Laptop showing a huge discountIn brick-and-mortar stores, rarely do you see the prices drastically change unless there are seasonal items available or there are markdowns. Additional expenses need to be considered before changing those prices on shelves, after all. But when it comes to online stores, there are no price labels to change, and there is an unsteady stream of buyers to cater to.

Enter Dynamic Pricing

Purchases done over the internet are hassle-free. A customer goes to their favorite store or searches for the item they want on Google, adds as many items as they want to their online cart, and proceeds to checkout. Depending on where they are buying, there might be some promotions and discounts in place. It’s a straightforward enough process that many have turned to online shopping to make their lives easier.

That is, until the spotlight was put on dynamic pricing. This puts the principle of supply and demand in place. What this means is that when the demand is high, prices tend to surge if the supply is low. An item you bought online could cost higher the next day after it has been featured in a magazine and is surrounded with hype. A brand that uses price tracking to observe their competitors may also change their prices accordingly.

Surge Pricing

You may have been familiar with Uber’s price surge. The price you pay for a trip depends on the distance and the surge. Uber claims that the surge in price is to attract more drivers into the area to cater to the demand. Amazon may be using the same model in their prices, as revealed in CBS News. To explain away the changes in prices, Amazon mentioned that prices “fluctuate all the time.” This fluctuation is something you don’t see so often in a physical store, but in the online world, it’s the way to go.

READ  The Seasonality of Market Prices

Dynamic pricing makes sense because of the supply and demand. However, it’s not as easy to accept when you see the prices going higher every time you check an item but rarely see it go down.