Newegg IPO Still Pending as E-Tailer Readies Holiday Sales Push

EDISON, N.J. -- Newegg’s proposed IPO remains pending more than a year after the initial filing (CED Sept 29/09 p1) and there are no firm dates for it, company officials said Monday during a tour of the company’s warehouse. They declined to comment further.

Online-only retailer Newegg, with more than 13 million registered users, filed for an IPO in September 2009, seeking to raise $175 million to finance expansion in China and Canada. The company, which posted revenue of $2.3 billion in 2009, up from $2.1 billion a year earlier, was also going to use IPO proceeds to repay a $7.5 million loan that was due in October. The loan was guaranteed by interim CEO Fred Chang, who owns 77 percent of the company. Chang returned as CEO last summer, replacing Tally Liu, who was named CEO in August 2008.

The e-tailer is building a new Asian headquarters in China, where it had 1,096 employees in September 2009, including 388 working on its website for the country. Newegg bought the land rights in Jiading, near Shanghai, for $3.2 million and was expected to spend $10 million on the new office and related buildings. The Chinese website carries 12,600 SKUs. Newegg also opened a new 55,000-square-foot office in Mississauga, Canada, where it has a two-year-old website that shares products with the U.S. operation. The company recently renewed for five years the lease on the 374,148-square-foot warehouse in Edison that serves the northeast U.S. The warehouse employs 120 of the merchant’s more than 1,000 U.S. staff.

Newegg carries a broad mix of up to 80,000 SKUs in the U.S., including CE and PC-related products, after adding Sony for all CE gear a year ago. Newegg had long been selling Sony Vaio PCs. Other recent additions to the product mix include DVDs, Blu-ray, books and music, all coming on line this fall, Bernard Luthi, vice president of marketing and merchandising, told us. Newegg started carrying more business-oriented books and is adding more general interest titles, Luthi said. The number of products Newegg carries is up from 33,000 SKUs a year ago.

The company began its push in CE four years ago and has forged direct distribution with most major CE vendors except Apple, Luthi said. Newegg has an “on-going effort” to secure Apple, and is “hopeful” it will eventually land its products, Luthi said. Newegg did develop and release an application for the Apple iPhone and is readying one for Research In Motion’s BlackBerry. “We've had to establish ourselves as a trusted partner” to attract CE vendors, one that wasn’t going to “trash” prices and would follow minimum advertised prices, Luthi said.

Newegg kicked off its holiday online sales push this month with a “Black November” sale that has included three daily “shell shocker” deals. Among them was a Western Digital 120 GB external hard drive that kicked off the promotion at $19.99, company officials said. The deals run in three daily time slots: midnight to 9:59 a.m., 10 a.m. to 12:59 p.m. and 1 p.m. to 11:59 p.m. The shell shockers are addition to daily deals posted on Newegg.com. On Nov. 2, the e-tailer had 48 daily promotions on its website. Newegg also has had category discounts including 10 percent off videogames as well as Intel and Advanced Micro Devices motherboards. Newegg also has been offering 15 percent discounts on videogames accessories.

With retailers increasingly promoting price cuts on products well in advance of Black Friday, the entire month of November has been given over to a wide array of discounts, Luthi said. Newegg launched the “Black November” promotions in response to consumers “aggressively” seeking discounts before Black Friday. “We've seen an increase in traffic to the site” since Black November began, and that has “sustained itself,” Luthi said. Along with price cuts, Newegg is launching a “Hassle Free Holiday” program this week covering “thousands” of TVs, major appliance and PC SKUs that offers price guarantees, free shipping and double the period for product return to 60 days, Luthi said. Newegg had Black Friday specials packaged in black boxes at its warehouse Monday, including a 42-inch Auria LCD TV, featuring 1,920x1,080p resolution, 450 lumens and 4,000:1 contrast ratio.

With the holiday sales season under way, Newegg extended its New Jersey warehouse hours to 8:30 a.m. to 9 or 10 p.m., from 5 p.m., company officials said. Besides its usual Cyber Monday sale after Thanksgiving, Newegg has an Encore Tuesday promotion with a new set of deals, Luthi said. “We love to have people come back to the site and by having a new set of deals each day, we can do that,” Luthi said.

The Edison warehouse processes 15,000 orders daily on average, accounting for about 40 percent of Newegg’s daily volume, Luthi said. It serves the Northeast, packaging and shipping online orders processed near Newegg’s City of Industry, Calif., headquarters. Newegg also has warehouses near Memphis, Tenn., and City of Industry. The New Jersey warehouse has 15 shipping lanes and serves a variety of delivery services, UPS being Newegg’s major vendor, company officials said. Newegg buys most of its products directly from CE and PC companies, but it also works with distributors, including Ingram Micro and Synnex and uses United Stationers Supply Co. for office supplies, including pens and paper, Luthi said.

In addition to branded CE and PC goods, Newegg sells cases, power supplies and other PC accessories under its Rosewill brand. Among them is a 500-watt power supply ($44.99) and Web cam ($24.99) as well as a aluminum mid-tower PC case ($99). And it packages do-it-yourself PC bundles that include a motherboard, memory and processor under the SuperCombo banner. These include an Intel Core i5-655K 3.2 GHz processor sold with a Asus Maimums III Genie Motherboard, Nvidia GeForce GTX 470 graphics processor and Corsair 4 GB DDR5 memory priced together at $1,451. The SuperCombo promotions may be expanded to include home theater products, Luthi said.

To appeal to customers, Newegg uses a range of social websites. It has 400,000 registered Facebook “fans” and has had 2 million views on YouTube for videos covering new products and other technical subjects, company officials said. Newegg posts about three new videos a week on YouTube, a spokeswoman said. It also has 100,000 registered users for its Eggxpert forum that covers product-related technical topics, company officials said.