Are you being cheated by Best Buy and Dell?

Last week, there were two major news stories concerning the pricing of consumer electronics.

The first involves a law suit filed by Connecticut Attorney General Richard Blumenthal against Best Buy. The law suit accuses Best Buy of denying deals found at the company's Web site, http://www.BestBuy.com. Blumenthal said store employees charged customers higher prices found on a look-alike internal Web site.

The second story involves Dell selling PCs loaded with the Linux operating system instead of MS Windows. Although Microsoft charges Dell (the OEM) approximately $100 for each copy of the low end version of MS Windows and Linux is a free (no cost) operating system, Dell is charging the same price for the same PC irregardless of whether the PC is loaded with MS Windows or Linux. Members of the Linux community are crying "foul" at Dell's pricing structure.

Are the consumers being cheated by these two merchants?


In the Best Buy case, I have to side with the merchant and say that Blumenthal doesn't understand the retail business.

For any item in a national chain store, there may be different prices for each area of the country due to the differences in the operational cost of the physical outlets and the demand for that particular product in each area (the reason why gasoline cost is different from region to region). The prices would also have to be competitive with other stores in that area.

The Web-based outlet has a different set of prices than that of a physical outlet in a particular region because it's operational cost and the demand for on-line ordered goods may be different than that of a physical outlet in any regional of the country. The prices at the Web-based outlet would also have to be competitive with the prices of other Web-based outlets.

The prices of the items on the in-store intranet of a physical outlet reflect the prices at that particular outlet. i.e., Each physical outlet has it's own set of prices on its intranet.

Thus, the prices of items in a physical outlet's intranet may be different that those in the company's web-based store.

The best way to shop at Best Buy, Circuit City, or any other nation wide chain with a Web-based outlet is to first check the price at the Web-based outlet and then call the local physical outlet to see which price is lower. If the latter, just go to the store and purchase the item. If the former, order the item on-line and specify in-store pickup at the local outlet.


In the Dell case, I also have to side with merchant.

Although the MS Windows operating system costs Dell about $100 per PC, Dell offsets that cost by installing trial software (what the industry call "crapware") on each MS Windows PC. Dell receives about $50 per PC from the vendors of the trial software. So, the software on the MS Windows PC (operating system and trial software) yield a net cost of $50 for Dell.

The software on the Linux PC costs nothing. However, a Linux PC is harder for the average user to manage (backup files, install printer drivers, etc.) than a MS Windows PC. So the cost of providing user support for a Linux PC is higher. Dell is assuming a cost difference of $50 between supporting a Linux PC user and a MS Windows PC user.

Thus, for Dell, there is no cost difference between the two PCs.

I suspect that the difference in the cost of supporting the two PCs will be greater than $50, but Dell is willing to eat the additional cost.

The best way to purchase a Linux PC from Dell is to purchase a MS Windows PC from Dell. Then, videotape yourself removing the MS Windows from that PC (reformat the hard disk) and replacing it with Linux (free from the internet). Send the video tape along with the MS Windows installation disk to Dell to request a refund on the uninstalled MS Windows operating system (about $100).