Big retailers know what they are doing (one hopes!) however, as for most businesses and their online ventures, I see anything but sensible pricing strategies and I rarely see how anyone in these businesses can price correctly given the information they have available to them.
For instance, how do you calculate the cost of selling a given SKU, particularly if bought with other items? Has money been made when you take away the cost of the warehouse, the cost of the shipping to the warehouse, the cost of the actual product, the cost of that 'adword' to get the sales lead, the discount you gave to the customer for their first purchase, the affiliate marketing cut that you have somehow incurred along the way, the cost of the transaction with the payment provider and whatever else? Note this excludes other 'costs' like the marketing spend and partnership programmes with other companies.
Add to the mix currency fluctuations and limitations of the accounting system you have to work with (e.g. unable to do fractions of pennies/cents) then factor in that the people running the show are managers, therefore of no technical competence, and there is no way whatsoever that costs for selling a given product to a given customer at a given point in time can be known.
Then add returns to the confusion. It becomes even harder to actually know costs on that fine-grained SKU level.
Plus sometimes you cannot sell less than what you are allowed to sell at. Your supplier will not like you if you sell at less than cost and will not supply you if you upset all the other retailers of the product. So the price is essentially set, discountable when the next model range comes out but not before.
If you have to sell at 'list price' then how do you compete? Do you pay £70 to people for those people to buy your £25 products at list price? Yes, this craziness happens when you have people of the non-technical marketing type decide to 'invest' in 'marketing'. These same people will send out ever fancier boxes and other packaging junk never thinking about the costs.
A company has to be of a certain size before it can have the people able to do the maths properly, to get professional about it. Otherwise costs are not realistic for the online operation and profit is not what it should be. This article tars ecommerce with the same brush, a large amount of it is utterly clueless and far from smart.
For instance, how do you calculate the cost of selling a given SKU, particularly if bought with other items? Has money been made when you take away the cost of the warehouse, the cost of the shipping to the warehouse, the cost of the actual product, the cost of that 'adword' to get the sales lead, the discount you gave to the customer for their first purchase, the affiliate marketing cut that you have somehow incurred along the way, the cost of the transaction with the payment provider and whatever else? Note this excludes other 'costs' like the marketing spend and partnership programmes with other companies.
Add to the mix currency fluctuations and limitations of the accounting system you have to work with (e.g. unable to do fractions of pennies/cents) then factor in that the people running the show are managers, therefore of no technical competence, and there is no way whatsoever that costs for selling a given product to a given customer at a given point in time can be known.
Then add returns to the confusion. It becomes even harder to actually know costs on that fine-grained SKU level.
Plus sometimes you cannot sell less than what you are allowed to sell at. Your supplier will not like you if you sell at less than cost and will not supply you if you upset all the other retailers of the product. So the price is essentially set, discountable when the next model range comes out but not before.
If you have to sell at 'list price' then how do you compete? Do you pay £70 to people for those people to buy your £25 products at list price? Yes, this craziness happens when you have people of the non-technical marketing type decide to 'invest' in 'marketing'. These same people will send out ever fancier boxes and other packaging junk never thinking about the costs.
A company has to be of a certain size before it can have the people able to do the maths properly, to get professional about it. Otherwise costs are not realistic for the online operation and profit is not what it should be. This article tars ecommerce with the same brush, a large amount of it is utterly clueless and far from smart.