Wednesday, February 9, 2011

Consumers Use Information Technology To Over-Come Opacity in Pricing

Bloomberg ran an interesting article on how the consumers' use of information technology is driving retailers to everyday low prices. If a housewife can figure out how to use information technology to properly value a product, clearly financial market participants are capable of doing the same with current asset-level data for both banks and structured finance/covered bond securities!  [emphasis added]
Best Buy Co., the world’s largest consumer electronics retailer, may curtail three decades of tactical discounting and move instead to its own version of the everyday prices pioneered by Wal-Mart Stores Inc. 
With Americans increasingly using their smartphones to comparison shop, consumers are unwilling to wait for sales if they find better deals elsewhere, said Mike Vitelli, executive vice president and co-head of the North America division. 
We have to move rapidly in recognizing the transparency of pricing,” Vitelli, 55, said in a Feb. 7 interview at Best Buy’s headquarters in Richfield, Minnesota. Internal discussions about making the switch are at an early stage, he said. 
... The retailer has tried new tactics to keep customers from defecting to rivals.  
... Typically everyday pricing is a pledge that a retailer will offer the best price it can get from its suppliers and still make money on each item. Best Buy hasn’t decided how the new pricing model would work, Vitelli said.
... During a staff meeting, Vitelli was willing to say out loud: “Why do we carry inventory when we train consumers only to buy it’” on sale, said Rick Rommel, a senior vice president who helps run a unit that tests new concepts.
“If the pricing isn’t everyday, the consumers just wait," Rommel said in an interview. "Our inventory sits and waits for that next promotional moment.”
Switching to consistent pricing would “be very powerful,” said Barry Judge, Best Buy’s chief marketing officer. “It makes our pricing much more transparent than it is today.”

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