Letting the Pricers Price

I've always been a little bit fascinated with racings pricing model, since it isn't something that's done by virtually anyone else.

This was looked at in this week's Thoroughbred Daily News by one of those bettor people!.

I watched the CNBC special about Costco the other night. The story looked at what exactly the business does, how it brands, how it sells, and most of all, how it keeps prices low to grow.

One part of the show focused on hot dogs. Costco sells concession foot longs for $1.50 and when asked why the price is so low the (now former) Costco co-founder and CEO Jim Sinegal said (paraphrasing):

'Most businesses will sell a hot dog for $4.75, and ask themselves if they can squeeze the price up to get five and a quarter. We see a hot dog that we can sell for $1.50, but we ask ourselves "Is there any way we can get it lower?"'

Costco - a place that you and I go for TV's or cases of soda pop - sells over $100 million dollars in cooked hot dogs. 

As we all know, Costco’s share price has almost quadrupled in the last eight years, and it wasn’t by accident. They work on a simple retail business model: Low margins are a result of low prices, but high volume is a result of low prices, too, yielding tremendous top line growth.

This week in the UK it was announced that British betting giant Betfair has agreed to pay racing, through the British Horse Racing Authority, 10.75% of their revenues from UK customers. This replaces their voluntary contribution, and they are the first betting company to strike a deal to support racing. It’s simple, it’s efficient, and according to Marcus Armytage of the Telegraph newspaper, welcomed. 

“The deal is highly significant …. because the British Horseracing Authority, Racecourse Association and Horsemen’s Group seemed joined at the hip”

To read more please see this link (page 17, PDF)

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