This week we discussed the concept of predatory pricing, which is the act of setting a low price to drive competitors out of business with the intent to establish a future monopoly. Specifically we discussed some of the practices of Wal-mart and the accusations of predatory pricing against them.
I would argue that this is just another business practice that is done on a daily basis in business. If Wal-mart drops the price of certain DVD's from $20 to $5 for a period of time then they are not only going to sell more of those DVD's but they will also have traffic through their store to purchase other items as well. Convenient Stores do this all the time as HESS has times that they sell soda for $2 per 12 pack. Obviously the store is not making money on this particular item but they are making money on other items that are purchased.
When a large retailer can sell an item at cost or even at a loss but increase their business because of that reduction then I would consider it a smart business move. That company should not be penalized for having success that allows them to operate at a more productive level than a local retailer.
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Predatory pricing is definitely a smart business move, and for that short period of time, I thoroughly enjoy consuming goods at a low price! However, I get so used to stores, Walmart for example, having the lowest prices, that once they jack the prices back up it's very frustrating as a consumer!
ReplyDeleteIt seems that predatory pricing is in fact a smart business move, because you traffic consumers to purchase other products that you sell out of convenience. You also give the perception that you have lower prices on most products in general.
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