Competing sellers are not supposed to be in cahoots when it comes to setting prices. If they were, consumers would be screwed; sellers would dictate how much stuff costs and all agree amongst themselves to charge ginormous sums for their wares. Because of this, price-fixing is illegal; just ask Dede Brooks.
So I’ve always wondered if there’s a hint of not-so-cool when it comes to being an Amazon seller. I unload my used books and CDs on Amazon.com if I can get at least $1.75 for ‘em, but I also determine my selling price based on what all the other sellers are doing. For the most part, this is good for the consumer; I want to move my inventory so assuming my minimum is met, I always set my selling price equal to the lowest current price.
But about 25% of the time, the price at which I’m willing to sell my goods is lower than the current price offered by other sellers. And I only know this because I can see the price that every other seller has set. So I’ll charge a consumer $34.98 for a Sesame Street sing-a-long CD because that’s what the current lowest price is.
Mewonders, for all you legal types: is this a form of collusion? What is the litmus test for price-fixing? And what should marketers keep in mind if they allow people to sell goods if they want to not enable no-good, very-bad consumer-screwing?
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I have a better question for you. Say an indie music publisher like me sets the list price for a cd at $13 and sells the cd to Amazon for $6 and pays the shipping cost. Then, Amazon hikes the price up to $20 (still only paying $6 to the publisher). And when I ask Amazon to please lower the price back to the REASONABLE list price I have set, they refuse. The cd is a domestic, in-print release from an indie band. It’s not a rare title, just a normal cd. Amazon claims they can set any price they want. At $13 the cds sold so well that Amazon ordered 600 from us. But after Amazon hiked the price to $20 sales came to an abrupt stop. Not a single cd sold in 2 months at the $20 price. Then Amazon returns the CDs claiming they don’t sell. Well, of course they don’t sell at $20 (even I would not pay this for a cd, no matter who the band is).
So, do you think that Amazon is engaging in price gouging? They are definitely engaging in EXTORTION, and the publisher and the consumer are the ones to suffer. The publisher and band suffer because sales plummet, and the consumer (if they do pay such a high price) feels ripped off. Ultimately this reflects poorly on the publisher because people think the publisher/label sets the price, when in fact we do not.