The Price Discrimination Of Amazon

Amazon believes in keeping its marketing plan simple in order to be effective. Consequently, their marketing plan is based upon the 4 P’s (product, price, place, and promotion). Amazon’s product is to provide an unparalleled selection of any item that exists on the planet. Its prices are extremely competitive and often lower than traditional stores and it is more convenient for people to shop on the internet (place) than it is in a physical location. Finally, its promotion emphasizes big ideas, innovation, technology, and customer centricity, enabling it to market itself as the most convenient place for consumers to shop and satisfy their needs (Kerin & Hartley, 2015). This strategy targets

Based on the initial sales of the Kindle Fire, it is recommended that Amazon move forward in positioning with Apple’s iPad and targeting its consumer segment to “media junkies”. An extensive financial analysis was then conducted to have found that a pricing strategy at

Amazon understood firsthand that the competitive advantage of a company originates immediately from how distinctive the organization's resources and competencies are. Amazon is able to both engage in production at a lower cost and generate a superior product at a standard cost. This is accomplished mostly via Amazon's strategy of having a wide variety of goods and competitive pricing. Customers know they can find basic products at slashed prices or high quality goods at standard prices and this is all achieved via the enormous range of products and product brands and types available on their massive marketplace. For example, the depiction displayed in the case study which shows how growth was related directly to: lower cost structure- lower prices customer experience traffic sellers -selection and convenience. While this is a grave oversimplification of the Amazon business model, it demonstrates how many aspects of the strategy reinforced one another.

Through selling more in a lower price, Amazon can achieve economies of scale, which in return can increase their bargaining power over its suppliers and partners.

Kohl’s pricing strategy has been the subject of illegal and ethical quandaries. Many opponents state that Kohl’s provides inflated deceptive reference prices. In 2013 a San Francisco appeals court permitted a lawsuit stating that the retailer falsely advertised sales pricing. (Los Angeles Times, 2013) Kohl’s appealed, only to lose as California courts permitted the lawsuits over the alleged false markdowns. While highly controversial other retailers have adopted a very resembling pricing model. In 2013 JCPenny implanted the Kohl’s sales strategies in its stores in an effort to revamp its struggling sales numbers. (Time 2013)

This is because of each seller is setting its price based upon the reaction by the prices its competitor establishes.

Those consumers that have flexibility to choose when they demand a product will benefit from price discrimination. An example of this would be workers that have the ability to take a holiday at short notice might be able to benefit from a heavily discounted price. This is second-degree price discrimination and it can be shown below on the diagram.

Amazon focuses on global reach, putting customer first,, and extensive selection of products through its vision which is “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online” (Gregory 2016).

Many consumers go for what appears to be cheapest and most convenient. The reality is, Amazon’s increasing dominance comes with high costs. “These consequences have gone largely unnoticed thanks to Amazon’s remarkable invisibility and the way its tentacles have quietly extended their reach” (LaVecchia, 2016). It is vital that consumers are aware of this superpower that is taking over.

The two types of price discrimination I have chosen are lower movie ticket price during the afternoon on weekdays which happen because people tend to be at school or at work early in the day which makes it easier to go at night. The other price discrimination is cyber Monday sales which is the lowering of prices to keep up with other big stores near black Friday time which is because people tend to buy a lot of products during this time of the year so them lowering the prices to encourages the consumer to buy more product then they would of originally. Sense Newegg is one company out of many other tech companies it does not hold monopoly power so it cannot be the one who is the price maker in its market.

Amazon’s core competencies are in its ability to effectively use and develop technology to drive site traffic and enhance the customer experience. Their distinctive use of website real estate coupled with their ability to leverage their brand and effectively use that leverage to deliver low prices and high quality products, makes them a leader in online retailing. Their partner brands and their ability to adapt and recognize deficiencies enable them to effectively cut out the middle man, or at the very least, partner with them.

Price discrimination can be defined as when the same good or service is sold at different prices to different consumers. If we look at this definition of price discrimination, for an example, we can show that price discrimination can be seen in the entrance tickets of parks such as Universal studios; this is due to the fact that there are discounts for children and senior citizens. (Phlips L. , 1983) However, this can be seen as not being discriminative at all due to the fact that if the price difference full reflects the difference in the cost of carrying the good from the seller’s location to the buyers’ location.

Retailers have adapted to the online marketplace out of necessity and opportunity. The great recession placed many retail companies in financial hardship and while some failed, others innovated and became some of the largest companies in America such as Amazon. A recent trend is consumers are buying more products online than ever before. As a consumer, I enjoy shopping in the convenience of my home and having the items delivered to my doorstep in 48 hours or less. Global internet access continues to increase, with mobile devices and affordable internet for the home, consumers will continue to shift and buy products online rather than in retail brick and mortar locations. Online sales in the United States have increased over 250% in the last ten years, accomplishing $250.0 billion in 2012 (Tehrani, 2014). Therefore, Amazon is in a solid market position to capitalize on the future trends and booming ecommerce

Amazon strives in a rapidly evolving and intensely competitive industry. Amazon competitors include publishers, vendors, distributors, manufacturers, physical world retailers and producers. Other competitors include media companies, web portals, shopping websites, online and mobile e-commerce sites, web search engines, and social networks, either directly or in collaboration with other retailers. Any company that provides e-commerce services, including website development, fulfillment, customer service, and payment processing is considered as a competitor by Amazon. Even Yahoo Inc. is also part of these services now with its new framework for providing easy e-commerce website development and payment processing services. Additional competitors include companies that provide information storage or computing services or products, services related to Cloud Computing, including infrastructure and other web services, companies that design, develop, market, or sell consumer electronics, telecommunication, and electronic devices. The competitive factors in retail businesses include selection, price, convenience, fast and reliable fulfillment. Additional competitive factors for Amazon seller and enterprise services include the quality, speed, and reliability of our services and tools. Many of the current

This chapter sets out the rationale for price discrimination and discusses the two major forms of price discrimination. It then considers the welfare effects and antitrust implications of price discrimination.