Why Prices On Gadgets (Except The iPod) Vary So Much From Site To Site
from the shopping-around dept
Browsing through a comparison shopping engine for electronics will sometimes reveal a surprisingly wide dispersion of prices for some gadgets. The very same product, say a new HDTV, may sell for hundreds of dollars less at one site than it does at another. A recent academic study looked into this phenomenon and proposed an interesting theory for why this occurs. Basically, if all online retailers held their prices stable, then shoppers would fall into a groove, leaving some sites as winners, and some as losers. So for retailers to ensure that they’ll get business, they must constantly tinker with their prices and create the type of environment where shoppers will do comparison shopping, and buy from a lesser-known site, as opposed to always just buying from Amazon. The seemingly ironic outcome, according to the study’s authors, is that prices in constant flux is actually a state of equilibrium online.
The author of the above piece then looks at one item whose price never varies, that being the iPod. Here it’s a very different situation. Apple tightly regulates the price of the iPod, so that retailers can’t squeeze the margins at its own store. And it can get away with it, because iPod buyers typically won’t settle for anything else but an iPod. The brand is so singularly hip that, like a pair of designer jeans, competitors can’t hope to compete on price. Since tastes change, and all brands are subject to some entropy over time, it’s unlikely that Apple will always have the luxury of ignoring price competition. But in the meantime, retailers are happy to abide by the price restrictions for the privilege of carrying the popular item. Another way in which Apple has benefited by dominating and tightly controlling its market is that it doesn’t have to compete with four-year old, first-generation iPods lingering around on stores, competing with the newer models it rolls out. As for the TV and computer industries, you can still easily buy new products that would have been the vanguard just a few years ago, now available on the cheap. So, if you’ve really procrastinated with your Christmas shopping, or you still haven’t found the right price on what you want to get, unless you’re buying an iPod, you should keep clicking the refresh button on your browser up until the last second, and you just might score a deal.