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Dreamer:
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Amos Kiche
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Dream Location:
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Iowa City,
IA
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Contest Month:
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Statewide September 2010
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Dream Rank:
18
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Number of Votes:
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3
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What is a Price Exchange Market?
A price exchange market (PXM) refers to a price information exchange network which allows buyers to take advantage of bundling different commodity prices to minimize their expenditure at a particular time as sellers try to confuse them with different price markups for similar goods. A price exchange market resembles a stock exchange market but instead of trading stocks consumers trade store specific bundles and prices at different times to save some money. The market can determine whether it is cheaper to use one or more bundles of commodities from one or more than one store to make a saving. The savings are obtained by trading different product prices listed by sellers. Stores often change prices of the products they sell and tend to exploit consumer limited price information. If same products have different prices at different stores a consumer may be lucky by chance to bring home a basket of goods at the minimal cost. In a world of perfect competition, the market or sellers will keep a unit price exchange rate for different commodity bundles, but that is not the case. Because stores sell many products they know that buyers have imperfect information on current prices because it is costly to obtain current prices for many products. Sellers use pricing as a strategy to increase their market share or profits. Temporary price discounts and coupons are intended to increase sales and profit. In the near future, we will see local price exchange markets broadcast on TV and other media.
Consumers filling shopping carts from a website will also be able to rank local stores according to a minimum expenditure criterion electronically. Currently many households use kitchen table shopping lists, but with limited information on product prices to help estimate the cost and many of these households would save some money if they consider price differentials across different stores in a vicinity. At Amazon or Ebay, sellers can be ranked according to their prices, but a buyer must search different stores even for one product to buy at the minimum price. This procedure becomes complex for local shopping involving many products. Competitive pricing can only lead to savings when consumers have better information on commodity prices. Consumers are already filling electronic shopping carts from designated suppliers of certain products, and it is easy to just pick one supplier if they are interested in the cheapest store in the case of one product. But when they are buying more than one commodity, they will have to construct and compare different spreadsheets in order to arrive at the minimum expenditure supplier at that time.
Why seek the $1000 Prize
I want to use the money to complete a preliminary market research on buyer behavior, commodity price differences and changes,the application and portability of bar-code price data and potential periodical savings. I also want to visit a few local information technology and software businesses to evaluate existing internet based capacity for such a business. Information obtained from this research will be useful towards launching a price exchange market(PXM) based on a sound business plan.
What are the expected gains to buyers, sellers, PXM and the business sector?
To operate the PXM, we need a live digital data base of product prices from participating stores constructed from bar-code prices. A GPS software will provides Information on distances between consumers and different stores. But why would a consumer prefer to use such a system? Every month or for every basket of goods, consumers will save some money. Most consumers want to buy a product from the nearest least price store, and to insist on this rule a consumer will have to search for information on different prices and visit different stores to minimize the cost of shopping. This strategy costs more gas and time and the savings made from using such a strategy can be minimal. Even if price of different products are available from the store's web site, buyers will have to make their own spreadsheets to get to the cost saving store. This can be time consuming and it is for this reason why consumers tend to buy from a specific store overtime despite any savings that can be made by using alternative stores according to where it is cheapest to get a basket of goods.
Buyers and sellers will pay some fee, but consumers will still have sufficient savings to justify paying a service fee. Consumers will also accumulate information on the history of their purchases which can provide valuable data on their consumption behavior and shopping patterns and expenditure, which can be used to monitor their shopping behavior.
A corporation or research firm interested in a market survey or consumer behavior can sponsor a sample of consumers or pay participants who are willing to provide access to their data bases at a fee. Consumers hardly get paid for their information. Information on purchasing behavior can be merged with other surveys to conduct a series of studies. There will definitely be some demand for this kind of data. A buyer swipes an electronic card issued by PXM to make a purchase on an account and the information on purchases is entered automatically into an account. This card can even be integrated to a bank service for payment purposes.
Consumers using this system can take advantage of most of the price reductions and coupons and add to their savings. This system allows both sellers and buyers to exploit the attributes of advertisements and coupons at a cheaper cost compared to TV, radio and newspapers and magazines. If a businesses believes that PXM will wipe down sales and profit margins as consumers learn that their goods are relatively expensive, they may be reluctant to provide price data, but adopting this strategy requires collusion among competing stores. Once a few stores join the market, it will be in the interest of others to do so, otherwise as more consumers start using the PXM, a consumer will have to have another good reason to visit a store which does not broadcast prices. There will only be a few of such consumers exhibiting such store specific loyalty.
A business that participates in this program can take advantage of the web by operating customer delivery. Businesses like Hy-vee deliver foods and flowers to their customers. They can expand their delivery service to include regular shopping for customers who pick Hy-vee. A business taking the advantage of a home shopping network can provide a delivery service to households not intending to visit stores to do their shopping. Alternatively a third party contractor can be hired to deliver goods to these households by taking orders from households and doing their shopping using PXM.
Businesses who want to insist on imperfect information world by refusing to participate in a PXM are more likely to face a business loss in the long run. A PXM can create a competitive business atmosphere in Iowa and elsewhere leading to consumer savings, other information technology services, a genetic price bar-code center and job creation in Iowa. The PXM concept has wide applications in other industries and service occupations.
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