There is one interesting observation you are likely to make, if you try comparing the prices of toys in online stores with the prices of similar toys in brick and mortar stores. That is where you will come to notice that, on average, the toys sold online are sold at considerably lower prices, compared to those which are sold through the traditional brick and mortar outlets. We are looking at a situation where, in some cases, online prices turn out to be 50 percent lower than brick and mortar toy store prices. These are obviously not the sorts of price differences one can ignore. At the very least, one would be interested in knowing what is causing them.
It turns out that there are at least three reasons as to why the toys sold online are typically sold at cheaper prices.
First is the fact that there is more competition in the Internet-based market. If, for instance, a person is shopping for angry birds toys online, and she suspects that the prices in one store are too high, all she’d need, to access another store, is to click on the next search engine result link. But in a brick and mortar store, this is a move that would involve moving from one store location to another – something most people would view as ‘not being worth the effort.’
Second is the fact that the Internet-based toy vendors get to avoid/bypass some costs incurred by their brick and mortar store competitors. Online toy vendors don’t, for instance, have to incur showroom rental costs and other such expenses.
Third is the fact that many of the Internet-based toy vendors are able to procure their stocks directly from manufacturers. Thus, for instance, majority of the Internet-based toy vendors who stock angry birds toys procure them directly from manufacturers. They thus end up in a position to sell such angry birds toys at what would otherwise have been ‘wholesale trade-discounted prices’ and still make tidy profits.