3 Important Ways Dynamic Pricing, Shipping Costs & Pricing Intelligence Affect The Cost Of A Dustpan

 In the past few posts, I talked about the advantages and disadvantages of dynamic pricing for both the retailer and the consumer. The discussions referred to Wall Street Journal article(s) about the frequent lowering of prices on all kinds of items (from toilet paper to bicycles) in order for retailers to be competitive and reach the top of the low price list. In a WSJ blog post ("Real-time Price Changes: The Story of a Dust Pan"), September 5, 2011, reporter Julia Angwin tracks the price changes of a dustpan to show "how real-time price changes are pushing into lesser-known corners of the consumer economy." Specifically, the WSJ asked consumer-price research firm Decide Inc. to track the prices for a mundane household item, a Rubbermaid Duster-Dustpan set.

Angwin's dustpan blog post and the chart below highlight how retailers changed prices on an hour-by-hour, and sometimes, minute-by-minute basis:

   

 WSJ / Decide.com

"Between 5:10 pm on Aug. 24th and 8:50 pm on Aug. 25, prices for the dustpan fluctuated by about a dollar," Angwin writes, "highlighting how volatile prices have become online for even basic consumer goods."

Tuesday, September 18, 2012:

For this blog post, I did my own informal study of prices for the duster and dustpan set. On the Amazon website, I found the following:

Rubbermaid Duster and Dustpan Set - 1 set

List Price: $10.99; 20 New available: from $4.19.

Most of the merchants first in the listings had banners indicating: "Fulfillment by Amazon," giving the basic price for the dustpan set, WITH the phrase "FREE Super Saver Shipping on orders over $25.00."  The base prices for the dustpan set from the companies listed first, were: $6.88; $7.00, $7.01, and $7.37.  (Oops, I just checked the prices again, about 10 hours later, and the same prices dropped to: $6.61, $6.97, $7.00, and $7.35.  

In the midst of the first group was this listing: "$6.89 WITH free shipping", (which just became $6.62 on my check a few moments ago), but still the best price of all the listings, as far as I can see.  As we noted before, low price bidders WITH free shipping have to be on a very slim or none margin, maybe counting on additional sales once they get the client to their website.    

The Amazon.com list continued with the following prices plus shipping costs, from several other retailers:

$ 5.52 plus $4.40 shipping (or $9.92).

$ 4.19 plus $6.54 shipping -- aha there's the low price of $4.19 that was advertised, but it's "PLUS shipping costs" (for $10.73 total). Not the cheapest price after all, eh? 

$10.75 plus 00.00 shipping ($10.75);

$ 6.03 plus 5.62 shipping ($11.65);

$ 5.61 plus 6.49 shipping ($12.10);

$ 7.29 plus 6.38 shipping ($13.67);

$ 8.00 plus 6.95 shipping ($14.95);

$ 6.80 plus 8.63 shipping ($15.43);

And so on.

I checked out the websites of some other Retail Giants to see how their prices compared: Kmart was selling the dustpan set for $4.89 plus shipping; Sears, for $5.25 plus shipping; Walmart for $4.95 plus 97 cents for shipping; and Sam's Club, for $4.47, shipping included.  

Observations:

1.  Don't you just love it when the shipping costs more than the product? Or you have to buy at least $25.00 worth of goods to be eligible for free shipping? In my informal study, it wasn't the real-time price changes that jumped out, as discussed in Angwin's article, but the ability to see the total price when shipping costs were added -- or, if the consumer bought $25 worth of goods they would receive free shipping.   

2. "In the age of the internet, fixed prices are a thing of the past," said Decide.com co-founder and chief technologist, Oren Etzioni, in a WSJ interview. I'm not sure.  I believe customers might become frustrated, disillusioned, and maybe angry about the too-frequent price changes to be the lowest price, as well as the multiplicity and obfuscation of the add-ons, like shipping, as shown above. I think the current dynamic pricing optimization tools may make customers and retailers long for "the good old days" of fixed prices, with retailers competing on other aspects and merits such as service, quality, creative bundling, price differentiation, an occasional sale, etc.

3. Pricing intelligence and pricing intelligence tools have quickly become de rigueur for online retailers. While Retail Giants like Amazon have their own competitive pricing technology, their own algorithms, strategy, and their own agenda, it's become compulsory for retailers to see what's happening regarding the market, competitive pricing, and assortment. Retailers have to be able to quickly, accurately, and actionably -- i.e. in real time -- track and summarize the thousands and thousands of products and related information. That's the only way retailers can have the whole picture, and respond to -- or, better yet, lead -- the competition, in intelligent, meaningful, timely, and profitable ways.  

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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