Online tech retailer Kogan has unveiled a new pricing model which allows shoppers to buy certain products at a cheaper price early in the manufacturing cycle, with the price tag rising every second until they reach the shelves.
The concept, which Kogan calls “Live Price”, has been launched on the company’s British site and will expand into Australia soon.
“Live Price lets shoppers join them early on in the production cycle. Join early, and you’ll be given a huge discount. Hesitate, and you’ll see the price slowly start to rise, until it reaches the full retail price that everyone access,” he said, via a webcast this morning.
“We’re going to eliminate the hidden cost of finance. We’re going see that you can buy your product at any stage of the cycle. The earlier you buy, the more you are rewarded.”
One LED television was pointed out as an example: right now, that television costs 330 pounds and is at the start of its manufacturing cycle. A user could buy that television now, and wait until January to receive it, or they could wait until January and buy it at the full cost of 399 pounds.
“The price is going to be live and constantly ticking,” he says. “Back in the olden days, you paid the same price for a product no matter what stage it was in. The price remained the same. But this is going to change all of that.”
Typical of Kogan’s approach to bricks-and-mortar, he took the opportunity to slam traditional retailers, saying that “this isn’t possible through a high-street retailer… we’re going to see a lot more businesses employ this concept”.
“There are a lot of high street retailers wasting a lot of money screaming at consumers, but on the internet you can take a much more cost-effective solution. That’s the whole aim of this, to bring down prices.”
“This concept is going to change the world of retail. Our aim is to make consumer electronics more affordable, and we think this is going to force companies to innovate and change their business.”
But despite the company’s insistence that the Live Price concept will change retail forever, Kogan refused to release the details of the algorithm, saying that “doing so would be like KFC revealing their 11 secret herbs and spices”.
“The transparency is all about the prices. This is what we’re doing and we’re allowing consumers to have the best price possible.”
He also dodged criticism of the Live Price model being an odd strategy when technology usually depreciates, saying that “certainly technology is a depreciating item… but even so, it’s a much better savings and feel free to compare”.
Retail Doctor chief executive Brian Walker says the concept is an interesting one, and raises questions about the modern supply line, but also warns that such a concept may have limited appeal.
“This idea says a couple of things to me. Firstly, the classic supply channel as we know it is getting blurrier, and this is an interesting concept that raises questions about that. But I don’t know if this product is going to have mass appeal.”
“For instance, I don’t know if there would be widespread demand for purchasing a television set that is only part-way through the production process. But it does show the supply channel is changing and the concept is interesting.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
