why no discount for full payment purchases online?
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with zero-cosf EMI, these e-tailers are absorbing the interest component. why aren’t they willing to provide the same amount (as the interest component) as additional discount for customers who are willing to pay the full amount?
why this disparity? any idea what is this approach called in economics?
This is similar to mobile billing / charges – screwing postpaid customers with amount + gst while prepaid gets away with just the amount coupled with additional offers. Telecom companies are ready to absorb the tax component for prepaid guys, but want to screw postpaid ones who are guaranteed to pay them.
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Btw, telecom companies don’t absorb any tax for prepaid either. Have you EVER recharged your own phone? You should know it.
Postpaid means you’ve the capacity to pay more. So, they screw u over.
So true bro.
Postpaid = Milking cow. So they will milk you till dry Prepaid= user has choice.
Very good point, i think this should be raised to the top eCommerce companies…
Why are so many companies so interested in giving you free food?
I am waiting for DD to start the sandwich club.. instead of weekly malamaal we would have eat all you can..
Fundamentals
If more units of any product is sold, cost can be reduced as profits are maintained.
Banks approaches ecom sellers, saying we will increase your sales in multitudes of 10 or 100 or anything and will take commission. Seller agrees (refer fundamental). Bank increases the sale by giving customer option of emi.
Simplified version:
Seller sells 100 pieces a month. One piece of product profit margin is 2000. So total he earns is Rs 2 lakhs.
Now he accepts banker proposition.
Emi gets sale up to 500 pieces but bank takes rs1000 commission. So for one piece seller earns rs1000. But no of sale is more. Profit 1000*500= rs 5 lakhs
I think reason for EMI related discount is to encourage people to buy stuff they cannot afford and will not buy otherwise. Also credit card companies will be sharing partial cost of these discount as they are getting the interest and do not need to provide reward points for the EMI transactions.