Pricing wars: weekend warriors

With ever-growing market competitiveness (mostly due to young, emerging online stores who try to make their way with cheap pricing, with extremely low margins) we have noticed a new phenomenon – prices going down on Friday evening, and up again on Monday early AM.

During our visit to Pro Light + Sound trade show in Frankfurt – we have confirmed this phenomenon with several musical brands – who observed it in last couple of months.

It typically works like this:

• A young and aggressive online retailer, wants to attract more sales
• The best way to do so is by lowering the price margin
• On the other hand the price shouldn’t go too low – usually the manufacturer wants the retailer to observe minimal agreed price (MAP, MSRP)
• The retailer knows that big brands use automated services to detect price changes on retail sites
• However, the retailer also knows that on weekends there is no-one in brand’s marketing office
• Thus on, Friday evening, the retailer lowers the price: sometimes just for a couple of products, sometimes across the whole brand range
• In certain industries (especially music industry) customers are more active on weekends – and such price cuts usually result with significant sales peaks.
• On Monday morning – the retailer moves the price back up
• When brand’s pricing department contacts them on Monday (because they have detected weekend price cuts) their story is either
  • sorry, we had a misunderstanding, the prices are back to normal now, or
  • sorry, we had a glitch in our software, but there was no one in the office to fix it, or
  • sorry – I had to do it, since everyone else does it as well
• There are even (rather comical) situations where retailer actually does perform automated price cut on Friday PM – but his software is not smart enough to get prices back up on Monday AM. In this case the retailer gets caught red-handed 🙂

What kind of advice can we offer?

• You need a reliable tool in order to to document ‘dirty pricing tricks’ performed by such retailers
• The tool also needs analytical features – so you can analyze retailer’s behavior over past weekends, and draw some conclusions from it
• Do let your retailers know that you’re familiar with such tricks, and that you have methods to fight them
• Arm yourself with a lot of patience 🙂
• Try not to work weekends (unlike myself 🙂 )

Good luck fighting weekend warriors!