Manipulating price of a product by controlling availability?
Discussion
Heard a story a while ago about a guy in the States in the farming industry who managed to control the price of a crop by dominating the availability of it, and then made a lot of money out of it and it got me thinking, can it be done on other items.
Lets take collectable items no longer in production like a Video Game. Find a title with relatively low availability already, buy up all current stocks, and any that come to the market after that, while also retailing the product at a higher price.
Appriciate Price elasticity comes into this but if you can find the sweet spot it could be very profitable.
Ignoring the moral arguements for the moment, any commercial thoughts on this?
Lets take collectable items no longer in production like a Video Game. Find a title with relatively low availability already, buy up all current stocks, and any that come to the market after that, while also retailing the product at a higher price.
Appriciate Price elasticity comes into this but if you can find the sweet spot it could be very profitable.
Ignoring the moral arguements for the moment, any commercial thoughts on this?
anonymous said:
[redacted]
Good questions. I'm still just playing with the idea to be honest but with a lot of media related collectibles (games, DVDs, VHS, Vinyl etc) the main place for people to buy is eBay and Amazon. There are then other dealers but they normally mark up their stuff quite high anyhow.The process would be to take item A. Buy all of the 'Buy it Now' ones on eBay and all of the available ones on Amazon. Let's say that's 50 in total at £10 each. I've watched the item for a few weeks and know that roughly 10 come onto eBay and 5 onto eBay per week. I relist the items at £25 each. I then buy each one that comes available under a price of say £15. Eventually the average selling price will rise and so will mine.
Basic terms I know, but as long as the item is desirable and doesn't go too high then it appears to work. You only have to look at a few older items to see that when availability reduces the price increases. Control availablilty, control the price.
Dont Porsche and Rolex do this too ? and many other premium brands that have in demand product
then you have the sales channel, who never discount...its not price fixing in any measurable way, but if no-one discounts the list price, no-one has to ...it only takes one or two resellers to start a price war and its a race to the bottom
so you need an in demand product, dont produce too many, and make sure your resellers dont discount = everyone makes a healthy profit ...just like apple
then you have the sales channel, who never discount...its not price fixing in any measurable way, but if no-one discounts the list price, no-one has to ...it only takes one or two resellers to start a price war and its a race to the bottom
so you need an in demand product, dont produce too many, and make sure your resellers dont discount = everyone makes a healthy profit ...just like apple
AyBee said:
Except that if I've got a video game that you're selling at a high price, I'll probably advertise mine at slightly below yours, so you either end up paying me pretty much what you're selling at and so reduce your profit margin...and so it spirals...
Yes agree, but if you've got to a point where you have raised the price others sell at then you have succeeded because you'd have purchased a lot at a lower price before that. Once the price becomes artifically high you sell through and pull out. It's always an attractive idea but only one that works if you have a lot of space to keep stuff and don't mind seeing the money trickle in slowly. For instance, you might have all of the crashed 80s Lamborghinis in Europe in your breaker's yard, and the bits fetch a fortune when they do sell, but you're lucky if someone buys one part every three months.
If there's a lot of demand for something and you attempt to control supply, then inevitably someone is going to make a copy/replica of the product and flood the market, undercutting you.
For example, my vinyl collection contains a lot of old 90s techno tunes that used to be worth between £50 and £100 for a 12" in good condition, due to scarcity. Then round 2006 the label released the whole back catalogue on MP3, probably £20 to download the whole back catalogue, the 12"s are worth maybe £3 now in mint condition. Sometimes you just have to sell stuff when it's hot and move on.
If there's a lot of demand for something and you attempt to control supply, then inevitably someone is going to make a copy/replica of the product and flood the market, undercutting you.
For example, my vinyl collection contains a lot of old 90s techno tunes that used to be worth between £50 and £100 for a 12" in good condition, due to scarcity. Then round 2006 the label released the whole back catalogue on MP3, probably £20 to download the whole back catalogue, the 12"s are worth maybe £3 now in mint condition. Sometimes you just have to sell stuff when it's hot and move on.
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