Electronic commerce is an increasingly popular way of conducting business and selling items to customers. Customers are able to efficiently identify and purchase a wide variety of items, including both goods and services, over computer networks, including the Internet. The same goods and services can be offered by multiple sellers, each with its own conditions of sales e.g., taxes, shipping charges, promotions, rebates, etc.), allowing a customer to quickly and easily select an item from a given seller with the desired sales conditions.
One problem commonly encountered by such sellers is an inability to effectively price items to maximize profits and manage inventory such that each item is sold at an optimum profitable price. Pricing strategies employed by some sellers often lead to losses and inventory outages because they make their pricing strategy dependent on the pricing of another seller. For example, some sellers set their own price by using a competitor's price and then subtracting, e.g., 10%. Each seller often manually adjusts the price under such a pricing strategy hundreds or thousands of a time in every day. And since this strategy depends on the actions of another seller, it can lead to losses and inventory problems as prices decrease because each successive seller is undercutting the next. Indeed, a situation could develop where two competing sellers make their pricing strategies depend on each other and conceivably, the prices could be driven below cost and cause losses for both sellers.
Nor do such pricing strategies capture the actual price at which a customer would purchase an item. Since these pricing strategies focus on competitors, they do not account for any customer reaction to the price or any customer reaction to the item that is for sale. Thus, no idea exists as to whether the customer would pay more or less for the item. So some profit is lost in certain instances because the customer might pay more for an item. While in other instances, sales are lost because the customer thinks the price is too high.
There exist other problems that can be encountered by sellers in a network-based environment. Another problem is that many pricing strategies and methods are cumbersome and typically require manual input and effort to monitor the information about any given item in a timely manner. It is also not unusual for a seller to offer thousands of items at any given time, and adjusting the price for each one requires expensive time and manual effort. Such problems are compounded because new sellers are offering products via network-based sites at an increasing pace.