Online shopping: prices and discounts are giving way to more exotic strategies(theatlantic.com)
theatlantic.com
Online shopping: prices and discounts are giving way to more exotic strategies
https://www.theatlantic.com/magazine/archive/2017/05/how-online-shopping-makes-suckers-of-us-all/521448/?single_page=true
7 comments
This article paints a pretty good description of how price discrimination is used in online shopping and how places like Amazon try to extract consumer surplus. I don't know if I agree with the title's claim, though. If a product is shown at a higher place and you click buy, you're still choosing to buy the product at an accepted price, i.e. the value of the product is still worth more than what you're willing to spend, otherwise you wouldn't have bought it at all. How does that make you a sucker? Because someone else might be getting it for cheaper? That might seem unfair at first, but ultimately it's irrelevant. Other people have different opportunities for a lot of things. Complaining about what price someone is voluntarily willing to pay for a good is probably near the bottom of my list of injustices.
What happens when consumers learn that they might have ended in a high price segment? Can they trust any seller to give them a good price anymore? You have to start comparing every item with a dozen web sites to make sure you're not being gamed. Seems like a huge waste of time and trust for everyone involved.
It goes against our sensibilities of fairness. We expect that all consumers should pay the same price for a the same item, regardless of age, race, gender, or browsing history.
So is it unfair when someone uses a coupon they found in a flyer? They're not paying the same price for the same item as someone without a coupon, and people using coupons are likely to be less affluent.
And what about student discounts? Is it unfair that students get better deals on Photoshop and Microsoft Office?
And what about student discounts? Is it unfair that students get better deals on Photoshop and Microsoft Office?
I think the issue is more secret discounts - people who dont't clip coupons know they could. People accept that students might get discounts (or seniors, or whatever), but the idea that a website might give you a different price just because it thinks you will pay more rubs people the wrong way.
It rubs me the wrong way too. But rationally, it's just your classic price discrimination tactics (coupons and special discounts) on steroids, so if you aren't upset by those, you shouldn't be upset by this.
I guess my main issue here is the clickbaity title, since I don't think Amazon is making us suckers. The consumer ultimately has the upper hand since they can just choose not to purchase the product, or use a price search engine to find a better deal (which is akin to using a coupon - people that are price-sensitive are more willing to put in effort to save money).
I guess my main issue here is the clickbaity title, since I don't think Amazon is making us suckers. The consumer ultimately has the upper hand since they can just choose not to purchase the product, or use a price search engine to find a better deal (which is akin to using a coupon - people that are price-sensitive are more willing to put in effort to save money).
I know that if I browse coupon sites, I can get a discount. If I'm a student I know there are certain discounts, same as a senior.
But what are my options when Amazon and others have logged my IP addresses and flagged my account and have determined I can afford to pay extra for everything?
Your option is not to buy if the price is greater than the value you feel you will derive from the purchase.
We do now, but those sensibilities are learned. We can unlearn them.
As someone who runs an e-commerce site, I 100% agree with you. The reality is pricing is really hard. There is no "right price" for an item, it's a moving target based on an infinite number of variables. Sometimes we have to test pricing on certain segments of visitors, but there's no deceit going on. If that person doesn't believe the value of the product is equal or higher to the price being offered to them they don't buy, and that's totally fine.
I don't think people realize how much dynamic pricing disrupts what we think of as capitalism, and many of the benefits it creates. The idea of goods having singular prices, determined by the market, has been taken for granted by proponents of the "invisible hand" and so forth.
Now we are returning to a world of haggling, but a world in which the cognitive abilities of the haggler can be purchased: more sophisticated algorithms can out-maneuver a human in a business transaction just as they can a chess game. The struggle between buyer and seller resumes without any hope of a truce, and any new businesses trying to sell their product without cognitive advantage can never compete. I mean, I'm definitely letting myself wander into science fiction land here, but this is a pretty big shift and I don't know how it can end (unionized consumers is the tamest way of describing a complete revolution of economics.)
