Consumer Behaviour Dictates Price

The supply and demand economics of the consumer marketplace are thought to dictate price, but it’s not always that simple, says a study from the University of Toronto and the Center for Economic and Policy Research in London, UK. ‘Search, Showrooming, and Retailer Variety’ says the internet and eCommerce are prompting more consumers to go to a physical store to inspect items before purchasing them product at a lower price elsewhere. This is called ‘showrooming.’ It says there are three main types of customers: those that ‘showroom’ by figuring out what they want at one retail outlet and buying elsewhere; others that research deeply and buy where they first find what they like; and others who are less choosy and conduct only limited research. Interestingly, the study shows this last type of customer is the only one that compared prices, as the others are more interested in look and fit. This has resulted in three varieties of retailer. The first is a retailer that offers more choice through a deeper selection. The second is the retailer that offers a shallower selection. Finally, an online channel may provide little opportunity to assess fit even if there is a deep selection. Most consumers are not as likely to search more than one store to look for the perfect match and a lower price. As such, the stores dubbed ‘shallow’ are more likely to sell a higher volume of a given product at a more competitive price, while stores dubbed ‘deep’ are more likely to sell their products at a higher price to more selective consumers.