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The Internet bazaar

February 2000

It's all about haggling. A number of years ago I traveled in the Middle East, and one of the striking differences from western culture was the fluidity of price--even the cost of a bus ticket in some places.

I remember walking the streets of the old part of Jerusalem where it was just expected that the price of every item in the little open-air shops was negotiable. "I'll offer you 20 pounds for that jacket," I'd say, and the vendor would reply, "My mother would shoot me if I sold it for that price." But eventually he'd come down.

Apparently, it wasn't until the last century (you know, the 20th century) that prices became fixed. I read that the rise of mail order catalogs and selling at a distance resulted in the ubiquity of fixed prices. Now we are rapidly moving back to a model of fluid pricing, in which the cost of goods fluctuates minute by minute as thousands of people flock to that great bazaar we call the Internet.

It's sometimes called "dynamic pricing," and it's giving rise to a mind-boggling array of new approaches to buying and selling. Perhaps the auction sites were among the first instances of dynamic pricing, with eBay continuing to be a leader in this area.

The highly popular Priceline was also an early instance of dynamic pricing, allowing people to get low airfares. The concept is simple: people name a price they're willing to pay for a ticket and when they want to travel, and then the airlines that have unsold seats on particular flights decide if they want to meet the person's price. Priceline has now expanded to other products, including hotel rooms, new cars, mortgages, even groceries.

I've seen recently that Priceline is also starting a flea market that will allow the buyers and sellers to haggle over price, but when I went to look for it in preparation to write this column I couldn't find it. Expect to find it soon, if not on Priceline then somewhere else.

eWanted is one of the most interesting newcomers to the great Internet bazaar. The site refers to their approach as an "upside down auction." If you have something in mind that you want to buy, you place a listing. Then dealers and other individuals submit offers to you. As sellers compete for your business, the price goes down. eWanted currently hosts over 1,000 categories of products and services. Sellers are also attracted to the site because it gives them a direct, targeted audience.

Another fairly new entry is OutletZoo, which handles closeout items. The site lists the number of available units of a particular item and the current price. At specified intervals the price goes lower, until every item is finally sold. As a buyer, you have to decide when to jump in. If you wait too long, the items might be sold out by the time you make your purchase. Or if you buy to soon, you may not get the lowest price. OutletZoo offers a wide range of computer items, but is also gradually expanding into areas such as consumer electronics, toys, tools, and items for the home.

A number of sites use the Internet as a way of grouping together those who want to buy a particular product, resulting in volume discounts. At Accompany as more people submit their intention to buy a particular item, the price goes lower. On a particular date the deal closes, and all those participating then make their purchase. Those who are buying often promote the product to their friends or on the Internet in order to get a larger group--and an even lower price.

As commerce on the Internet bazaar continues to heat up, you'll no doubt encounter many more such novel schemes of dynamic pricing, where the only constant is flux.

© 2000 by Jim Karpen, Ph.D.

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