Now we are returning to a world of haggling, but a world in which the cognitive abilities of the haggler can be purchased: more sophisticated algorithms can out-maneuver a human in a business transaction just as they can a chess game. The struggle between buyer and seller resumes without any hope of a truce, and any new businesses trying to sell their product without cognitive advantage can never compete. I mean, I'm definitely letting myself wander into science fiction land here, but this is a pretty big shift and I don't know how it can end (unionized consumers is the tamest way of describing a complete revolution of economics.)
Arguably this is how capitalism works, at a very retail level. If your counterparty isn't trustworthy, though, it's more like a market for lemons. Which as you are thinking, might not be good for either party.
> The idea of goods having singular prices, determined by the market
My impression is that anyone in business who is more than a couple of years out of college understands that market prices are a spread around a moving average.
My impression is that anyone in business who is more than a couple of years out of college understands that market prices are a spread around a moving average.
Big retailers know what they are doing (one hopes!) however, as for most businesses and their online ventures, I see anything but sensible pricing strategies and I rarely see how anyone in these businesses can price correctly given the information they have available to them.
For instance, how do you calculate the cost of selling a given SKU, particularly if bought with other items? Has money been made when you take away the cost of the warehouse, the cost of the shipping to the warehouse, the cost of the actual product, the cost of that 'adword' to get the sales lead, the discount you gave to the customer for their first purchase, the affiliate marketing cut that you have somehow incurred along the way, the cost of the transaction with the payment provider and whatever else? Note this excludes other 'costs' like the marketing spend and partnership programmes with other companies.
Add to the mix currency fluctuations and limitations of the accounting system you have to work with (e.g. unable to do fractions of pennies/cents) then factor in that the people running the show are managers, therefore of no technical competence, and there is no way whatsoever that costs for selling a given product to a given customer at a given point in time can be known.
Then add returns to the confusion. It becomes even harder to actually know costs on that fine-grained SKU level.
Plus sometimes you cannot sell less than what you are allowed to sell at. Your supplier will not like you if you sell at less than cost and will not supply you if you upset all the other retailers of the product. So the price is essentially set, discountable when the next model range comes out but not before.
If you have to sell at 'list price' then how do you compete? Do you pay £70 to people for those people to buy your £25 products at list price? Yes, this craziness happens when you have people of the non-technical marketing type decide to 'invest' in 'marketing'. These same people will send out ever fancier boxes and other packaging junk never thinking about the costs.
A company has to be of a certain size before it can have the people able to do the maths properly, to get professional about it. Otherwise costs are not realistic for the online operation and profit is not what it should be. This article tars ecommerce with the same brush, a large amount of it is utterly clueless and far from smart.
For instance, how do you calculate the cost of selling a given SKU, particularly if bought with other items? Has money been made when you take away the cost of the warehouse, the cost of the shipping to the warehouse, the cost of the actual product, the cost of that 'adword' to get the sales lead, the discount you gave to the customer for their first purchase, the affiliate marketing cut that you have somehow incurred along the way, the cost of the transaction with the payment provider and whatever else? Note this excludes other 'costs' like the marketing spend and partnership programmes with other companies.
Add to the mix currency fluctuations and limitations of the accounting system you have to work with (e.g. unable to do fractions of pennies/cents) then factor in that the people running the show are managers, therefore of no technical competence, and there is no way whatsoever that costs for selling a given product to a given customer at a given point in time can be known.
Then add returns to the confusion. It becomes even harder to actually know costs on that fine-grained SKU level.
Plus sometimes you cannot sell less than what you are allowed to sell at. Your supplier will not like you if you sell at less than cost and will not supply you if you upset all the other retailers of the product. So the price is essentially set, discountable when the next model range comes out but not before.
If you have to sell at 'list price' then how do you compete? Do you pay £70 to people for those people to buy your £25 products at list price? Yes, this craziness happens when you have people of the non-technical marketing type decide to 'invest' in 'marketing'. These same people will send out ever fancier boxes and other packaging junk never thinking about the costs.
A company has to be of a certain size before it can have the people able to do the maths properly, to get professional about it. Otherwise costs are not realistic for the online operation and profit is not what it should be. This article tars ecommerce with the same brush, a large amount of it is utterly clueless and far from smart.
