Deflationary pressure from apps

[mooncliff]

I recently loaded a couple of barcode reader apps into my iPod Touch. It is really amazing. You find an item and use the camera to take a picture of its barcode, and it tells you the prices of that item in stores around you! Still clunky and doesn't really work, but you can see the potential. Imagine an easy MySimon.com that lets you just wave your cell phone at an item, and you can then decide whether it is worth your bother to go to another store to get it for less. The ultimate would be, since we usually buy the same things over and over again, you just scan the barcodes of things you buy often and the app will tell you what items to get on a particular day at a particular store.

http://online.wsj.com/article/SB1000...ghtMostPopular

[c1ue]

Re: Deflationary pressure from apps

The ultimate would be, since we usually buy the same things over and over again, you just scan the barcodes of things you buy often and the app will tell you what items to get on a particular day at a particular store.

I've seen a large number of these startups.

My question for you:

What incentive would any store have to open up its pricing database to allow this type of comparison shopping?

It might be acceptable if the loss leaders bring people into the store and thus likely to buy other necessary items, but a full pricing database access would allow people to schedule multiple visits to multiple stores to optimize.

A fully open pricing database also makes it much easier for new competitors to emerge - like Wal Mart - as well as easier for existing competitors to undercut.

The first to open their databases had better be the lowest price - they can then use their lower prices to crush the competition, then raise prices after the competitors go out of business.

[jk]

Re: Deflationary pressure from apps

people are killing stores by "shopping" items in the bricks and mortar stores but then purchasing online. do they expect these "showrooms" to stay open?

[GRG55]

Re: Deflationary pressure from apps

I've seen a large number of these startups.

My question for you:

What incentive would any store have to open up its pricing database to allow this type of comparison shopping?

It might be acceptable if the loss leaders bring people into the store and thus likely to buy other necessary items, but a full pricing database access would allow people to schedule multiple visits to multiple stores to optimize.

A fully open pricing database also makes it much easier for new competitors to emerge - like Wal Mart - as well as easier for existing competitors to undercut.

The first to open their databases had better be the lowest price - they can then use their lower prices to crush the competition, then raise prices after the competitors go out of business.

WalMart, Costco, Target and others are indicative of the commoditization of major chunks of the consumer market. On-line shopping for certain types of vehicles is another. That trend remains intact and is far from reaching maturity, although the so-called "luxury" brands are holding out [Rolex, as just one example, started buying back dealer inventory during the height of the credit crisis to try to prevent the discounting of its brand and therefore its implied commoditization].

Once something becomes a fungible commodity, price is the primary and often the sole determinant for the transaction...and if that is what is needed to get the customer to transact with you, that is the information that you put out there. It is rapidly becoming "no longer good enough" for WalMart to advertise generic Everyday Low Prices...now to fend off their competition they have to prove it on enough items, and with sufficient frequency, to keep the customers coming into the stores.

[Fiat Currency]

Re: Deflationary pressure from apps

... The first to open their databases had better be the lowest price - they can then use their lower prices to crush the competition, then raise prices after the competitors go out of business.

Yes. Well said.

This is actually Business Rule #13 for us. "You had better be the fattest man in a starvation contest". I kid you not.

We labelled it #13 as we generally accept this will NOT be a winning strategy >95% of the times.

I firmly believe that a Business Partnership must maintain a living set of rules that everybody agrees to live by ... unlike the current orgy of malfeasance, lies, obfuscation and moral turpitude we have created.
Cigar Smoking Happy Face.gif

[blazespinnaker]

Re: Deflationary pressure from apps

App just scrapes prices. Stores don't have a choice about 'giving it up' in terms of prices. Sorry, the future is in control..

[c1ue]

Re: Deflationary pressure from apps

Stores don't have a choice about 'giving it up' in terms of prices.

This is a completely inane statement.

The identity of an item is standardized via the bar code. The price is not.

[ThePythonicCow]

Re: Deflationary pressure from apps

This is a completely inane statement.

Please don't insult other posters statements.

[ThePythonicCow]

Re: Deflationary pressure from apps

App just scrapes prices.

How does the app scrape prices?

[c1ue]

Re: Deflationary pressure from apps

How does the app scrape prices?

What BS is trying to say is that you can cull prices from web sites or links (scraping).

But the pricing data sets for store inventories simply don't exist.

The store ads only cover minute fractions of each store's total inventory - and these are by definition sale items and thus in many cases are loss leaders.

A gas price web site like sanjosegasprices.com/fresnogasprices.com/****gasprices.com can populate its dataset using social network effects because there are only 3 items in question which are in very common and standardized use.

The same cannot be said for grocery store purchases.

The organic raisins you consume, for example, are something which I've literally never bought.

[blazespinnaker]

Re: Deflationary pressure from apps

This is a completely inane statement.

The identity of an item is standardized via the bar code. The price is not.

