J.C. wrote in with an interesting question about Dewalt 20V Max combo kit pricing. Basically, he’s seeing a certain combo kit on Amazon for $50 to $70 less than everywhere else. Why?
I’ve noticed that the pricing seems to vary somewhat wildly for Dewalt’s brushless DCK296M2 combo kit. Amazon often changes prices and I’m familiar with that. As of now, that combo kit is $369 from Amazon, CPO, and Lowes. It is $349 at Home Depot. Some of the sellers on Amazon are selling it for $299 plus $10 for shipping.
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I’m trying to figure out how they are able to sell the kits for that price. Most of the big box stores keep pretty consistent pricing on most of their kits and usually Amazon is a little below but not quite so drastically. Can you offer any insight into how some of these “no name” resellers can offer such products so much cheaper? They often don’t seem to keep a large selection so, again, it makes me a bit wary.
Okay, so let’s take a look at the DCK296M2 kit.
This kit comes with Dewalt’s 20V Max brushless hammer drill, brushless impact driver, (2) 4.0Ah batteries, a charger, and a soft carrying case.
It is currently priced at $349 via Home Depot, $349 via Amazon directly, $369 via many independent distributors, $304 via one 3rd party seller on Amazon, and $299 via another 3rd party seller on Amazon. The third party sellers tack on another $10-11 for shipping, but the out-the-door price is still a lot lower than at major retailers.
So why are 3rd party sellers selling this combo for a lot lower?
My first guess would be that they are liquidators and bought these combos by the pallet-full. But it’s unlikely that this would happen with a new and relevant combo kit.
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Then, I looked at some of the products these 3rd party Amazon dealers are selling. Some of these products are Home Depot exclusives.
My second guess is that some of these stores are simply resellers. In other words, they might only carry products that are purchased from retailers at a discount.
To refresh your memory, Home Depot ran a “tiered discount” promo over the holiday season. The DCK296M2 combo kit is one of the items that was eligible for a $150 discount towards another tool, kit, or combo kit.
Dewalt’s compact radio, currently $99 via Home Depot, is one of the 45 tools listed as being eligible for the $150 discount tier.
So, before the promo ended, assuming the current prices carried over from the holiday season, that Dewalt brushless combo and a radio would have cost $349 + $99 – $150 = $298. Let’s bring that up to $325 to include taxes, and let’s assume that no additional coupons or discounts were applied.
A reseller could charge $300 for the combo and $85 for the radio, and walk away with $60 in profit, less Amazon listing fees.
If you look back at the Dewalt 8V Max gyroscopic screwdriver deal from last week, Home Depot’s price is still $39. Resellers are listing it for $69 and up on Amazon. That kit was priced at $39 at Home Depot on December 11th, maybe a little sooner, and was first listed on Amazon on the 13th.
Again, this is only my guess as to what’s going on.
The profit margin on power tools and kits is said to be quite slim. Home Depot and other major resellers can negotiate special pricing based on volume, and partnership arrangements. It doesn’t seem that smaller retailers have the same pricing flexibility or negotiating power. And so it is entirely feasible that small-time resellers can buy tools from retailers such as Home Depot for less than from Dewalt and other power tool brands directly.
So that’s what I think is going on here. If anyone has greater insight or can come up with a better possible explanation, please let us know!
Michael Quinlan
6+ years ago, around the holidays, I would but combo kits at Home Depot or Lowe’s @ 20% off and get a free bare tool too, then sell them on eBay for a profit – sometimes the selling price ended up higher than the original retail price. More often then not I would break up the kits and sell bare tools, chargers and batteries separately. Sometimes I even bought them on eBay and resold them on eBay; this became easier as my seller rating developed. Keep in mind that this was before manufacturers were really offering bare tools for purchase.
I agree that small, no-name resellers are probably doing something similar – taking advantage of holiday promotions, and selling the items now that the promotions have expired.
MtnRanch
I’ve run into the “prize with an inflated MSRP” problem before. All you need to do is keep a record of the street price at a couple of retailers and the IRS will accept that as the being the value of the prize. I won a $2,000 scanner with an MSRP of $3,500 a few years ago. The manufacturer filed a 1099 with the $3,500 price and the IRS didn’t even blink when I offered the printouts of the actual street price.
Jason
I wonder if Dewalt will ever send lawyers after Amazon and these resellers. I know it has happened on other tools and items before if your selling too cheap below what they consider msrp. Amazon the actual site is really guilty at inflating the tools msrp when they send their tool deal emails. They say 75% off but your marked if up so much from average retail it doesn’t matter!
BikerDad
Amazon isn’t inflating the MSRP. MSRP is the Manufacturer’s Suggested Retail Price. Milwaukee has long had seriously inflated MSRP, and most of the other tool makers are almost as bad. While this rarely presents a problem other than being annoying marketing, it can bite folks in the tuchus on occasion. If you happen to win a prize, you pay taxes on the MSRP, not the street price.
