A Short Overview of Retail Arbitrage
Price arbitrage is not a scientific term. It is simply the same as price variation between two items, and that includes between retailers, for example. Thus, in essence, the term refers to price variation between companies.
The term was coined in the 1980s by an economist to refer to the retail pricing of goods in the American economy and to that of a company’s competitive prices. The idea behind this is to make sure that prices are level and not distorted by hidden differences between companies.
Before the U.S. instituted a system of price setting that required retailers to set their retail sales at a level that is consistent with the income tax collected by the Federal government, there were prices that differed in different regions. This led to variation in what was perceived as the price of a product.
Sometimes it was known as a gap in price which lead to distortions in what consumers perceived was the price of the item. For example, if one retailer sold the item for less than the others selling it for, this might be seen as a profit for the first retailer.
With the introduction of the uniform price for all retailers, all retailers could learn about the average retail sales in a particular area. This enabled them to control their prices and thus they could maintain profitability.
When the U.S. began implementing a single sales price across all of its retailers, there was no longer any distortion in the retail sales of a particular item. Therefore, instead of inventing a new term, we decided to use the term to describe the practice of maintaining a uniform price across all retailers for a particular item.
With this method of implementation, retailers no longer had to know the difference between the average retail sales in the different parts of the country, nor did they have to track the variation in retail sales across geographic locations. Retailers were able to maintain uniformity of pricing without having to know the difference between national averages.
From a purely mathematical standpoint, the uniform pricing system meant that retailers were now able to apply the same pricing to the same products without creating distortions in their retail sales. The uniform pricing also meant that each retailer could maintain a solid supply of supply to sell at a price that makes them profitable.
What this meant is that the price at which each retailer sets the price of a product means the price at which the seller would have to sell it. This means that the formula for setting a price is the difference between the minimum price the seller can charge and the maximum price he or she can sell it for.
The formula for setting the price is the difference between the minimum price the seller can charge and the maximum price he or she can sell it for. If you will look at this formula, it is made up of the minimum price and the maximum price – or, equivalently, the maximum price he or she can expect to sell the item for.
In order to get a truly good understanding of the significance of the meaning of price arbitrage, you must understand that the same set of rules apply in each retailer, and not just the ones selling the item. For example, a retailer may sell a similar item to another retailer, but in another part of the country.
The same principles of distribution of price apply and therefore the resulting difference between these two geographic locations translates into a difference in pricing, which again translates into a difference in profit. This process continues until the stores are all at parity, or the prices are at the same level, and all retailers are able to profitably sell their goods.