Retail vs wholesale
Retail business focuses on distributing goods to consumers, while making a profit. Wholesalers focus on selling goods in bulk at a lower price to other businesses and distributors. Eg in USA: Sam’s club, costco. In India: Metro.
Price discrimination
Different people are willing to pay different prices for the same product, and retailers try to exploit this.
In general, retailers try to distinguish the two types of customers by offering lower prices only to those who participate in some undesirable process which costs extra time and attention- eg: waiting for a certain day to make a purchase, committing to purchase in advance, gathering coupons.
Haggling
In markets where there is a slower pace of life, prices were negotiated with each customer. But, this costs time and attention on both sides. Hence, in places with a fast pace of life, a base-price is fixed, and other techniques are used for price discrimination.
Special discounts
Discounts are offered to special categories of people known to be price sensitive - old people, students, people who shop in the same store repeatedly, members of clubs.
Store sale
To spur more purchases by price-sensitive customers- especially of items obsoleted by competition - retailers sometimes offer incentives/ price reductions. This often happens in special occasions Eg: Black Friday, Christmas in USA.
Illusory discounts
Often, there is only the appearance of price decrease: The label price is actually increased prior to offering a discount.
Coupons
Customers willing to find coupons in certain locations (including deal websites) are offered a lower price.
Sales techniques
Salesmen
Salesmen are employed to answer questions, pitch various products, perhaps even bargain with potential customers. Traveling salespeople visit homes and try to sell products. Telemarketers call/ email to sell products.
They are provided incentives to do a good job - eg: commissions which increase with the number of items sold.
Pitching
Demonstrations are often used, with the customer being allowed to handle the product.
Sales-tricks
Once the customer agrees that the product is desirable, salesfolk can use psychological tricks to encourage purchase at a good price. For example, they may appeal to the vanity of the customer by saying that ownership of the product leads to greater social/ moral status.
Other incentives
Music to encourage impulsive behavior/ spending is often used.
Physical interaction with products - touching, holding - increases probability of purchase.
Shopping experience/ comfort is elevated by clustering shops at an attractive location (malls), offering food, rest-rooms, day-care etc..
Internet retailers
These have the advantage of incurring lower building/ sales labor costs because of not having to operate physical stores. Without space constraints, they are capable of maintaining a large inventory, which caters to quirky tastes of consumers, which constitutes a large fraction of consumer needs - aka the long tail of consumer needs distribution.
Returns policy
When returns are accepted, often a restocking fee is charged for electronic items in USA.
Electronics retail
Some stores, like Fry’s guarantee meeting competitor’s price within a few days of purchase.
Pressure for low prices
Short life-span
Due to technological progress, devices become obsolete fast; so there is a thriving secondary market. So, devices with newer technologies must compete with lower priced older devices.
Competition
Electronics industry is highly competitive; and deal-sharing websites ensure that customers are able to find the best deals/ prices online.
Online reselling infrastructure
Web-services like Ebay, Amazon etc.. try to ensure that there to be mutually satisfactory transactions between sellers and buyers.
For the sellers, they make it very convenient for to list their products on a popular platform on the internet, perform much of the order-information processing for the seller. For the buyers, they ensure that they have access to the seller’s rating/ reputation, have some guarantees about the quality of service.
Fraud
Buyers/ sellers sometimes try to avoid paying commission on items sold by finalizing the transaction outside the reselling website.
Revenue sources
Advertisements, commission from sellers.
Set-time auctions
Eg: EBay. In these transactions, the item is sold to the highest bidder at a certain point in time.
Pricing assistance
Auction websites may offer statistics about the price paid for an item of a certain type.
Underselling avoidance
Sellers have various ways to ensure that they don’t sell cheaply: Auctioned items may have a starting bid revealed to bidders or reserve price not revealed to bidders - the latter option being used to not turn away bidders. Even for items without a reserve price (to attract bidders), sellers can ensure that they only loose the commission by using automatic bidding services acting on their behalf.
Bidding services
One can use services like esnipe to bid using a program in the last few moments of the auction. They charge commission for auctions won.
Bid-price auction
Aka penny, all-pay auctions.
Bids rise in small increments, and fees are charged for every bid.
The winner of such auctions often gets items at much lower prices: eg: 1/3 or 1/2. But, the auctioneer still recovers the cost of the item from the bid-fees.
They often start out as set-time auctions, but auctioneers often extend the time by small increments (eg: 20 sec) to take advantage of peoples’ bidding.