Blizzards, Snow Shovels, and Fairness in Pricing
With the recent blizzard dumping two feet of snow on the District of Columbia, I called an old friend to check in on her. Perhaps due to my vocation, she steered the conversation towards the frustration she was feeling from a recent visit to her local hardware store. The District and its residents rarely have to deal with significant snow. Thus, the hardware store was full of people buying snow removal items ahead of the impending storm. Complaining about her total bill, my friend felt that the store owner had raised the price of snow shovels.
Our discussion reminded me of a passage that I wrote in The Art of Pricing on fairness and pricing. Consider the predicament faced by a hardware store owner with a limited stock of snow shovels. With a heavy snowstorm expected tomorrow morning, the owner knows that the shovels will quickly sell out. This leads to several ethical questions:
Is it fair to the storeowner (and late rising customers) to maintain prices and immediately sell out to those who line up at 7 AM?
If it is fair to raise shovel prices, by how much should prices be raised? 20%, 50%, 100%, 200%, or greater than 200%?
Would you – as a customer - “hold it against” the store owner for raising prices? Would you feel ripped off?
Now let’s take relationship out of the equation. Suppose that you have an extra 25 shovels in your attic and decide to sell them on a street corner. How would you set prices?
I would love to hear your thoughts on this issue. Fairness and pricing is a delicate issue and managers are often hesitant to set a price that is fair to them, their company, and its stockholders.
Readers' Comments on This Blog Entry
It is all about supply and demand. I lived in a hurricane area and hardware stores were charging $20 for plywood. I would have paid more but that was what he was charging. Yes I felt gouged for hte product. If you dont want to pay for it is is your choice.
They would of kept the price the same if they could of gotten more shovels, but probley had a limited amount. So raising the prices becase of supply was okay
The airlines increase their prices around spring breaks and holidays. Same concept. Good points! Steven MBA student at Babson College
I would not feel ripped off by somebody selling shovels on a street corner. I would definitely feel ripped off by my local hardware store. A lot of people have very close releationships with the local hardware store and this would be a violation of their "community relationship".