Re: Re[2]: Pricing Strategies, was directories

Richard Layman (rlayman@cap.gwu.edu)
Fri, 9 Dec 1994 10:25:08 -0800

Because digital toilet paper doesn't get the job done, you're right it has
to be shipped to the recipient. But it adds to the manufacturers cost
significantly if they have to start shipping house size amounts of it,
rather than truckloads or traincar loads to distribution facilities.
There is still some sense in going to Staples from a suppliers standpoint
as well as a individual one -- one transaction instead of many.... one
shipment received instead of many.

With telemarketing now, at least for the significant consumer oriented
companies you aren't paying for the call, they are. Yes. They will save
money if we call them via the Web. But that still doesn't affect the most
significant part of the transaction cost -- cost of finished goods, etc.

I guess for the paper I'll be writing I'll seek out a breakdown of the
costs of a mail order transaction according to cost of goods sold,
inventory and warehousing, order taking, fullfillment/shipping, etc.

I don't know retail, maybe Bo does, but as I said before, the most
significant cost of a retail transaction, at least above a certain amount,
isn't the cost of conducting it. Internet transaction processing won't
cut those costs. If people are building interest in electronic commerce
by stating it will result in big cost reductions, then we're building them
up for a fall.

I don't think that taking everything into account, it's easier to get
prices below category killer retail stores (Circuit City, Office Depot, etc.).

I agree that WWW/laptops aren't necessarily an improvement over tactile
catalogs. I do think that Web catalogs will be important. Especially
with regard to one thing I forgot to mention in my earlier post -- the
fewer catalogs a company can mail, because of WWW presence, the greater
reduction in marketing costs. That's where there might be significant
savings over time, that can be passed on in lower prices.

Richard Layman
Computer Television
rlayman@cap.gwu.edu