The land of the commodity purchase

December 12 2004

With it being holiday season, like the rest of you, I'm doing a fair bit of online shopping.  As mentioned previously, I'm looking for a new mobile phone, but also a mobile GPS system, a cordless phone, possibly a laptop computer.
One of the great promises of e-commerce was price inelasticity [it would make my economics teacher proud to know that I was paying attention enough to use this word conversationally].  A buyer's market, if you will.  Now that a buyer can choose to "visit" any merchant with a click of a button, merchants must be price-competitive to win business.  Sites like shopping.com, NexTag, bizrate, froogle, and others have all been born of the idea of making comparison shopping easy.
So my question for the day is, why isn't everyone using these services?  I have to assume that there is still an unwashed population that doesn't comparison shop.  How else do you explain that the Tomtom Go is $629 at TigerGPS yet $799 at Computer Discount Warehouse (or even more on this eBay auction)?  Are there just that many stupid people who don't have the extra five minutes to find the best deal?  Or, if nobody is buying from the higher-priced vendor, how are they staying afloat?
[Yes, I ordered a TomTom Go from TigerGPS.  Too bad it won't get here before I leave for this week's Texas Two-Step -- user group meetings on Tuesday in Dallas and Wednesday in Houston.  Oh, and yes, I'm also aware there are one or two sites on the Internet that are offering the Tomtom Go for $619 or so.  I have my limits as far as trust in online storefronts...but again, that's what Bizrate, NexTag, etc. offer as their value-add.]
[Oh, and yes, today was the two-year blog-o-versary.  I'm holding the "year in review" for a few days....]

Ed Brill | Highland Park, IL USA Category:  Toys  Add/View Comments [20]

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  1. 1  Bill Geimer  | 12/12/2004 10:04:04 PM

    Thought one! The internet varies; I have two friends that just moved to new developments, where they cannot get a cable modem or a DSL connnection and are back to using modems. Thought two. Not everybody has either the time or the internet savvy you do. Good luch with your purchase and have a good time in TX.

  1. 2  Ben Rose http://blog.jaffacake.net | 12/13/2004 2:53:30 AM

    Sometimes people pay for service too. I know generally service is poor everywhere these days (speaking from UK experience) but if there's a stock/delivery issue with the cheaper supplier I often pay a few £'s more.

  1. 3  Lee Davis  | 12/13/2004 3:23:17 AM

    I am unclear how proud your prof would be as I am not sure you used the word correctly. :-) My impression is that inelastic goods are where price has little effect on demand. E.g. heroin, Microsoft Windows. Versus commodity markets where demand is so price driven there is a price.

    While I will never object too strenuously to your thesis that most people are idiots, I think some could be explained by the fact that brands still matter as well. E.g. the recent MIT study about Amazon able to discount somewhat less than one would expect just based upon price.

    { Link }

    I feel I - and probably others - satisfice: { Link }

    at a certain discount level, I try to

    optimize other things.

  1. 4  Tony C http://www.tonycocks.com | 12/13/2004 7:19:56 AM

    I have the Tom Tom Nav for Pocket PC and it works really well. I hear good things about the 'Go' to. I went for the Pocket PC one as I can use it on foot in London with the tiny Bluetooth GPS unit.

  1. 5  Matt White http://www.11tmr.com | 12/13/2004 7:43:17 AM

    I recently upgraded my GPS and sold the old one on eBay. I thought I might get half the money back but I actually made a profit! The only thing I can think in this case is that auction fever took over and my buyer got into the mindset of "winning" the auction and forgot about the actual price they were paying.

    I would guess for the other examples you gave that it is a combination of laziness and lack of knowledge. If someone isn't interested in the internet then the less time spent online the better. I tend to think of parents or technophobe contemporaries in these situations.

  1. 6  Mike Lazar  | 12/13/2004 8:14:30 AM

    Ed -- I'd say it has far more to do with reputation than anything else. I'll agree with Ben. On a purchase of this magnitude, I'd gladly pay an extra $25-$50 if I trust one vendor and do not trust (or know) another. Also, those "quick prices" often don't include either shipping, handling, tax, etc. It takes a little digging to get the entire price.