Jon
Actually it’s Home Depot that’s likely to do something about it. Like enforcing buying limits for the kits that come with a free tool or other discount. It’s hard to do as resellers tend to pay cash, but it’s in Home Depot’s interest to keep the products in stock for the average consumer and limit the resellers. Remember, deals like this are often loss-leaders, where Home Depot will take the hit because they make money on the 10 other things you buy while in the store. Resellers don’t spend that money.
ajw1978
I proved today that I am that sucker HD has in mind on their “loss leader” products. Anyone have any good tips on hiding purchases from their “bosses?” 🙂
BikerDad
On the pricing, these small online retailers are often major local toolmongers, and they have made some sort of special deal with their local manufacturer’s rep. That exact kit was going for $299 at my local tool monger for most of the summer, $369 or so every where else. I ended up getting it for $245 at Lowe’s, using their price guarantee AND a $25 off coupon. I wasn’t going to go to Lowe’s for it, but the combination of the guarantee and coupon sucked me in.
The local toolmongers carry a much wider range of tools than the Big Box, so while they may not have the buying power by volume, they do have some buying power by breadth of product.
Ken
This guy is correct, and it’s called MAPP pricing. Manufacturers set what the lowest price your allowed to advertise a product for during a certain time period. Say the kit is MAPP at $359, distributors can sell it for whatever price they want, but they can’t advertise it for less than MAPP. Online, there are ways around this, such as adding an item to an online shopping cart to see the price. That is not advertising.
Basically, Dewalt ran a promotion on this kit in Q4. Now that it is January, the MAPP has gone back up. Though some distributors are still sitting on inventory from Q4 that they paid less for. So they are able to sell these kits at a discount.
Garlco
It’s MAP with one P… and it’s not supposed to be sold under MAP… Period!!!
Kevin
Garlco; tomato / tomahto. Some tool mfg’s call it MAP & some call it MAPP. Minimum Advertised Price Program. Some leave Program off.
Kevin
Garlco; I should correct you; as the acronym clearly states, it is not supposed to be ADVERTISED below MAPP. The tool mfg’s do not monitor/delegate what it is SOLD for – their sole focus is “advertised price”.
John A
A 20% off HF coupon will land you a $349 MSRP item for $279.20 + tax, EG (8%) so for about $301.
I just picked up the “newer” ryobi drill press for $113 including tax at HD with my 20% HF coupon. Look for my review on YT.
So, buying local you support your local people, which I think is good, plus, I could imagine the hassle of trying to return a defective item through the mail or ups…
jason. W
You can use harbor freight coupons at home depot? How?
adam
HD accepts competitor coupons, though that really just means Lowes & Ace for the most part. If you are lucky, some newbie might accept a HF coupon, though it can just as easily be rejected because HF doesn’t carry anything HD does.
JT
I’ve tried 3 home depots in Houston, TX. All have said no. HF isn’t considered a competitor because they don’t carry similar stuff. However you can use Lowe’s mover coupon for 10%. That has never failed me.
Joe M
There is also the possibility that smaller retailers are buying them in the same bulk amounts as the Big Box Retailers or Amazon, but since they’re a smaller operation, can cut the price without losing the profit margin that the higher prices get. With lower overhead, fewer employees, and smaller warehouses, Buying something that has an MSRP of $300 (just for the sake of easy math.) but is sold to them at a bulk (supplier) price of, say, $220 each gives them a lot of wiggle room. A Big Box or Amazon has to use that $80 profit margin per sale on marketing, huge numbers of employees, and all sorts of overhead. Meaning, of that $80, their overhead for selling it to you might be, say, $60, leaving them $20 per sale as profit.
Small operations, on the other hand, have fewer employees, smaller warehouses, and don’t have to have as big an imprint online as the big guys. So, where the big ones were needing about $60 of that sale to be Overhead, the little guys may very well only need $30 to cover THEIR overhead. So, instead of selling at the MSRP, they can under-sell that MSRP a little bit and make the same profit, or even a little more. If they buy the same $220 kit (Supplier Price) and only mark it up to, say $280 instead of $300 MSRP, they can make $30 per kit, but sell more OF them than the Big Box/Amazon can supply.
Sure, the Big Box can BUY in bigger amounts, but their MSRP based price point means they can easily hold onto stock while people go to the lower-priced smaller retailer. Let’s say they BOTH buy 5000, or even 10,000 units. Even a MODEST amount of shopping around means the smaller retailer will get more hits on the price. The Big Box/Amazon may sell between 60-70% of their stock @MSRP of $300. 6-7000x$80 profit=$480k-$560K Gross, $60 of each $80 being overhead, the Profit would be $120K-$140K.
The SMALLER retailer, on the other hand… due to their lower price, may easily sell between 80 and 90% of their stock, just purely by having the lower price. Same Math:
$280/Kit, 80-90% of 10K Units Total Sold, $30/Unit Overhead, $30/Unit Profit.
8-9Kx$30 Profit=$240K-$270K out of the same 10K units bought.