> Our ability to know the price of anything, anytime, anywhere, has given us, the consumers, so much power that retailers—in a desperate effort to regain the upper hand, or at least avoid extinction—are now staring back through the screen. They are comparison shopping us.
It's worth being aware of price discrimination, but in the end, the only "suckers" are those who don't use price search engines.
It's worth being aware of price discrimination, but in the end, the only "suckers" are those who don't use price search engines.
Can you provide some examples of good price search engines?
Somewhat related, I use Honey as a browser extension to automatically apply trivial coupon codes to online purchases, but I must admit I was hoping it would work more than I've seen. I'll still always run the product through though.
https://www.google.com/shopping
is adequate for most items.
is adequate for most items.
I like CamelCamelCamel, personally.
This is another example of "I have nothing to hide" strategy not giving good results.
Would you mind explaining yourself a little? I'm not sure what you mean, but I feel as if I want to know.
I believe that many people think about privacy in the axis of sexuality or political views but completely overlook the commercial axis or are buying into marketing that knowing more about them would provide them with better product/service.
The problem I see it is being singled out. The more singled out you are and more you stick out specifically, the worse.
Paying more for something is one thing (and it does not mean that you have more resources but simply less advantage to bargain) but not seeing products/services that do not "fit" your profile is ever worse.
The problem I see it is being singled out. The more singled out you are and more you stick out specifically, the worse.
Paying more for something is one thing (and it does not mean that you have more resources but simply less advantage to bargain) but not seeing products/services that do not "fit" your profile is ever worse.
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At least I can compare prices and order from china directly.
Sounds like a plan -- for you -- a protected buying experience if you have a back-up there or contacts. For the typical shopper, that is not the case. In my case, I need to go through intermediaries i.e. Amazon, a big-box store where my money is protected and there is some quality assurance. That is what the price difference pays for between what you would pay directly buying in China and what I would pay for the same item through Amazon.com. If I get free shipping with Amazon, then that is an added value -- bonus.
As I have an associate who ships internationally thru an online store portal, I am aware of how a typical $1 - $2 per order overage on shipping costs can add up in bottom-line revenues year-over-year. Even so since I do not buy enough to justify paying for the Amazon free shipping service, their prices are generally a good buy.
An exception everywhere now in my experience is clothing made in China by Chinese designers that has yet to reach the quality standards I will pay full price for in women's apparel. The problem I have read in Comments and have experienced is the difference in size between American and Chinese or Asian women.
That's where for me Ross for Less, Marshal's etc. come into the picture. Sometimes I buy quality through trusted online sellers (J.W. Crew, Land's End, Eddie Bauer, L.L. Bean, etc.). But even then the quality of workmanship and fabric can be wildly varied despite the price of the item.
The global economy does have its challenges. The current state of the consumer economy has forced me, therefore, to buy less, and to make what I have last longer through care and cautious use, as well as periodic maintenance where appropriate.
As I have an associate who ships internationally thru an online store portal, I am aware of how a typical $1 - $2 per order overage on shipping costs can add up in bottom-line revenues year-over-year. Even so since I do not buy enough to justify paying for the Amazon free shipping service, their prices are generally a good buy.
An exception everywhere now in my experience is clothing made in China by Chinese designers that has yet to reach the quality standards I will pay full price for in women's apparel. The problem I have read in Comments and have experienced is the difference in size between American and Chinese or Asian women.
That's where for me Ross for Less, Marshal's etc. come into the picture. Sometimes I buy quality through trusted online sellers (J.W. Crew, Land's End, Eddie Bauer, L.L. Bean, etc.). But even then the quality of workmanship and fabric can be wildly varied despite the price of the item.
The global economy does have its challenges. The current state of the consumer economy has forced me, therefore, to buy less, and to make what I have last longer through care and cautious use, as well as periodic maintenance where appropriate.
But still you have some choice, while in a physical store you don't. Not even reviews or ratings.
Of course I pay extra for good support and free shipping too. Stuff over 30eur I only buy in shops I trust. For something like a laptop I'd only buy from 3 sites or do extensive research on how good the support is.
Of course I pay extra for good support and free shipping too. Stuff over 30eur I only buy in shops I trust. For something like a laptop I'd only buy from 3 sites or do extensive research on how good the support is.