tornado thoughts

It's a dog eat dog world out there

Gone were the days when customer loyalty is a norm in the society. People would buy stuff from same supplier irregardless of fluctuation in price. Meaning the people will share the good times AND bad times together with the supplier. How? When good time comes, supplier gets stuff cheap, sell stuff on offer, people buy. But when times are bad, no more offer, people in the past will still buy from the supplier (if the price difference doesn't vary too much la). This may be due to either imperfect information knowledge of the product in the market or just want to be loyal.

With the introduction of internet, every single consumer can get to know about the product without even stepping out of the house to find out, not even asking around. Just need to search in internet and you'll get the information you want. It's also a double edged sword (internet) whereby people can advertise their products in a more widespread scale, and also people can post offensive or negative remarks on certain stores due to some misunderstanding.

Why do I start talking about this? Well, I'm a transformers toy collector and if people are in the community will know about the recent price war and yup it's coming again. Good news for consumers (for the moment) and also bad news (in the long run). Transformer got 3 big players in the market. Let's call them A, B and C. In economics we know that as long as A, B and C control the price, the smaller players do not dare to do anything to the price.

However, when 1 of the big players (say shop A due to over-order of stocks and need captial urgently to purchase new stocks), lower down price of certain items, those particular items will have to be lowered for the other players (B & C) or else all the consumers will flood to A to buy the product knowing that A sells at a lower price. If B & C keep still and dun wanna adjust the price, their stock will just stay there and will just be backlog and unless they print money, they'll soon run into crisis. This vicious cycle of undercutting each other will only mean that the retailers are either making very little (compared to expected) or making a loss. In the short run (say 1mth, 3mth or 1year), it'll be a happy season for consumers.

But when this price war end up with one big shop close down, or even worse, left one big shop standing, it'll be monopoly. It'll be disaster for consumers as they control the market and will raise the price to gain back all the losses they make. They are not scared that consumers will run away coz they're the only source to get the toys and they're getting a much bigger portion of the pie compared to the portion they used to get.

I feel that once price war starts, it'll take some time for it to rest. One of the players broke the rules (keeping price consistent), then all hell break loose when it's too much for other big players. They'll join in the undercutting. See who has the most captial to last the longest. For some consumer (let's call them pests), they'll just jump on whichever wagon that offers the best price. To them, loyalty is not in their dictionary. CHEAP is the only word they keep deep to their hearts. When A offers the lowest price in town, these pests will just cling on to the shop. However after price war, when A offer at price X initially and B offer at price Y (which is lower than X), these pests who intially thought they got the best deals from A, complain how come so expensive. (they never thought of the times when price was dirt cheap and ask how come so cheap).

To counter B's attack, A also undercut B's price Y to price Z because B didn't abide the rules of keeping price at the price they set during the agreement for the price war to end. Now, A offer price Z which is lower than B. These pest again COMPLAIN that how come A's price not consistent. They felt cheated of their money and thus argue with A and decide not to have any transaction with A. This has caused the revival of the price war, and the pests will hop onto which ever wagon that offers the best price. As a consumer, I really pity the shops (big or small). Just pray that there'll not be too much "casualties" out of the war. RIP in advance for the shops that cannot tahan the price war.


Ok, another thing I want to say is that I finally bought this year's edition of EVIAN bottle!. the Pink one is this year's one. Red one is last year's one. On the flip side of the pink bottle got the 2006 numbers. I think it's a cool decorative piece to put at home. I missed out on the droplet series (where there were many colors, 1 for each year?). But now I've set myself to collect the "mountain" series. Will be great to have each year's design and place it in the room.

Comments anyone?

posted by tornado @ 8:09 PM