The difference here is that the Big Box/Amazon has more left over that they have to sell over time @MSRP, with less room for error. They would, in this scenario, have between 3000 and 4000 units they still had to sell to get rid of the entire batch, but the smaller operations would only have between 1000 and 2000 units to clear. Enter the “Sale Price” phase of selling off these items. Boxing Week/Black Friday/Clearance prices. Let’s bring both down so they only make $10 per sale profit, for the sake of clearance, and let’s assume they cleared all the stock.
Big Box: Clearance/Sale Price: $290, 3-4K units sold, Profit=$30-40K
Smaller Guys: Clearance/Sale Price: $260, 1-2K units sold, Profit=$10-20K
Total Profits per batch of 10K Units: Big Box/Amazon: $150K-$180K, Smaller Guys: $250K-$290K.
The problem with being small is more of that has to be re-invested in more stock to sell, and the big guys can buy bigger amounts, which means this kind of under-cutting the MSRP situation can’t happen as often as they’d like it to. Their sales may not come as often, as a result, or their selection or customer service response times may be slower to handle the discrepancy in size of the company. A lot would suffer company-wide if they did this kind of volume on every item they sold. The ones you see where they’ve under-cut the MSRP are fewer, and far more specialized to specific items they knew for certain would be popular enough to clear the batch they bought.
Or… that’s my thinking/analysis of the situation. I deal pretty exclusively with one of these little online retailers, and it’s the best way I have to explain why they consistently have better prices than Amazon or Home Depot.
Stuart
That’s the thing – small resellers don’t have the capital to buy anything in the same bulk amounts as Home Depot and other larger distributors.
And if they did, their undercutting prices might violate MAP or discount pricing agreements.
Joe M
That’s why I don’t think they do it very often. Just on certain things they know they can move. They can take the collective bite, and invest in a large batch of that ONE item, and offer the lower price. Just so happens, since so many of us are looking for that one item, or the items we’re noticing are all desirable items, we keep seeing them at lower prices consistently.
The rest of the time they get out-sold by the Big Box and Amazon not buying 10K items, but more like 50K items.
Just… for the ease of the math, I used the same amounts for each, to show how a small operator could afford to do it in one burst. I deal with a Canadian small online retailer, and they have consistent lower prices. The only exception is when they’ve had an item for a while, it’s at a regular low price, and then Amazon or a big Box puts things on Clearance and they just can’t match it.
T
Worked for an industrial supply/repair shop years ago. Fixed power and pneumatic tools/equipment, also sold retail products. At one point, even though we were the “authorized” shop for some of these companies, the retail products showed up in big box at lower prices than we could source direct from the manufacturers. But that also meant more equip to fix/service. Some of the big box lines had markedly diffrent products even though the product numbers were the same. Not so much these days from what ive seen.
Ed
There is this guy in Phoenix that sells Dewalt and Makita tools on Craigslist. He is selling a 20V Dewalt brushless drill & impact driver, one lithium battery and charger for $195. You can upgrade to the 3 speed drill foe and extra $30. I have seen his lists for quite a while now so he seems to be legit. I’ve been tempted to buy one of those sets but I really don’t need 20V, I am happy with my 18V set. I wonder how he acquires Dewalt and Makita tools.
BikerDad
If he’s only giving you one battery, the that’s where his profit is at. He’s selling the other battery out of the kit for $50-$80.
Ed
Actually extra batteries are $35.
OhioHead
Reselling stolen tools?
Whoever posted about MAP, is 100% correct (from a DeWalt perspective).
Chris
If you go for the Home Depot tiered promo thing *in store*, you can trigger the 150 off by buying a very cheap second item (Ridgid cordless radio or Ryobi 8V screwdriver) which in turn will apply most of the 150 discount towards the DeWalt kit.
If you factor out the 2nd item, the DeWalt kit can go as low as $211. So even at $299 from a 3rd party seller on Amazon, the seller is probably making $60 or so. Thats not a WHOLE lot of money, but sell a few of them and you are talking some decent profit for very little work.
Jimmy L Simmons
In a nut shell the online world is greater than we all could ever imagine. Simply this is the answer to everyone’s question because I do this for a living. Target Walmart Homedepot Bed Bath and beyond Lowes eg. They sell so much on line that when people return there items they have know where to put them it’s like this Amazon has the best return policy ever. Now if your a seller when you agree to there terms to sell on there site if the customer returns there item you eat the cost not amazon so amazon has liquidation warehouses that load up pallets and sell to major wholesalers 1000s at a time aka pallets they sell truckloads to smaller wholesalers who sell individual pallets that may have sets of Milwaukee dewalt etc. They may have 500 in entire pallet and can offer $300 sets for 250 and still make money this is an epidemic that big retailers are facing they have know answer for. Have you ever noticed when you buy something now especially home improvement that theres a peice of paper that usually says STOP do not return to retailer lol they will replace any part no questions asked because everyone has went to Amazons policy and its killing all the small manufacturers of goods. Especially if they have a flaw eg. Zog water hose I’ve seen thousands of these on lowes pallets Same thing wrong with everyone of these easy fix but I’m guessing they will be in major financial problems because of the return policy. Hope this sheds a little light.
Jimmy L Simmons
And yea the number one question I get is. Is this stuff stolen. I usually reply with a laugh…does it matter