From Monday's Wall Street Journal:
Why can't Internet retailers be more like airlines?
Airlines have long known that business travelers will pay higher fares in return for maximum booking flexibility, and that leisure travelers are willing to give up some flexibility in order to pay less.
Recognizing and balancing these differences helps the carriers fill their planes to capacity while bringing in significantly more revenue than they would if seats were sold on a first-come, first-served basis.
The lesson for e-tailers: They, too, can reap rewards from managing demand -- in their case, by segmenting customers according to how they want their goods delivered. People who shop online can differ greatly in what they're willing to pay for delivery, and how flexible they can be on the time and date, when they have to be home to receive the package. If e-tailers adjust their fees and delivery options accordingly, they can not only increase revenue but also efficiency.
I sure hope retailers don’t try to learn anything from airlines--studies show that e-retailers do a much better job satisfying customers than airlines do. The business models and market considerations for airlines and retailers are miles apart! For one thing, competition is much fiercer in the retail industry. For another, retail consumers won’t put up with the price on each product changing every day. The supply/demand model on airlines tickets may work (because we don’t have many other choices and because most airlines do it whether we like it or not) but I would not expect it to work in the competitive world of online retail.
Now, as for segmenting on delivery preferences--that sounds like what most retailers do today: charge for shipping and vary shipping costs according to how flexible the customer can be on delivery date.
But actually, isn't it time that retailers thought a little harder even about that standard practice? What is the real cost (not the accounting cost) of delivery? With all the cost savings of web (compared to store) to the retailer itself, maybe the value of a consistent price across channels would be offset by the loss of revenue from shipping charges? Time will tell, but something to think about.
My suggestion to online retailers: don’t try to learn from airlines! The airline industry sure hasn’t had much success lately.
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