PREDATORY PRICING – ALL YOU SHOULD KNOW

December 8, 2014

A SHORT ESSAY ON PREDATORY PRICING

Hello, friends from last few days Indian e-commerce market has shown remarkable growth by fulfilling customer demands upto satisfaction level.With new market players coming in to the arena cmpetition is increasing day by day.To remain on top these market player are adopting new strategies,plans and tactics everyday.One of those techniques is “PREDATORY PRICING”.Read this article to know the concept.

1. OVERVIEW-

Gone are the days of when there used to be a few number of market players in the country.Communication and information transfer facility werenot sophisticated at that time.So people were less informed about the products,demandwas not that high and ultimately there was less competition among the market players.

2. WHAT “HAPPENED-NEXT”?

In the last few decades India has witnessed rapid development especially in the IT sector.Modern technology enabled men to access information almost anytime and from everywhere.Thisrevolution in IT world provided a fertile field to new market-players to raise their heads.They began to showcase their products and services to customers through digital market and internet.Thus people became aware of the products of different companies.As there were numerous product options avilable in market,customers got chances to compare them that suits best to their budget.

3. CONCEPT OF PREDATORY PRICING-

Therefore competition among the market players became intense.This resulted into a price war.To cement their place in market and eleminate competitors they started offering services/products at much lower price than the original cost-price(ofcourse they make losses).This strategy is known as ‘Predatory pricing’.In a bid to survive the other players are forced to bringdown the price and suffer losses too.As a result market as a whole makes losses and customers get benfitted(get goods cheaply).

4.IMPACT OF PREDATORY PRICING-

But actually these benefits and losses are temporary.How?When the predator makes loss others are forced to make losses too.In this process the smaller players are thrown out of the competition and only big pocket players exist.They adopt this strategy for a very short period.But in long term the firm or company starts exploiting the same customers by raising the prices(to meet previous losses) and establishes pvt monopoly.This is known as recoupment.

5. EXAMPLE OF PREDATORY PRICING IN INDIA-

In the last week of oct India’s leading e-retailer Flipkart claimed to have raised $100mn in 1hr through its ‘Big billion day’ scheme.Branded products were offered at throw away prices.Reacting to this many brick and mortar retail stores complained against(before CCI) it.Well it(their complaint) seems legit.Because if the e-retailers continue to offer at this rate the physical retail outlets would cease to exist.

6.CONCLUSION-

Anyways our job is not to decide who is wrong or write.Let CCI(Competitioncommission off India) decide this.Till then lets hope for a candid solution that favours both online and offline players without violating the social right ‘Right to grow’.

We have tried to represent ‘Predatory Pricing’ in layman language and hope this long decription would have helped you understanding the concept.

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Last Updated On: December 10th, 2014

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