The (Price) Race To Nowhere

Only one place to go

Twenty years ago, in the throes of the Christmas season, I knew what my big gift idea for the year was going to be. I wanted to get the woman who eventually became my wife a high-end leather jacket.

This wasn't the kind of purchase that you'd do over the Internet, especially not in those low bandwidth days. Fortunately, I knew people in New York City who trafficked in high fashion circles, and knew the right places to go. They also knew *how* to shop in such a setting, and prepared me accordingly. So instead of relying on a credit card, on the instructions of my experienced friend, I pulled my cash out of a bank machine, then spent the better part of an afternoon going from shop to shop in Lower Manhattan.

After four or five stops, we finally found what we were looking for, at a price that, to my non-New York eyes, seemed high but fair. It was, after all, a really nice coat. My very sharp friend agreed with the choice, and then approached the shop keeper.

What followed was something out of a play. My friend offered half of the price. The shop keeper looked at her as if she had insulted his ancestors, but she didn't flinch or seem in any way taken aback. He repeated the sticker price, at which point she noted the seasonality, how the coat was more of a fall piece and wasn't likely to move in January, and her original offer. He came down 10%. She went up 10%. He complained about his costs, and talked up the piece. She shrugged and made as if to leave. We got halfway out of the shop before he came down another 10%. She replied with 10% more, final offer. With a frankly uncomfortable amount of venom, he agreed to split the difference for a final 5% less, or 25% off the sticker price, but only if we paid in cash. Which we did, in a transaction that somehow didn't involve sales tax.

The whole experience took about five minutes, saved me a significant chunk of change, and gave me quite an education. From what I learned later about fashion, the shopkeeper probably still made significant profit from the transaction. (The fact that he was willing to risk his margins to avoid paying sales tax also shows that even at 25% off, he might not have paid full price for his goods, either.) But to me, and to anyone who might have witnessed the conversation in what wasn't an empty store, we were all quickly trained to the idea that paying the full price was just a mistake.

Now, let's pivot to the current state of affairs in e-commerce.

There are a myriad number of ways to avoid paying full price online. Comparison shopping among vendors can happen with just a couple of clicks. If you've got the time and inclination, abandoning a cart and seeing what might come your way in a retargeting offer can drive significant coin. Checking coupon sites for codes, or just typing in common keywords before checkout, can pay off handsomely. Using a rewards credit card, buying in bulk, taking advantage of seasonal discounts, bundling purchases to avoid paying for shipping... it's all there for you, and you don't even have to handle cash or haggle.

The challenge this brings to marketing and advertising professionals is considerable. How do you protect your margins while still driving enough revenue to matter? Can you protect your brick and mortar stores while still having a competitive online presence? And when connectivity gets even more ubiquitous, and wifi more widespread, are we all on a race to the bottom?

The answer, as far as I can see it, can only come from protecting the brand through extraordinary value and customer service. My favorite grocery store has exceptional prices across the board and a down-market esthetic that makes me think they'll always cut corners; I don't check their prices or fliers, because life is too short. Instead, I just load up on stuff when I'm there. The company that makes my poker cards just has a better product, so I wait for them to go on sale, or just pay full price if I have to, because there's no substitute. When my wife and I researched our most recent car purchase, we tried over a half dozen models, but wound up fixating on one model in particular... which led to a purchase with less leverage, since the only thing we could do was pit different dealerships against each other.

But if your brand doesn't have exceptional service or value, and there's no way to invent it with your work?

Well, then, you're in the race with way too many other entrants. With the fading hope that new prospects won't find out about all of the ways they can cut your margins...

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