Apple's Bait-and-Wait Pricing Strategy Creates Opportunities for Honest Entrepreneurs, Called "Scalpers" by Late-Comers
March 21, 2011
What is a person who offers to work for less than union strikers are willing to work for? If you are a union member, he is called a "scab." If you are a customer, he is a beneficiary.
What is a person called who buys low and sells high on capital markets? An entrepreneur.
What is a person called who buys a scarce item at the listed price and sells it higher at a free market price? If you are someone who got to the store too late to buy it, you call him a scalper. If you want to buy one at a price higher than the listed price, you call him a seller.
Recently, Steve Jobs announced that Apple would sell the new iPad2 at the same price as the iPad1. Apple cannot actually do this. The company ran out of them within hours. The delay time for online ordering is officially said to be 4-5 weeks.
The price was fake. It was "same price as before, plus a month."
Why did Jobs do this? To forestall the competing tablet products. The strategy has worked. Reviewers all noted that the iPad2 is more advanced technically than any of the competing tablets, and it is cheaper.
Is it cheaper? Not if you don't want to wait. The price is fake. This is not bait and switch. It's bait and wait.
Apple limits purchases to two per order.
That tells us that Apple self-consciously adopted bait and wait. The company adopted a policy of limited sales to any customer. That is rationing by standing in line.
You can allocate by price or ration by time. Apple rationed by time.
That is what the Soviet Union did, too. It made people with rubles line up. If someone had Western currency, he could buy all he wanted in special stores. The prices in ruble stores were fake. The prices in foreign currency stores were real.
This analysis is basic economic theory. It does not register on some outraged journalists. They wrote in the New York Post, which was reprinted in Wired: iPad cads scalping buyers -- Demanding $2,000 .
They began with this remark: "If only there were an app to nail black-market extortionists." Ah, yes: extortionists. What are extotionists? People who offer to sell something.
They demand. What happens if you say no? They go away. Or maybe ask for less. This is called negotiating. The horror!
A cutthroat Asian group has set its crosshairs on the flagship Apple store on Fifth Avenue at 59th -- scoring nearly every iPad 2 it can get its hands since the hot gizmo went on sale last week, to re-peddle at exorbitant prices here and in China.
Ah, those wily Asians with their hammers and tongs, which they use to cut people's throats!
What is an "exorbitant" price? A price that journalists prefer not to pay.
The illicit, highly orchestrated scheme was in full gear yesterday, with a ringleader doling out massive wads of $100 bills to about five cohorts.
Illicit? You mean illegal? No, it's not illegal. Well, then, what is it? Profitable. The highly orchestrated scheme supplies fake-priced items to people who were willing to pay more to Apple, but Apple adopted bait and wait to smash their competitors in the media, which has worked like a charm.
The sidekicks then went up and down a line of about 200 Asians outside the store and around the corner, handing out the money. GIGA BUCKS: Scalpers offer the iPad 2 for a more than 100 percent markup near the Fifth Avenue Apple Store yesterday.
What with all those cohorts and sidekicks, who can beat those wily Asians?
You say you could have, but you did not spot the opportunity? Me, too. What are we? Not so wily almond-eyed shoppers.
The scammers in line then went inside and bought iPad 2's -- wiping out the store within minutes.
Wiping out the store! How? Buy paying the listed price. I mean, this is Pearl Harbor stuff!
"We buy from here, then sell," one of the organizers gloated outside the store, standing near one of several bulging, oversized shopping bags filled with the hot devices.
Can you imagine the mendacity? They buy, then sell. There ought to be a law!
"The ones we bought today are already on their way to China," where they haven't gone on sale yet, said the boss. "It's been pretty crazy."
Adopt bait and wait, and things get crazy. Listed prices then allocate to those with a plan -- all those wily Asians.
(By the way, had they been Jews, they would not have been described as wily.)
An Apple worker inside the store said he didn't like what was going on -- but he couldn't do much about it."Listen, we all know what's going on here. I find it sad and disgusting," the worker said. "These people are preventing ordinary folks from getting their hands on an iPad."
Disgusting. Hurting ordinary folks. You know: late-comers who believed Steve Jobs.
A legitimate would-be customer said she's been to the store three times since Friday -- only to be thwarted by the creeps.
What is a "legitimate" customer? Someone who got to the store late.
What is a "creep"? An Asian who got there early.
"I walked right up to the guy with all the bags and said, 'Shame on you,' " said the woman, a Manhattan event planner who asked that her name not be used for fear she would be blackballed by the store and never get her iPad 2."He just laughed at me," she said.
When you say economically silly things, people may laugh at you. Especially a wily Asian who is about to make 3 to one on Apple's bait and wait.
"I talked to the manager at the store. I said, 'They're dealing them right now upstairs on private property.' . . . They said, 'There's nothing we can do.' "
There was surely nothing he could do about Apple's policy of bait and wait. But he did not mention Apple's marketing strategy.
Apple did not return calls for comment.
So, the reporter had to wait. He decided not to wait. He had a deadline to meet.
Reporters dare not adopt bait and wait with editors.
If you think the level of economic ignorance among journalists cannot sink any lower, just wait.