Pick a Number, Any Number

Issue Date: December 18, 2007, Posted On: 12/18/2007

By Marc Henderson

Pick a Number, Any Number

The act of making a purchase has changed significantly over the last few decades. It used to be that shopping was limited to brick and mortar stores, which later transformed into catalog and phone shopping. Now that the Internet has found its way into millions of homes, e-commerce has risen drastically in the shopping hierarchy. What is unique though about e-commerce is that many of the rituals of brick and mortar shopping have morphed into new rituals that are now associated with online shopping. For example, it used to be that you walked into the store and the sales associate was there to have a face-to-face conversation with you about your buying preferences. Now you can simply instant message the associate while lounging in your slippers and simultaneously be reading the morning paper. Recall what negotiating a price used to mean at a brick and mortar store – heckling the manager with offers and counteroffers. Nowadays, web sites just ask you flat out what you are willing to pay and your amount is either accepted or rejected. While a few dedicated negotiators may find this unexciting, many people welcome the straightforward nature of this process. The consumer gets to avoid the embarrassment of potentially sounding cheap and the store gets to determine in advance a bottom line price they are willing to accept.

This type of name your price or make a bid shopping earned enormous fame from the web site priceline.com where travelers are able to give their lowest bid for airfare. Priceline.com was just the beginning though, (and probably not actually the beginning, but the most popular), as everyone has jumped on the bandwagon. No pun intended, but even a band has jumped on the bandwagon – when Radiohead released its album, In Rainbows, the customer got to the checkout page of the web site only to find a message reading "it's up to you" with regards to the price.

Other industries have also adopted similar price structures. For example, HardwoodBrokers.com allows customers to place a bid for flooring. If the unfortunate event occurs that the company cannot accept your price, a representative will contact you and may even give you a counteroffer. Accepted bids are valid for 24 hours.

Back in the brick and mortar world, some restaurants have instituted menus with sliding price scales. At the end of your meal you have the opportunity to pay the restaurant what you thought the meal was worth. Granted, one downside of this is that sometimes even the low end of the scale seems to too high. But, this is a risk we are willing to take in the changing marketplace.

One may be wondering how some of these name your price web sites still manage to turn a profit after giving the consumer so much power. In the example of priceline.com, they simply act as a middleman or broker and try to find you a company that is willing to accept your offer. Priceline.com has a leg up in that they make the consumer commit to the purchase if the offer is accepted. So, from a seller's standpoint, it is welcomed to know there is an obligated buyer on the other end of the negotiation. Even priceline.com was surprised by its success after learning that its first year profits exceeded half a billion dollars. Priceline.com decided that airfare was just one small market, so they have since expanded the name your price model to everything from rental cars to groceries. Priceline.com is even in the process of breaking into the gasoline market, which customers would presumably welcome given the recent rise in oil prices.

It should come as no surprise that purchasing control has shifted towards the consumer. As customer loyalty has become more and more difficult to obtain, companies are searching far and wide for ways to keep people coming back. Purchasing decisions have become much more about price and much less about service – and when a customer gets both, it is duly appreciated. You can certainly bet that a customer whose bid was accepted would return to the same site the next time before wasting his or her time anywhere else.

So where is e-commerce heading in the future? At this point that is hard to say – the rearview mirror is crystal clear, it is the windshield that is foggy. One thing that is fairly certain is that things will not be static for long. Judging by the popularity of name your price shopping, it will not be replaced anytime soon, but rather, any changes that occur will be mere advancements. We will have to wait and see if future changes will benefit the sellers or the buyers on a general basis. With the increasingly competitive global marketplace, all bets are on the consumer getting the upper hand.