Should eCommerce Price affect retail price

[williammgary1]

First off I think this is stupid to have to set a poll up for but lets begin shall we?

Currently in my game in a release version I have a subsidiary company that makes software for Operating Systems. My company entered the Operating System market and begin producing first party productivity and security software in order to market the OS to the enterprise. After gaining market share the subsidiary company begin porting their existing line of software products to our OS.

My company has NO DESIRE to make any additional lines of software. We entered discussions with the subsidiary company to resell their software in our retail specialty computer stores (60 stores) as a cross-promotional effort and to utilize some free self space. The subsidiary had no retail presence of the software products they make for our OS.

The Issue

When we begin purchasing their software products and placing them into our retail stores we were locked (by design) into a retail price agreement to sell at the same price the retail company sells the product for in its eCommerce store obviously this resulted in carrying the software in the stores to be unprofitable due to shipping costs and the difference in operating expenses (such a labor for purchasing unit and sales unit)

So I ask of you, fellow titans of industry, should a eCommerce price result in a retail store being locked into a price agreement?



IRL Example
" Stories about price cuts well beyond what is commercially viable, compromising the pricing for specialty resellers, are common. The script is well-known, the crisis starts when Amazon demands lower prices from the brand, and the specialty retailers revolt and boycott the brand's products because their wholesale price can't match Amazon's retail price. That leads to rapid revenue shrinkage for the brand and possible liquidity problems. "
Source: https://seekingalpha.com/article/423433 ... t-overdone

[Berbe]

Your real-world example and question seem to drift from online vs retail product to own vs third-party.

Indeed, there is a tying mechanism which is logical to have between an online version and its retail counterpart: being the same product, they would need to sell either at the same margin or at the same price on the same sector, depending on the seller's strategy.
One could say: not at the same price, since as you noted, retail has incompressible overhead expenses. Retail addresses customers who will prefer having tangible assets for their own reasons, maybe are there more strings attached too (longer/better support, etc.)
Someone else could say: well, it's the same product, hence the same content, how could it be that it is sold at different prices?
I guess Microsoft used the first logic for their online vs retail license keys, but the difference in price was low compared to the original price (thus a low percentage of it), was justified by CD/DVD burn, and the customer ended up having an official burn of the product instead having to it himself.
This is an internal problem about price/margin.

The other dilemna, which is I think the one you are invoking here, is the classic own product vs third-party.
Price agreement exists for a reason, and a competitor like Amazon selling your software ends up undercutting your margin until they are too thin to be viable. Considering potential size difference (which is the case), Amazon was using its enormous capacity at 'working' with razor-thin margins or even at a loss to increase customers basis. This is their way of functioning: unfair competition & unsustainable growth-centric business model. Thus, yes, being able to control the price your competitor will sell your products at is essential for your own sake.
Technically, a subsidiary is seen as third-party with special privileges (having special/exclusive access to internal products or friendly transactions for cash injection or technology knowledge purposes for example) but it not the same entity. A merger will be required to totally remove borders, which is logical.

Now that all that has been said, I will clarify the different ways I interpret your question with associated answers:

• Online & retail software from the same owner should have their respective price freely set. Depends on the era, but more Internet-advanced the consumer base is, thinner the price difference shall be.
  For convenience, it could be possible to offer the option to 'fix the margin', that is ensure both products are sold for the same profit, the game automatically making the price varying depending on overhead retail expenses (but well since the game is not simulating individual consumer behaviour sometims preferring to buy something closer but more expensive rather than crossing the city to save 20 cents, it could be a game-breaker).
• Third-party products shall always enter a price agreement. The game currently only triggers it when the producer is also selling in the same sector to avoid undercutting its margins, however that behaviour is questionable: letting a competitor freely adopt a huge market share in a sector where you are absent will reduce your ability to set a foot on it later on, with your very own product.
  Remember subsidiaries are third-party in this case.

[megapolis]

William, drop your RPG bull***t. It restricts field of view on the problem.
As a result, I disagree with your poll goal and answer "Yes".
I see a broader problem here and don't want to support incomplete solution.

[williammgary1]

William, drop your RPG bull***t. It restricts field of view on the problem.
As a result, I disagree with your poll goal and answer "Yes".
I see a broader problem here and don't want to support incomplete solution.

