Tuesday, June 09, 2015

Amazon's Pricing Strategy the Art of Perequation

Amazon is clearly a leader in terms of pricing in the E commerce battle. But obviously, Amazon is a business and needs to earn money. It is therefore impossible to be the cheapest in everything, unless you are the unique competition that you rule, and therefore no discounts are needed to get clientele.

I read an interesting article about that topic. Now it does not provide extensive detail about the whole strategy, or by a really creative approach: Amazon tends to be cheaper on the big runners, to create a great image to shopper, and try to lift their prices on complementary articles that have a cheaper value. But Amazon has an advantage on brick & mortar retailers: it can have a yield management strategy by having different pricing at different time of the day to trigger sales, which is more difficult to set in the traditional retail world.

But perequation is obviously one of the main tool in our nowadays retail world in order to create two impacts:
  • Generate extra benefits by mastering margins
  • Attract new prospects by providing attractive prices to customers.
This is the reason why I discuss a lot lately about pricing strategies, as it is an issue that have a lot of innovation ahead of it.