  1. 7  Ed Brill www.edbrill.com | 12/13/2004 8:26:54 AM

    @3 - You're right -- I was trying to talk about elasticity in general, kinda used the word incorrectly. Thanks for the new SAT word ("satisfice") though.

    @6 - Mike, the sites like shopping.com and nextag.com are kewl because they actually show you the bottom line price - shipping/handling/tax all-inclusive. They also have ratings for the vendors (like eBay feedback) so you can see whether they are trust-worthy or not. I bought a flat-screen monitor from newegg.com earlier this year, even though I had never heard of them. It arrived two days later and had no issues. Perhaps I'm willing to take a bit more of a risk. I still think it very funny that CDW - with "discount" in their name - tend to be on the more-expensive side. Same thing with "Budget" rent-a-car. Maybe I should go back to marketing with all this new-found branding knowledge. :)

  1. 8  Christopher Byrne http://www.controlscaddy.com/ | 12/13/2004 10:41:46 AM

    @3 - "Satisfice"? Oh now you are bringing back my Herbert Simon nightmares from Graduate school:-)

    My favorite example was that as one gets older, the level of qualities sought out in a spouse or significant other goes down as people seek to "satisfice" their needs:-).

  1. 9  Ben Rose http://blog.jaffacake.net | 12/13/2004 10:46:58 AM

    @7 - Ed, it's true some of these companies have funny names. I meant look at International Business Machines...didn't they just sell their machine making division ;O)

  1. 10  Eric Parsons startingblockcomputing.com | 12/13/2004 10:56:23 AM

    One can only assume that some of those "lower priced items" are actually in-hand and ready to ship. Also gotten into the cheap item with massive shipping and handling.

    I'm one who, when buying a car, and seeing the $200 Documentation Fee, starts walking for the door. The dealers call it ADP, and that is exactly what it is.

  1. 11  Mike Lazar  | 12/13/2004 11:08:30 AM

    I guess it's all relative. I wouldn't take a flier on a TV, camera, or other major purchase. If it's disposable, I'll jump, but if I want to have some sort of service in 3-5 years, I won't go with some company that's been around for 2 years and is completely virtual.

  1. 12  Mike G  | 12/13/2004 12:01:39 PM

    Another thing to beware of are "grey market" items ... items built/packaged/intended for another market (usually European). While doing a lot of comparison shopping for digital cameras and portable dvd players I became well aware of these items. Warranties are usually only good on another continent.

    Another consideration has been that paying a *little* extra for a store that you are familiar with - and close to - means that it's easier to deal with returns, repairs and warranty issues. (again with the warranty)

  1. 13  Ed Brill www.edbrill.com | 12/13/2004 12:12:39 PM

    Both fair points.

    But the TomTom Go is $659 at buy.com -- very reputable, and still $140 cheaper than CDW. Still seems bizarre to me.

  1. 14  Brian Sniegocki www.dana.com | 12/14/2004 7:34:27 AM

    Interesting you mention eBay being higher. My brother sell automotive / 4x4 truck parts, they have a web site that lists a part for $200 and have the same part on eBay for $240, both of these prices are below what others charge. Guess where most of the sales are from, yes eBay. At time he has mentioned that people using eBay contact him to see is he has a part in a different color or size, he says yes and gives them the web address to the online store, again no-sale. I don't understand why people would rather deal, and take a chance, on eBay then get the same item direct from the source.

  1. 15  nanook  | 12/30/2004 10:33:10 AM

    Hi Ed -- any chance of getting a review of your TomTom? I've been debating upgrading my GPS to a similar type. I've been a loyal Garmin user for many many years, but now they finally have some good competition!

  1. 16  Ed Brill www.edbrill.com | 12/30/2004 11:00:13 AM

    I've only been using it for a short time, but will review it within a week or so.

  1. 17  Nanook  | 1/1/2005 4:25:32 PM

    sorry for the double post -- I forgot I had posted already -- I only *remembered* thinking that I should ask. Sorry!