Micro pricing behavior and competition effect in man-made festivals by e-commerce enterprises

ZHANG Hao1

(1.National Academy of Economic Strategy, Chinese Academy of Social Sciences 100028)

【Abstract】This paper analyzes the behavioral mechanism of pricing in sales promotion and the impact of competition among e-commerce enterprises. And empirical tests with price adjustment data about more than 4000 home appliances sold on the three online shops of JD, Suning and Gome are conducted. The results show that, in order to enhance the effect of concentrated promotion, these e-commerce enterprises always cut prices in shopping festivals and raise prices otherwise, and adopt a staggered high-low price adjustment method. The products involved in the competition among multiple e-commerce enterprises generally see a bigger price reduction in the centralized promotion period, but the prices of these goods will be raised to a higher level than those of the goods sold without competition in non-shopping festival period. The reason is that competition brings risk to the upwards price adjustment of the staggered method, and increasing the frequency of price adjustment will adversely affect its function of affecting customers’ purchasing psychology, so the prices of products involved in competition are raised by a relatively wide margin in non-shopping festival period. It can be seen that the e-commerce shopping festival is essentially the centralization of price competition based on consumer psychology guidance, but does not mean that consumers can get real benefits. In consideration of the long-term development of the industry, efforts should be made in reducing the activities that induce speculative consumption, and shifting the focus from price competition to the aspects such as improving quality and assisting innovation.

【Keywords】 e-commerce enterprises; centralized promotion; price adjustment; competition effect; micro-data;

【DOI】

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    Footnote

    [1]. ① Data of whole year sales are from China Top 100 Chain Retailers. [^Back]

    [2]. ② Strictly speaking, only JD and Tmall are “pure” e-commerce enterprises as they only run online. For retailers such as Suning and Gome who integrate online business and off-line business (O2O), their online platforms now are accessible for consumers to complete a series of purchase activities, such as searching, comparing prices, placing the order, and taking delivery of goods. Therefore, these O2O enterprises can be included in our observation as e-commerce enterprises who have brick-and-mortar stores. [^Back]

    [3]. ③ This will lead to the effect of price discrimination so as to possess consumer surplus to the maximum. [^Back]

    [4]. ④ Here “staggered high-low price adjustment” refers to price adjustment where a certain price adjustment (upwards or downwards) is opposite to previous price adjustment. This concept lays more focus on features of the process of price adjustment. “High-low pricing” as is mentioned above is possibly one of effects resulted from it. [^Back]

    [5]. ⑤ The third, the fourth and the fifth are respectively Guangzhou Vipshop Information Technology Co. Ltd., Apple Electronics Products Commerce (Beijing) Co. Ltd. and Xiaomi Technology Co. Ltd. [^Back]

    [6]. ⑥ For instance, this research differentiates “Haier” from its sub-brands such as “Leader” and “Casarte,” and “Gree” from its sub-brand “Kinghome.” [^Back]

    [7]. ⑦ Combined with the calculation in Table 7 in later part, it shows that price adjustment occurred when original price is equal to that of competitors accounts for 15% of the whole period and about 1/3 in promotional festivals. [^Back]

    [8]. ⑦ As price adjustment cycle is measured by times of price adjustment during a certain period of time. Duration of the period then will impose an effect upon the result and thus it is not possible to compare whole-year data and monthly data. [^Back]

    [9]. ⑨ With regard to the situation where the price is adjusted for many times in a day, it is impossible to confirm concrete time relations between price adjustment of an e-commerce enterprise and that of its competitors. Therefore, this research decides inter-relations among prices based on the final result of price adjustment of the day. [^Back]

    [10]. ⑩ Prices in June, September, November and February are lower than annual average and they are higher than annual average in other months. [^Back]

    [11]. ⑪ The maximum price can also occur in the process of staggered high-low price adjustment during centralized promotion periods. The ratio of centralized promotion period and that of average value are basically equivalent in the situation where prices remain on maximum level for some time. Measured by data of this research (excluding May when data are incomplete), total days of centralized promotion account for 11.38% of all days observed. During the days of centralized promotion, 736 of all 6390 cases (11.52%) are found with the maximum prices of the year and the prices last for three days or even longer. These maximum prices, in most cases, last till the end of promotional festivals. And thus they are viewed as cases of “normal times” in nature. [^Back]

    [12]. ⑫ It excludes samples of core explanatory variable (Cycle). These samples cannot be measured in that data interval available is not overlapped with months when prices are relatively lower. [^Back]

    [13]. ⑬ Based on calculation results of average monthly prices, it shows that the phenomenon is not found in November and February, the two months when prices are the lowest and competition is the most fierce. [^Back]

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This Article

ISSN:1002-8102

CN: 11-1166/F

Vol 39, No. 11, Pages 128-144

November 2018

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Article Outline

Abstract

  • 1 Introduction
  • 2 Analysis of pricing mechanism of e-commerce enterprises: promotional behavior and sales competition
  • 3 Data collection and processing
  • 4 Process and result of empirical analysis
  • 5 Conclusions and implications
  • Footnote

    References