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The company that I work for uses a dynamic pricing SaaS. This SaaS basically scrapes the 10-15 competitors' ecommerce websites, including the website of the com

The company that I work for uses a dynamic pricing SaaS. This SaaS basically scrapes the 10-15 competitors' ecommerce websites, including the website of the company that I work for and they provide an excel sheet with every product and the price at which every company sells it for. Additionally if you have a contract with this company, you can also provide it your product stock information on a daily basis. This tells the SaaS how quickly or slowly some products are being sold. It provides two services that I could tell (I'm not a pricing expert) 1. It gives you a "dumb" daily recommendation per product to either lower or increase the price so that your price in on par with the competitor who is selling it for the highest price. 2. It also gives you a "smart" daily recommendation per product to either lower or increase the price so that your price in on par with the competitor who is making the most sales. Now I see no reason why all 10-15 competitors can't be subscribed to this SaaS and therefore all competitors are pricing their products practically the same. It's hard for me to come to terms with it, because on one hand it is "pricing it right" and on another it is algorithmic collusion. The only moral issue I see here is that some products are "essential" (think food, toiletries) and therefore the customer will buy these products at prices that they are not comfortable with.

avidphantasm 3y ago
I have come to suspect such algorithmic pricing “coordination” may be facilitated at the consumer level by sharing of web search results. Recently I was shopping for a circular saw. Eventually to decided on the saw I wanted, and was looking around at pricing. At first, one retailer had the best price, which was $169, $30 off MSRP of $199. Then after searching some more, I noticed another retailer had it for $149, but that was for delivery, and I needed it for a job quickly, so I settled on the first retailer. When I went to the store to buy it, the price ended up being $149. In this case, this apparent “coordination” worked out in my favor, but the same mechanism could easily be used to raise prices. Either way, if such a mechanism exists, it is troubling.
- datavirtue 3y ago
  Consumers used to shop online to leverage competition and save money. Seems it has totally flipped.
paul80808 3y ago
Pricing software offers implicit collusion by providing competitors a way to agree on a price that is equivalent to monopoly prices, without them need to formally meet and agree on a price - which would be easily prosecutable. There are examples in many markets, here is a well-researched example that comes to mind: https://economics.yale.edu/sites/default/files/clark_acex_jan_2021.pdf https://economics.yale.edu/sites/default/files/clark_acex_ja... This paper discusses how algorithmic pricing produces outcomes that are equivalent to collusion-based pricing in the German gasoline market. Recent experiences with grocery pricing across North America and Europe look very similar to me. I know some computer scientists who have worked with major grocery retailers to implement fairly sophisticated automatic pricing tools. The goals they work towards are typically fairly simple metrics, like average spend. Even though the goal isn't to gouge consumers, it's easy to see how how this might be the unintended result.
- lotsofpulp 3y ago
  Retail business profit margins are 1% to 5%. Mathematically, how can the prices be any lower without the business failing? Hence we see similar prices everywhere. Grocery stores especially have 1% or 2% profit margins, so logically, the things they sell must be priced as low as they can. And also why a mom and pop grocery store cannot compete with Walmart/Kroger/Costco/Target/etc, you need those huge economies of scale otherwise your prices will be uncompetitive.
  - dclowd9901 3y ago
    In 2022, Kroger made $2.2B on $34.8B sales. That’s more than 6% _profit_, never mind margins. These companies are making way more margin than you are saying they are. Edit: looks like that was just the quarter — still 1% profit which means margins must be far higher. Margins in retail, by the way, are mark-up over wholesale cost. Source: https://www.cincinnati.com/story/money/2023/03/02/how-much-did-kroger-make-in-profits-last-year/69962158007/ https://www.cincinnati.com/story/money/2023/03/02/how-much-d...
    - gruez 3y ago
ensignavenger 3y ago
This type of service has existed long before ecommerce. Brick and mortar retailers pay someone to go to stores and check prices.
- datavirtue 3y ago
  Now it's in real time for all products with no work required or delay and they are all going to check prices together, and grabbing coffee afterwards. How are you missing the subtle shift that makes this not the same?
  - AnimalMuppet 3y ago
    How, exactly, are they "grabbing coffee afterwards"? From what I've seen so far, it looks like there is no direct communication between competitors. If I ran a bakery, say, in New York City in 1900, I could send a boy around to the nearest five bakeries and get answers within an hour. That would be "real time" within that context, in the sense that customers would not respond faster than I could gather the information. If I ran a stall at a market in, say, 1500s England, selling potatoes, I would know what price my competitors were selling potatoes for, faster even than an hour. If I ran a gas station at an intersection, I could see at a glance what price my competitor across the street is displaying. With current stock market tools, I can see the backlog of both buy and sell orders. When I go to sell a house, my agent tells me the asking prices of comparable houses that are currently for sale, as well as the actual selling prices of comparable houses that have recently sold. This is how markets are. Sellers know each others' prices. So the only thing different is your "grabbing coffee afterwards" claim, and so far, I have seen nothing of substance to back it.
    - PierreProstata 3y ago
      The difference is that the bakery boy now works for every bakery on a city, state or maybe even country-wide level and gives advice on how much each baker should take for their bread.
      - 3y ago
Horffupolde 3y ago
How do you link the same product across competitors if there’s no unifying unique id?
- loa_in_ 3y ago
  I imagine every client includes some metadata with the product information like list of package constituents
- Enginerrrd 3y ago
  I mean the manufacturer SKU is a unique identifying id.
  - ric2b 3y ago
    There are also gtins, which are global identifiers.

