Wednesday, January 30, 2008

Marketing: Price=supply(name) + demand

For the past few months I've been interested on pricing. No one loves a good bargain like Tyra Banks. But second in command, and less cheap, that's me. If I could find a good price on something, doesn't have to be on sale, I'll purchase it. Last year was the first year I've invested on shoes and jeans over $300 dollars each.

So at first I was interested in store pricing but then as I was riding the subway today in conjunction with the online purchases I've been making the past few months, I became interested in online purchasing.

What I know about store pricing like Bergdorf, Neimans and other luxury stores is that they have a mark-up of more than 50% on the product. How else do you think they're able to have those great sales and not really worry about losses? The thing about luxury stores is that you can't really walk from store to store and compare prices and then decide on which one you want. Well you can if you are really in shape and not the average American. However, you are probably asking such sites have online stores now. You're right.

So I'm a huge online shopper because I live in Philadelphia and there's no stores that carry the brands that I like within walking/public transportation distance. The closest would probably be King of Prussia which has Neimans, Versace, etc. The closest thing to luxury in Philadelphia is Boyds for both men and women (carrying brands like Zegna, Armani, D&G, etc) and other local boutiques for women like Echo Chic on Sansom and Joan Shepp on Walnut Street. My point is that these local physical stores have a niche in Philadelphia so they're able to have a greater mark-up. For people who like good, quality, luxury items but aren't tech savy, the price that's presented are higher than the internet prices.

But for people who constantly window shop and online browse, I'm concious of the price difference. Though they're 100-500 difference, after a few items it all adds up. Especially since I'm a college student.

To recap, online stores most likely cost less than the local boutiques of pseudo-cities where the general population are a little older and money isn't an issue.

Online stores are for a younger generation that are brand-concious but with a limited income, or at least I'm talking about me. So I was wondering if there are millions of me out there, how do these store price themselves as competitors. They're limited amount of clothes in high-fashion that comes out each season so how do they price themselves so that customers are willing to go to their site instead of the competitors? The answer:


Let's assume I want a pair of Dior Homme Jeans. Each season, the house releases a limited amount of jeans and then buyers from stores and online stores come and request the list of inventory they think will sell. Let's assume the online stores are, some are my favorites, Saks, Bergdorf, Neimans, Bloomingdales, LuisaViaRoma, Pret-a-porter, Diabro, bluefly, and eluxury. Let's say there's one pair of Dior Homme jeans that all the stores carry. So as an avid shopper, I notice these pairs of jeans and I want them a lot, however, the only way I would purchase them is knowing I have the best price out there. What do I have to factor in? The cost of the product and shipping and handling.

So how does one go about making sure one has the best price on the jeans? Well, I would go from site to site to look for them or do a search with the name of the jeans or the description.

Easy enough right? Wrong.

The sites will turn out to each have different price ranges but you can't really tell the difference if they're the same pair of jeans because the name for it is different. On one site it could be called, Dark Blue Jeans, and another could say Spring/Summer 2008 Jeans, and another could say Spring/Summer 2008 Raw, Whiskered Jeans, etc. Not only the name is different, but how they're presented is different as well. It could be different models wearing it, different lighting. So before you know it you're presented with jeans that looks different and it seems to have over five different kinds but in reality, they may just be the same pair.

This is how the online stores are able to get around price comparisons. The make the supply low and the demand high so they could put the price on it. It seems like that online store you're looking at is the only one carrying that type of jeans and you could get it no where else so the average consumer, not knowing this, would make that purchase.

How clever right? I'm really intrigued by pricing and that's what I thought about on my day to school today on the train. Hope that give you some insight into being more careful when making a purchase online.

1 comment:

Tabitha said...

i love that you talked about pricing and branding because i'm learning about that in my marketing class! you're literally made to do this