2011년 11월 29일 화요일

Menu cost and the Internet

According to investopedia.com, menu cost is an economic term used to describe the cost incurred by firms in order to change their prices. How expensive it is to change prices depends on the type of firm. For example, it may be necessary to reprint menus, update price lists or retag merchandise on the shelf. Even when there are few apparent costs to changing prices, changing prices may make customers apprehensive about buying at a given price, resulting in a menu cost of lost sales.

Read more: http://www.investopedia.com/terms/m/menu-costs.asp#ixzz1fGHxRuqO

There are at least 360 categorizes of products at Walmart, and each category has at least 5 subcategories. In short, Walmart are selling numerous kinds of products. How long it will cost and take to change all kinds of products. Obviously, very much, and very long. 

For off-line retail stores, menu cost is usually very expensive, as a result, prices of their products do not change often. How about online stores? Menu cost might be close to Zero.

What does this mean to consumer behavior?
How does the internet change consumers behavior by reducing menu cost?

More analysis will be post soon!  

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