Maybe 20% of all online prices change daily. Some even change every few minutes. When the Wall Street Journal compared Amazon, Sears and Best Buy, they saw intraday prices bounce between a low of $744.46 and a high of $899.99:
The year was 2012 but it could have been now.
Where are we going? To a firm’s pricing power.
Faced with an avalanche of cascading prices, some retailers are resisting. Vitamin seller GMC will soon have just one price for each item instead of a high regular price, a lower non-member price and a super low member price. Trying a different approach, upscale furniture retailer Restoration Hardware has been experimenting with a “loyalty” program. Customers who pay the $100 annual fee will get a 25% discount on all merchandise. Similarly, Bed Bath & Beyond is testing a $29 yearly membership plan that guarantees free shipping and 20% off a regular price.
Our Bottom Line: Pricing Power
In a traditional retail world, sellers tried to charge each customer the most that person was willing to pay. Starting with a fully priced item that the most affluent or the most impatient would purchase, they delayed the coupon or discount. Gradually, as the price went down, a new customer cohort entered the market.
Also involving different kinds of buyers, price could depend on age or a time constraint. Movie theaters charge senior citizens less while some restaurants charge Saturday diners more. And we all know that many business people purchase pricier airline tickets than discretionary travelers,
Among all of this price churning, Apple is conspicuously absent. Like all very large sellers and also those with a unique product, Apple has pricing power. In the following market structure continuum, pricing power increases as we move to oligopoly and then monopoly.
Returning to where we began, we can see that Amazon has reduced the pricing power that many businesses once had.
My sources and more: You can read a good overview on pricing from The Economist while the more targeted internet retailer perspective is here. To complete the picture, this WSJ article discusses how firms are changing their pricing strategies.