Since our model is quite different from anything out there today, thought it would be good time to give some tips on pricing your products on the fididel site.
fididel's strength lays in these five points:
1.) Sellers can sell to different people at different prices. Give us your real costs and we will sell to everyone above that price. (In economic terms, this is elasticity of demand for different pricing equilibriums)
2.) Sellers are able to turn inventory to more buyers. Unlike auctions, which have days before completion, inventory is able to be turned more often and to more buyers.
3.) Buyers have a better end user experience when shopping because they are engaged with both the seller (or fidideler) and the product. This leads to a higher rate in conversion of traffic to sales and quicker inventory turnover.
4.) Sellers are able to sell their products quickly , which previously were not able to be sold successfully online.
5.) fididel strives to provide sellers a new platform and opportunity to sell their goods and services, free of constraints and heavy handed policies.
So... lets evaluate these further.
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1.) Sellers can sell to different people at different prices. Give us your real costs and we will sell to anyone above that price. (Elasticity of demand for different pricing equilibriums)
Different people place different values on goods or services. For example, some people think a good milkshake is worth $5 or more, while other people think a milkshake is never worth more then $5.
The point is, most everyone has a different price point at which they are willing to buy the milkshake. (In economics, this phenomenon is an extension of the concept of elasticity of demand.)
The seller, on the other hand, has but one hard price point, which is their cost to get the product and sell it.
Lets graph this out:
As you can see, the equilibrium is the price where most buyers are willing to buy the highest number of milkshakes for the most profit to the seller. So, sellers price their goods at one price and they get, or produce, as many goods as needed to reach this equilibrium.
In the milkshake example, lets say the happy equilibrium for the seller would be to price his milkshake at $4.25.
This means anyone who's willing to pay more then $4.25 would happily buy this milkshake.
But, what about that guy who's willing to buy the milkshake for $4.00 but not $4.25?
Well, he can't buy it under the traditional pricing model since he can only buy it at $4.25 and he's not willing to pay that much.
BUT, what if it costs the seller $2.75 to make the milkshake and sell it?
That means the seller loses out on a $1.25, or roughly 40% margin, of potential revenue!
The seller deals with this loss in potential revenue because they cannot change the price for everyone without lowering the price down to the lowest price offered.
This is where fididel's strength comes in to play.
Because each transaction takes place privately through our negotiation platform, anyone who is willing to buy a milkshake for more then the seller's cost of $2.75 become possible customers.
This means the guy who would not pay more then $4.00, $3.50, or even $3.00, all become real customers and realized revenue instead of lost potential revenue!
This becomes even more significant when we consider the second strength of fididel, which is the ability to turn inventory.
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2.) Sellers are able to turn inventory to more buyers. Unlike auctions which have days before completion, inventory is able to be turn more often and to more buyers.
In continuing our milkshake example from above, sellers are now able to turn inventory to more buyers. Because seller's are now able to sell their milkshakes to people at $4.00, $3.50, or $3.00, they are able to increase their number of potential customers and thus increase the frequency of sales, which uses the sellers inventory. There are many benefits for both the buyer and seller to inventory turning more frequently.
Lets use the milkshake example again.
-Milkshakes are typically made with milk and ice cream. Well, because the seller has more customers, they are able to consistently use the inventory of milk and ice cream stored to produce milkshakes.
I don't know about you, but I know I'd prefer a milkshake with fresh ingredients than one with a carton of week old milk and a tub of month old ice cream! So, the quality of the goods tend to improve.
This is especially true with goods that expire. BUT, this is also true with things like basketball shoes and even video games because quality is something people perceive, and when it comes to new products, people perceive the newer to be better.
That's typically why the newest pair of basketball shoes or video games sell for retail at first, and six months later they've been reduced by 25 - 60% in price or more.
-Inventory turn means the seller's cash is not stuck in maintaining inventory and therefore is better able to manage their cash flow by turning their goods. Lets take the basketball shoes example.
If a newly released pair of basketball shoes costs the seller $55 dollars, and they can sell them for $100 then they stand to make $45 in profit from the sale.
6 months later however, when a newer model has been introduced, if they have to reduce the price to $75 to move the shoes, they stand to only make $20 in profit. Lets say a year and a half later, they have to sell the shoe at cost or below just to get some of their original money back. What is the real cost of the original $55 the seller used to keep this good in stock?
Its actually $55 + interest they could have made by buying things like government bonds. At today's rate, the $55 spent to buy the shoes, is actually worth around $57.80 two years later.
However, another reality sellers have to consider is inflation. Today's rate of inflation is typically ~2-3%. If we take the conservative 2% then their $55.00 is only worth $52.8 cents two years later! That means by holding onto this inventory, the seller has tied up their money from making profit or interest, and instead lost some of the value of their money because of the evils of inflation!
Had they sold the shoes for even their $55 cost one year after stocking them, they could have then turned around and stocked the newest pair of shoes that had the high 45% margin and demand the customer and seller were looking for!
This is the dilemma all retail businesses must consider when thinking about inventory. The above example doesn't even take into account how much the seller has to spend to advertise and store the product, which is not cheap either! Therefore, turning inventory, or the act of converting inventory back into cash is so critical for sellers to continue to make profits.
-More inventory turn leads to better cash flow, which in turn means new high margin inventory that customers want!
-The last advantage from high inventory turn is that the seller is able to get better pricing on their inventory by buying in bulk. (Economies of scale for those of you who like economics!)
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3.) Buyers have a better end user experience when shopping because they are engaged with both the seller and the product. This leads to a higher rate in conversion of traffic to sales.
When a buyer initiates a negotiation on a product, they engage the seller and the good by creating a connection to both. People see something and they want it. If they try negotiating for it, they're going to want it more because they will be more in touch with how they truly feel about buying the product.
This means people are more likely to buy the product, as the only reason they initiated the negotiation was because they have an interest in buying the product, and as they negotiate, they become more in touch with their desire for the product, resulting in more sales.
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4.) Sellers are able to sell their products, which previously were not able to be sold successfully online.
Since fididel empowers sellers to sell at different price points, goods that typically have their prices negotiated are now able to be sold online through our negotiation platform!
So businesses like car dealerships, art galleries, oriental rug galleries are able to sell online the way they have always done business!
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5.) fididel strives to provide sellers a new platform and opportunity to sell their goods and services, free of constraints and heavy handed policies.
fididel's goal is to empower buyers and sellers to participate in world commerce, free of heavy handed restrictions, policies and content. We believe that sellers should be free of burdensome policies that inhibit their abilities to sell, and that buyers must have absolute safety and comfort to buy. We believe in keeping things as simple as the user desires. We believe we can't succeed without our users succeeding, so we only believe in fees based on success.
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