The LAN Shop Price War

The Price War in Computer Rentals: Understanding the Debate

The pricing of computer rentals per hour is a topic that sparks a never-ending debate in LAN shop forums. On one side, you have shops offering rates as low as P10 or P15 per hour, while on the other side, there are shops sticking to a P20 per hour rate. Let's delve deeper into the reasons behind these differing pricing strategies.

One common assumption is that lower-priced shops are running promotional offers. However, true promotions typically have a limited time frame, unlike these shops that consistently maintain permanently low prices. Additionally, it is not always the case that lower-priced shops have inferior computers. Some of these shops offer low prices from the very beginning, even with brand-new computer setups.

The primary reason cited by shops offering lower prices is that it attracts more customers. However, we need to question the kind of customers these low prices are drawing into the shop. Lower prices tend to attract the C and D market segments. While some B or even A customers may be price-conscious, mixing them with the C and D market might not encourage their return visits.

On the other hand, there are older shops, like mine, that have never succumbed to the price war and maintained a P20 per hour rate. One reason for this decision is our target market. By avoiding extremely low prices, we deter potential bad elements such as thieves and saboteurs who may take advantage of crowded environments to carry out their activities.

Another important consideration is the long-term viability of lowering prices. By reducing prices and attracting more customers, you may accelerate the depreciation of your computers. Without sufficient savings from higher prices, the additional funds needed for maintenance become a financial burden. While some owners may equate a full shop with increased sales, it is essential to recognize that savings come not just from sales but also from effective expense management.

From my perspective as a shop owner, it is not essential for our shop to always be fully occupied. At the end of the day, profitability stems from prudent expense management rather than just sales figures.

In conclusion, the price war in computer rentals is a complex issue with various factors to consider. Lowering prices may attract more customers in the short term, but it may also lead to undesirable consequences such as a challenging target market mix and financial strain. Balancing reasonable prices with a focus on managing expenses can contribute to the long-term sustainability of a LAN shop.

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