24 February 2013

Price Gouging

What's the difference between gouging and market rate?

The number of vendors that change their prices.

Supply and demand and inexorable.  Less supply, more demand, prices go up because the demand is willing to pay more.

This is price signaling.  The sellers are being offered more than the previous market rate for the good in question.

It can go the other way, the seller raises the price and sees if demand slacks off.  Higher prices do tend to reduce demand.  It's tough to strike a balance with this one, price things too high and your customers scream gouging and stop buying from you.

In most cases of "gouging" there's a disruption in the supply and a sudden uptick in demand from people who abruptly realized they needed the good in question.  Generator sets after a hurricane, for example.  Once the supply is restored, prices drop right back to normal.

Gouging accusations also follow the pricing of items which have volatile pricing.  Gasoline, for example.  The price at the pump is usually what the station owner expects to have to pay to replace his stock, not what it cost him.

Which brings us to magazines.

The demand was pretty steady and the supply was balanced against it.  A shortage was created by increased demand by government interference in the demand curve.  Suddenly people were willing to pay $100 for a $15 magazine.  I watched it happen on Gunbroker.

I watched Cheaper Than Dirt make $99 their normal price for a Magpul PMAG.  Demand sure signaled that was the going rate.  The problem with CTD is Magpul didn't raise their prices.  Magpul was very vocal about it too.  Brownells didn't raise their prices.  Midway didn't raise their prices...

Oops, CTD.  People remembered the previous panic when you raised prices BEFORE demand started to impact the supply in 2008.  (Spikes Tactical did too)  Once bitten, twice shy guys.  It's a PR problem and emotion is involved and you guys suck at PR.

Good luck.

1 comment:

  1. I've never purchased from CTD. A coworker does; he is pretty sour on them. Poor shipping, delays, crappy communication of split orders.

    It is one thing to charge an $85 in stock fee for a product, will it actually show up 2-3 days later? I'd raise hell if they jacked mag prices and then played the game, oh, we are too busy to send it to you today. No, you are not- that is why you raised your prices.

    Same reason I don't order from some of the other sites that are selling parts for 2-3x "normal" price- they also have the "this will be delayed up to 2 weeks" warnings up. Screw that, I can wait or back order the stupid things. If I can wait 2 weeks, I can wait 2 months for stuff to come back in at a far lower price.


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