells higher-priced cables, such as $35 Monster-branded HDMI cables.

"Amazon is trying to sell more Monster cables than Amazon Basic cables," said Wedbush Securities analyst Gil Luria. "Other direct-to-China websites ... don't curate their products. They also don't have the same level of service."

When an order comes to the Monoprice distribution facility, an automated system identifies what size of shipping box is needed and it's put on an assembly line of sorts that runs on metal rollers through the facility. The box is directed to the station nearest the ordered item, where a worker drops it into the box. Once the order has everything it needs, the box makes for the exit and winds up in a shipping truck.

Recently, Kumar has begun pushing his 270-person company into new categories, such as musical instruments and power-efficient LED lights. Last week the company started offering same-day shipping to areas of California's Los Angeles and Orange counties for $9.95 if the order is placed before noon.

The company sells Monoprice-branded electric guitars for $91.07 and a flute for $106.03. A simple plastic iPhone or Android case - the kind available pretty much everywhere for between $10 and $50 - sells for less than $4.

Not all of Monoprice's expansions have gone smoothly. The company has been sued several times for patent infringement.

Last March, for example, it was sued by Klipsch for allegedly infringing on a speaker system that sold for $399. Monoprice wanted to sell similar speakers for $249. The case was settled privately and dismissed in May. Today, Monoprice offers a "premium" speaker system for $229.86, as well as a cheaper set for $91.11.

Whittier, Calif., resident David Gonzalez heard about Monoprice from the IT guy at his office who had used it to buy components. He arrived at Monoprice headquarters on Thursday, online order in hand, to pick up a $74 swivel TV mount he was buying for personal use.

"Best Buy wanted $200," he said.

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alfie_null
not rated yet Apr 21, 2014
Mention of cables is interesting. You'll find that even at retailers like WalMart, which would normally be associated with low prices, cables which are simple and inexpensive to manufacture, are priced exorbitantly.

Brick and mortar stores seem to have a pricing strategy with certain products - they recognize that when you need a cable for instance, you are likely to need it NOW, and will be willing to pay whatever for it. You end up buying it, but feel you've been violated. The store thus gains a reputation in your view and next time you have a choice and time is less pressing, you shop elsewhere (on line).