Question, Why does one company (company A) sell a porn movie for $24.95, and another company (company B) sell same movie for $19.95, and many other companies selling for $21.95, $18.95, etc. Why isn't the price the same for same movie? Is one company just greedier than others or Is there a legitimate reason behind such wide variety of prices for same video?? Not that I'm bitching about lower prices, lol, But it would make sense to me If I was selling "Blowjob Bitches #20" for $24.95, And found out competition was selling it for $18.95, I'd drop my price to $18.95, or I'd expect to be outsold by my competitors, As most consumers buy for the lower price.
The smart-ass answer to your "Blowjob Bitches #20" scenario is that dropping your price to $18.95 would encourage the other guy to drop his price to $16 to maintain his advantage, and so on. Pretty soon it's not worth anyone's while to stock "Blowjob Bitches #20", and shortly after that, the studio decides that it can't sell "Blowjob Bitches #21" enough to cover the cost of making it, and so on,,,,
Taking your example one step further (and being more serious about
it), let's say that the wholesale cost of "BJB #20" is $12.50. (I'm
assuming both you and your competitor are internet retailers) Your
competitor's gross margin is the following $18.95(price) -
$12.50(cost) - $3.85 (Priority Mail shipping) - $.56 (credit card
processing fee) = $2.04
Well, not so fast. Out of that 10.4% you still have to pay:
shipping from the distributor to you
So pricing is just a fiendishly difficult balancing act between the market, competitors, costs and the margin you need to make to stay in business long term.
Hope this helps.
In some cases, the cost can be driven by the level of customer service that the store provides. Some online stores keep a higher level of inventory onhand, which allows them to immediately ship out your order. Other stores maintain a lower level of inventory which can create backorder delays if they run out of a title that you are looking for. Still other stores carry no inventory at all. These stores (mostly based in Southern California) will order your disc from the distributor as soon as they receive your order. Their proximity to the major companies allows them to get these orders more quickly than another store might get their order, but there is still always a delay in shipping an order.
Maintaining high levels of inventory is very expensive and often results in excess inventory. These stores might have a great sale in order to get rid of excess inventory, but that is usually at a loss.
So, essentially part of the extra costs at some of the higher priced stores is to cover the additional expense of maintaining that extra inventory that allows them to keep backorders to a minimum. The stores with a lower level of inventory don't take as much of a risk, so they can pass on some of the savings. The stores that don't stock any inventory take on zero risk, because they don't buy the disc until a customer orders it, so they can pass along even greater savings.(this is the same reason that the mainstream DVD retailers offer discounts for pre-orders, they assume no risk of excess inventory when they purchase the DVD that they are going to sell to you.