avidphantasm 3y ago

I have come to suspect such algorithmic pricing “coordination” may be facilitated at the consumer level by sharing of web search results. Recently I was shopping for a circular saw. Eventually to decided on the saw I wanted, and was looking around at pricing. At first, one retailer had the best price, which was $169, $30 off MSRP of $199. Then after searching some more, I noticed another retailer had it for $149, but that was for delivery, and I needed it for a job quickly, so I settled on the first retailer. When I went to the store to buy it, the price ended up being $149. In this case, this apparent “coordination” worked out in my favor, but the same mechanism could easily be used to raise prices. Either way, if such a mechanism exists, it is troubling.

datavirtue 3y ago
Consumers used to shop online to leverage competition and save money. Seems it has totally flipped.

paul80808 3y ago

Pricing software offers implicit collusion by providing competitors a way to agree on a price that is equivalent to monopoly prices, without them need to formally meet and agree on a price - which would be easily prosecutable. There are examples in many markets, here is a well-researched example that comes to mind: https://economics.yale.edu/sites/default/files/clark_acex_jan_2021.pdf https://economics.yale.edu/sites/default/files/clark_acex_ja... This paper discusses how algorithmic pricing produces outcomes that are equivalent to collusion-based pricing in the German gasoline market. Recent experiences with grocery pricing across North America and Europe look very similar to me. I know some computer scientists who have worked with major grocery retailers to implement fairly sophisticated automatic pricing tools. The goals they work towards are typically fairly simple metrics, like average spend. Even though the goal isn't to gouge consumers, it's easy to see how how this might be the unintended result.

lotsofpulp 3y ago
Retail business profit margins are 1% to 5%. Mathematically, how can the prices be any lower without the business failing? Hence we see similar prices everywhere. Grocery stores especially have 1% or 2% profit margins, so logically, the things they sell must be priced as low as they can. And also why a mom and pop grocery store cannot compete with Walmart/Kroger/Costco/Target/etc, you need those huge economies of scale otherwise your prices will be uncompetitive.
- dclowd9901 3y ago
  In 2022, Kroger made $2.2B on $34.8B sales. That’s more than 6% _profit_, never mind margins. These companies are making way more margin than you are saying they are. Edit: looks like that was just the quarter — still 1% profit which means margins must be far higher. Margins in retail, by the way, are mark-up over wholesale cost. Source: https://www.cincinnati.com/story/money/2023/03/02/how-much-did-kroger-make-in-profits-last-year/69962158007/ https://www.cincinnati.com/story/money/2023/03/02/how-much-d...
  - gruez 3y ago

ensignavenger 3y ago

This type of service has existed long before ecommerce. Brick and mortar retailers pay someone to go to stores and check prices.

datavirtue 3y ago
Now it's in real time for all products with no work required or delay and they are all going to check prices together, and grabbing coffee afterwards. How are you missing the subtle shift that makes this not the same?
- AnimalMuppet 3y ago
  How, exactly, are they "grabbing coffee afterwards"? From what I've seen so far, it looks like there is no direct communication between competitors. If I ran a bakery, say, in New York City in 1900, I could send a boy around to the nearest five bakeries and get answers within an hour. That would be "real time" within that context, in the sense that customers would not respond faster than I could gather the information. If I ran a stall at a market in, say, 1500s England, selling potatoes, I would know what price my competitors were selling potatoes for, faster even than an hour. If I ran a gas station at an intersection, I could see at a glance what price my competitor across the street is displaying. With current stock market tools, I can see the backlog of both buy and sell orders. When I go to sell a house, my agent tells me the asking prices of comparable houses that are currently for sale, as well as the actual selling prices of comparable houses that have recently sold. This is how markets are. Sellers know each others' prices. So the only thing different is your "grabbing coffee afterwards" claim, and so far, I have seen nothing of substance to back it.
  - PierreProstata 3y ago
    The difference is that the bakery boy now works for every bakery on a city, state or maybe even country-wide level and gives advice on how much each baker should take for their bread.
    - 3y ago

Horffupolde 3y ago

How do you link the same product across competitors if there’s no unifying unique id?

loa_in_ 3y ago
I imagine every client includes some metadata with the product information like list of package constituents
Enginerrrd 3y ago
I mean the manufacturer SKU is a unique identifying id.
- ric2b 3y ago
  There are also gtins, which are global identifiers.