I, in fact, do this for a living. You are absolutely correct in that nobody is going to open up their database.

So how do you think this works?

[blazespinnaker]

Re: Deflationary pressure from apps

But the pricing data sets for store inventories simply don't exist.

That's news to me!

Part of the problem is that I think you're obsessing a little with grocery stores here. Grocery stores are a special kind of store and only one particular element of this equation, and to be honest, I don't think an important one. I'll comparison shop that digital camera, but seriously, I'm not going to run all around town to get the lowest price on apples.

Anyways, mostly I suspect you're comparing prices against online websites. eg: This cool gadget, is there a website which has a massive discount on it right now? Or is the markup small enough that I can just pick it up at the store without having to worry about CC fraud, delivery, condition, warranties, etc etc.

[Serge_Tomiko]

Re: Deflationary pressure from apps

people are killing stores by "shopping" items in the bricks and mortar stores but then purchasing online. do they expect these "showrooms" to stay open?

There is nothing I despise more about America than the consumer culture. Let the showrooms die, along with the shopping centers and the entire communities built around them.

[jk]

Re: Deflationary pressure from apps

There is nothing I despise more about America than the consumer culture. Let the showrooms die, along with the shopping centers and the entire communities built around them.

my point is more that if you want the information you can only glean at a "showroom," then you should be willing to spend a little more to support the continued existence of that bricks and mortar store. i'm not much of a consumer, or a shopper, but on those occasions i wish to take advantage of the existence of actual non-virtual stores, i expect to pay a bit more to support them.

[c1ue]

Re: Deflationary pressure from apps

I, in fact, do this for a living. You are absolutely correct in that nobody is going to open up their database.

So how do you think this works?

For a standardized item which equates to most if not all electronics including cameras, there are more than enough stores online with their entire inventory available for a Google style link traversal program, or a 2nd generation search engine style traversal, or no doubt 3rd/4th/whatever generation brute force searches, to populate a database with prices.

As the bar codes are a standard - you then just need to link said prices to database buckets for all prices associated to each given bar code. The model numbers/brand names are extra bonus verification categories.

Another method is Pricewatch.com - in this case specific online stores actually use that site as an advertising aggregator. The sites themselves provide prices in order to access pricewatch.com's aggregated customer base.

The key again here is the ubiquity of the items: at any given time there are only a couple hundred SOA or near SOA digital cameras, ditto for LCDs. For PCs, the growth of the megabrands - Dell,HP,Lenovo - also lead to much easier comparisons. These large companies don't really care that they can be compared directly as they are selling commodity products - they focus on branding and advertising plus they control their own brand supply (and thus a significant chunk of the marketplace's supply).

Electronics in general are also relatively expensive items for which driving expenditures of gasoline or shipping are relatively insignificant.

Part of the problem is that I think you're obsessing a little with grocery stores here. Grocery stores are a special kind of store and only one particular element of this equation, and to be honest, I don't think an important one. I'll comparison shop that digital camera, but seriously, I'm not going to run all around town to get the lowest price on apples.

This is an old and tired argument.

Here is the latest BLS data on consumer spending:

Food	$6,372	12.99%
Housing	$16,895	34.43%
Owned dwellings	$6,543	13.33%
Maintenance, repairs, insurance, other expenses	$1,138	2.32%
Rented dwellings	$2,860	5.83%
Utilities, fuels, and public services	$3,645	7.43%
Housekeeping supplies	$659	1.34%
Apparel and services	$1,725	3.52%
Transportation	$7,658	15.61%
Healthcare	$3,126	6.37%
Entertainment	$2,693	5.49%
Fees and admissions	$628	1.28%
Audio and visual equipment and services	$975	1.99%
Pets, toys, hobbies, and playground equipment	$690	1.41%
Other entertainment supplies, equipment, and services	$400	0.82%
Personal care products and services	$596	1.21%
Reading	$110	0.22%
Education	$1,068	2.18%
Tobacco products and smoking supplies	$380	0.77%
Miscellaneous	$816	1.66%
Cash contributions	$1,723	3.51%
Personal insurance and pensions	$5,471	11.15%
Life and other personal insurance	$309	0.63%
Pensions and Social Security	$5,162	10.52%

Electronics are at best 2.5% of consumer spending - and likely much lower since this category includes music, video games, etc etc.

Grocery stores are involved in at least 3x more consumer spending. Likewise apparel is at least 50% a larger factor.

Transportation - gasoline is at least 2x more than electronics, while utility costs are at least 3x.

To say that an app which allows one to optimize the price of a camera bought and thus affects deflation systemically is to focus on a very tiny part of the picture.

On the other hand, grocery store prices are a much larger part of the picture.

Gasoline prices also are very significant, but there are costs associated with shopping for gasoline - including the de facto collusion between gasoline vendors (or at least, how else do you explain simultaneous price ramps during holiday driving periods?).