Monday, August 06, 2007

Price Fixing

British Airways got hit with a very hefty fine last week. It was for colluding with another airline to add on exactly the same fuel surcharges . Virgin Atlantic was equally guilty but so far as I can tell they got away with paying nothing because they reported the offence. Things don't work that way here, if you are equally culpable of a crime then admitting it provides mitigation and can reduce the sentence, it does not eliminate it. If individual criminal justice worked like that, imagine what you could get get away with …

Yesterday I went to PC World and bought a printer for the business. £29.99. Perfectly reasonable. Looking around any shop or site these days, that's a fairly normal price for a mass-produced shoebox-sized block of shaped plastic and metal with a few electric motors, transistors, integrated circuits, some consumables and a small book of documentation. The costs of production, transport and marketing must be fairly close to that. So I don't bother hunting around online to save a few percent.

At the checkout, the cashier told me that I also needed to buy a cable to connect it to the PC. The cable probably has less than a thousandth of the materials and complexity of the printer. They said the only cable available was £14.99. Eventually, when I had finally stopped laughing, I walked next door to Currys Electrical. You can guess the price there.

3 comments:

Faisal said...

The typical retail model suggests that 25% of the price you pay goes into the manufacture, transport, and marketing of the printer. The rest is 100% markup from manufacturer to distributor, then distributor to retailer. There are a few other factors that come into play, such as shelf opportunity cost and depreciation and obsolescence, which all lead to these things eventually being given away for next to nothing. Not saying you should have shopped around, it's a very small sum of money, but your understanding of retail pricing is off.

Don't really understand why Virgin wasn't fined, though.

RNB said...

Fair point. But I do know a little about marketing and markups ;)

The printer costs about sixty dollars whether bought from store A or store B or online, there are small differences but it seems to be fair competition.

The USB printer cable costs thirty dollars from store A and exactly the same from the only local "competitor" - you know what they cost online …

v!sh said...

RNB - it may help to know that Currys & OC World are owned by the same group. I am sure it must be some Indian - who else will name a shop "Curry"?