Quote:
Originally Posted by fjtorres
Some governments feel the need to regulate the pricing of "essential" products. It is not universal even in those states.
"Dumping" is the sale of products below manufacturing costs across national boundaries. It is only deemed illegal if it harms local producers.
Otherwise, selling below cost happens all the time and is called "clearance", "fire" sales, or just plain "doorbusters". Check the thread on Sony reader pricing at Target for a perfect example.
A better example of what Amazon does can be found in supermarket weekly fliers: they are loaded with loss-leader sale items intended to draw in traffic and customers that will then buy other, regular-priced, items. It is called "basket pricing" because, while the supermarket may lose money on the sale of the discounted items, they make it back on the rest of the purchases in the shopping basket. Perfectly legal and standard practice in volume-based retailing.
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Clearance and discontinued items are exempted along with "going out of business" sales. Although, the state monitors abuses in the latter.
And the loss leaders in the stores are not necessarily below cost. The markup along the chain is incredible. Do you really think it cost GM $4.00 to produce a box of cheerios? Compare the brand name costs with generic. I worked in retail while in college and no loss leaders we sold were below cost except for the store brand free item coupon.
Trick is we really dont know what the costs are for most things and it isnt important. The industry is self-policing. Abuses are quickly reported to the authorities. Notice how fast Amazon's competitors and publishers reacted to Amazon's ebook price structure which was reportedly below cost.