Sales and marketing, MSP

MSP Pricing: What Staples vs Amazon Teaches You

I'm an entrepreneur. When it comes to online shopping, I make most of my purchases from Amazon. Or I do some digital dumpster diving over on Craigslist, buying used items for pennies on the dollar.

But here comes Staples -- launching a rather aggressive pricing guarantee to counter Amazon and other online retailers. As part of a new 110% Price Match Guarantee designed for small businesses and entrepreneurs, "customers will receive an additional 10 percent off the difference between the Staples price and the competitor price," the retailer announced this week.

It's sort of ironic. Staples several years ago tried to avoid price wars. While continuing to sell commodity products, the company also moved upstream -- acquiring Thrive Networks in 2007 as part of a push into managed IT services. Best Buy attempted a similar strategy when it acquired mindSHIFT in 2011.

But neither retailer really mastered managed services. They underestimated just how difficult it is to build scalable MSP businesses that attract, onboard and retain high-margin customers. Alas, Staples and Best Buy both sold off their respective MSP businesses in recent years.

Showrooming Challenges

Fast forward to the present day, and Staples -- like just about every other brick and mortar retailer -- is striving to remain relevant in the age of online retailing and cloud services.

The 110% price match could help Staples to counter so-called showrooming -- when a customer visits a retail store, checks out specific products and pricing, and then purchases those offerings from an online supplier like Amazon.

Many retailers have launched price match guarantees to counter showrooming. Best Buy certainly has one. And now, Staples is going the extra mile -- or extra 10 percent -- with its 110 percent price match guarantee.

But read the fine print. The price match guarantee "Excludes Staples® EasyTechSM services; Copy & Print products produced by third-party vendors; custom print and promotional products; postage; gift and phone cards; and the® App Center."

MSP Pricing: The Lesson for MSPs, VARs

That fine print is a healthy reminder to VARs and MSPs: Even Staples will NOT discount its basic PC support services (virus removal, PC tuneup, data recovery, etc.).

Instead of competing against Amazon on price, we've often advised channel partners to ride public cloud railways -- Amazon, Microsoft Azure, Google Cloud Platform, IBM SoftLayer -- to your advantage. As cloud providers launch price wars against each other, the box cars you deploy on those railways can get less and less expensive to run.

True believers in the railway strategy include Cloud Nation, a cloud service provider that offers virtual desktop services to VARs and MSPs. The service is built atop Amazon rather than competing with Amazon.

If you're tempted to compete on price, remember this wise question from David Brock: "What if you couldn't discount?" That's right. What if there's absolutely no way for you to offer a price cut or price match to counter existing or perceived rivals? In that scenario, how would you sell?

Go find the answer to that riddle and you'll protect your margins forever. Ignore the question and the potential answer... and you could wind up like Staples -- with a failed managed services business and a last-gasp price match guarantee vs. Amazon.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.