Tuesday, January 29, 2008

Price Gouging is Never Right

A colleague and I were chatting the other day about price gouging. Particularly, the way things have gotten so expensive in Las Vegas during the annual Consumer Electronics Show. You no doubt pay more for a flight to Sin City (or any other destination, for that matter) during the days of such a big show then you would any other time of the year. Why? Because airlines know that people from around the world will be traveling there in the thousands. Hotel stays also creep up in price: you might end up paying upwards of $300 for a room that would cost half that any other night. (On New Year's Eve, for example, even the most basic hotel room in Vegas will run you five-hundred smackers!) And do we really need to pay US$10 for a watered-down, half-glass of vodka and cranberry at a cheesy hotel bar?

Of course it all comes down to the basic principles of supply and demand. The more coveted a product or service is by the masses, the higher the price of said product might rise. I've seen nasty examples of this on several, isolated occasions. Anyone who lives in Toronto and tried to buy a bottle of cold water during the sweltering hot summer blackout a few years ago knows exactly what I mean ($5 for a 250 ml bottle, anyone?)

This got me to thinking: is price gouging rampant everywhere? Rather, more specifically, is it rampant within the consumer electronics industry?

In the CE industry, it seems that the situation is exactly the opposite, especially when it comes to big-ticket items. It's no secret that companies like Toshiba and Sony took a hit in order to sell products like first-generation HD DVD players and Playstation 3 at the prices they did. And we all know what severe price erosion is doing to the flat-panel TV industry.

But when it comes to many smaller-ticket items, the gap between cost and sale price is exponentially wider. However, this isn't exactly price gouging: manufacturers and retailers need to make a profit somehow, right? And just because a product might cost X to manufacturer, we all know that plenty of people involved in between the manufacturing process, and the point the product arrives in your hands, need to get paid somehow.

Of course every Tom, Dick, and Harry will have felt, at one time or another, that he's paid what he thinks is "too much" for something. But there's a big difference between perception of price, and actual price "gouging" of the customer.

Needless to say, before you buy into anything, whether it's a product, vacation package, or service, do your research. If you're planning a vacation, investigate times, other than the obvious seasonal differences, when prices usually rise. For example, heading to any city when there's a big trade show or festival won't be your cheapest bet! And always make comparisons before forking over your dough.

As for the water story, it was only select gas stations that were gouging customers who strolled in with sweat dripping off their foreheads and dry mouths, dying for a drop of cold aqua. But charging $5 in a situation like that is just wrong, no matter how you slice it.

[Photo: www.freedigitalphotos.net]


Anonymous said...

You conveniently forgot the biggest price gouge in Canada. The limited response by many CE companies to the higher Canadian dollar. It has been a disgrace.

Simon said...

I think most consumers are judicious in price comparing big ticket items (ex. HDTV). This is easy since all retailers readily advertise their products and it's easy for the consumer to compare (and also leads to price wars between retailers). Where the consumer loses the battle is on the accessories: cables, stands, mounts and extended warranties. But by this time, the consumer is so happy with themselves for saving a couple hundred dollars that their defences are down and go along with what the salesperson recommends: gold plated cables anyone? It reminds me of buying a new car, and then getting the 'rust proofing', alarm system and mats.