On Portobello Road one can walk down the street and purchase an umbrella for £5 . Walk further along and you will find that at another vendor you can find the same exact umbrella for £2. On Portobello Road all sales are final so there is no point in going back to return your £5 umbrella to get the same exact one at £2. This scenario sums up the level of competition on Portobello Road. You have so many vendors, most selling the same exact items, but the prices always seem to vary. Since there is a vast amount of competition, vendors have to undercut the vendor from up the street in order to sell their product. The goal for these vendors is to clear out as much of their products they have by the end of the day while still making a decent profit. As there are many vendors selling identical items at similar prices, some of the vendors decide to take blow in their sales. The two different strategies in play between the vendors are price skimming and penetration. Vendors will aim to sell a high volume of merchandise, by lowering their prices, rather than trying to increase their sales margin only to have their merchandise collect dust all day. There is always the possibility for vendors, within close proximity of each other, to collaborate to set prices high in order to maximize on sales profits. This is an example of price fixing and it is illegal. In the corporate world this collaboration would be punished. However I do not think that there is much regulation of prices on Portobello Road. If vendors, that have agreed to collaborate on a certain price, decide that they no long want to participate and lower their prices; (undercutting their competitors) there is nothing that the other vendors can do but lower their prices as well. Because price fixing is illegal, there is no way the other vendors can report any unwilling participants of their cohorts as their activities were illegal in the first place.Price fixing could be another example for why prices for similar products vary so much on Portobello Road, but in the end it all spurs from competition.
Thursday, 18 October 2012
Portobello Road: Prices
On Portobello Road one can walk down the street and purchase an umbrella for £5 . Walk further along and you will find that at another vendor you can find the same exact umbrella for £2. On Portobello Road all sales are final so there is no point in going back to return your £5 umbrella to get the same exact one at £2. This scenario sums up the level of competition on Portobello Road. You have so many vendors, most selling the same exact items, but the prices always seem to vary. Since there is a vast amount of competition, vendors have to undercut the vendor from up the street in order to sell their product. The goal for these vendors is to clear out as much of their products they have by the end of the day while still making a decent profit. As there are many vendors selling identical items at similar prices, some of the vendors decide to take blow in their sales. The two different strategies in play between the vendors are price skimming and penetration. Vendors will aim to sell a high volume of merchandise, by lowering their prices, rather than trying to increase their sales margin only to have their merchandise collect dust all day. There is always the possibility for vendors, within close proximity of each other, to collaborate to set prices high in order to maximize on sales profits. This is an example of price fixing and it is illegal. In the corporate world this collaboration would be punished. However I do not think that there is much regulation of prices on Portobello Road. If vendors, that have agreed to collaborate on a certain price, decide that they no long want to participate and lower their prices; (undercutting their competitors) there is nothing that the other vendors can do but lower their prices as well. Because price fixing is illegal, there is no way the other vendors can report any unwilling participants of their cohorts as their activities were illegal in the first place.Price fixing could be another example for why prices for similar products vary so much on Portobello Road, but in the end it all spurs from competition.
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