I'm a little confused. In the context (screenshot) of why this was proposed you seem to agree but here you disagree can you please explain?

In my company I'm able to set a price for say Eggs and sell them in ecommerce (doesn't sell but just follow my logic) at $1.00 but in East Enterprise in a retail store I can sell Eggs for $1.35 with no issue. If I were to open up resell of Eggs I wouldn't want a reseller in Rome to be locked into a price agreement of selling Eggs at $1.00 because that's the price I have set for ecommerce.


Apparently there's a number of issues with the game that I don't feel has been explained about why this shouldn't be in the way I'm thinking.

[Berbe]

Remember online business is a thing of the Digital Age DLC, which introduces new features which seem to somewhat conflict with base game mechanisms. From what I understand so far, quick 'n dirty solutions have been adopted by the developers to circumvent difficulties leading to less-than-ideal game-breaking situations like the one you describe.
I haven't tried to start a game with that DLC, and the more I read about it, the less I wish to...

IMHO, the following shall be adopted:

• Move this thread to the DIgital Age DLC section of the forum, not Release version which is a general one for base game mechanics
• Deactivate Digital Age DLC if its mechanisms fail and push for them being corrected in the dedicated section of the forum

[williammgary1]

Remember online business is a thing of the Digital Age DLC, which introduces new features which seem to somewhat conflict with base game mechanisms. From what I understand so far, quick 'n dirty solutions have been adopted by the developers to circumvent difficulties leading to less-than-ideal game-breaking situations like the one you describe.
I haven't tried to start a game with that DLC, and the more I read about it, the less I wish to...

IMHO, the following shall be adopted:

• Move this thread to the DIgital Age DLC section of the forum, not Release version which is a general one for base game mechanics
• Deactivate Digital Age DLC if its mechanisms fail and push for them being corrected in the dedicated section of the forum

Good proposals besides deactivating Digital Age .

Digital Age actually isn't that bad just seems like the developers/beta testers didn't fully appreciate of the challenges that would arise. Like right now I have tons of alerts about new tech I have to go and check on because my staff loyalty may be too low to the point that I can't fully focus on managing the company with no way (to automatic) maybe a CTO but I don't think the CTO gained the skills to manage staff loyalty.

[megapolis]

William, drop your RPG bull***t. It restricts field of view on the problem.
As a result, I disagree with your poll goal and answer "Yes".
I see a broader problem here and don't want to support incomplete solution.

I'm a little confused. In the context (screenshot) of why this was proposed you seem to agree but here you disagree can you please explain?

In my company I'm able to set a price for say Eggs and sell them in ecommerce (doesn't sell but just follow my logic) at $1.00 but in East Enterprise in a retail store I can sell Eggs for $1.35 with no issue. If I were to open up resell of Eggs I wouldn't want a reseller in Rome to be locked into a price agreement of selling Eggs at $1.00 because that's the price I have set for ecommerce.


Apparently there's a number of issues with the game that I don't feel has been explained about why this shouldn't be in the way I'm thinking.

There's nothing wrong here. I agree that there is a problem but disagree with proposed solution. I described a broader issue not bound by your roleplay. Knowing that your personal roleplay is your only concern, I don't agree with solutions that suit only your roleplay needs.

[williammgary1]

William, drop your RPG bull***t. It restricts field of view on the problem.
As a result, I disagree with your poll goal and answer "Yes".
I see a broader problem here and don't want to support incomplete solution.

I'm a little confused. In the context (screenshot) of why this was proposed you seem to agree but here you disagree can you please explain?

In my company I'm able to set a price for say Eggs and sell them in ecommerce (doesn't sell but just follow my logic) at $1.00 but in East Enterprise in a retail store I can sell Eggs for $1.35 with no issue. If I were to open up resell of Eggs I wouldn't want a reseller in Rome to be locked into a price agreement of selling Eggs at $1.00 because that's the price I have set for ecommerce.


Apparently there's a number of issues with the game that I don't feel has been explained about why this shouldn't be in the way I'm thinking.

There's nothing wrong here. I agree that there is a problem but disagree with proposed solution. I described a broader issue not bound by your roleplay. Knowing that your personal roleplay is your only concern, I don't agree with solutions that suit only your roleplay needs.

Ah, you just being an ass I see. Well propose your solution probably will help me and my role play.