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posted by Fnord666 on Tuesday May 09 2017, @05:11AM   Printer-friendly
from the back-to-brick-and-mortar-stores dept.

The Atlantic has an extended piece on the realities of internet pricing:

As Christmas approached in 2015, the price of pumpkin-pie spice went wild. It didn't soar, as an economics textbook might suggest. Nor did it crash. It just started vibrating between two quantum states. Amazon's price for a one-ounce jar was either $4.49 or $8.99, depending on when you looked. Nearly a year later, as Thanksgiving 2016 approached, the price again began whipsawing between two different points, this time $3.36 and $4.69.

We live in the age of the variable airfare, the surge-priced ride, the pay-what-you-want Radiohead album, and other novel price developments. But what was this? Some weird computer glitch? More like a deliberate glitch, it seems. [...]

The right price—the one that will extract the most profit from consumers' wallets—has become the fixation of a large and growing number of quantitative types, many of them economists who have left academia for Silicon Valley. It's also the preoccupation of Boomerang Commerce, a five-year-old start-up founded by Hariharan, an Amazon alum. He says these sorts of price experiments have become a routine part of finding that right price—and refinding it, because the right price can change by the day or even by the hour. [...]

Simply put: 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.

While most SN readers likely are aware of the existence of pricing algorithms, this article highlights a number of recent developments that have basically ended the idea of fixed prices and returned us to the historical norm. In the past, retailers offered different prices depending on the situation and what they thought a particular consumer might be willing to pay. Along the way in this story are intriguing tidbits such as the history of haggling, the origin of fixed prices, the innovation of GM's tiered branding system to maintain different price points for different consumers, and some failed models of flexible pricing (e.g., the time an algorithmic price war among Amazon's 3rd-party sellers led to a paperback briefly priced at $23.7 million, Coca-Cola's failed venture to charge more at vending machines on hotter days).

Recent lawsuits threaten traditional pricing models further—such as Marc Ecenberger's suit against Overstock.com for selling him patio sets for $449.99 with a "list price" of $999 when Walmart's normal price was $247; he has been awarded $6.8 million in civil penalties though it's still under appeal. It's likely that we're going to soon see a more pervasive demise of fixed pricing and perhaps significant modification to the fiction of "list prices." Online retailers have increasingly complex ways of managing profit by steering customers' shopping experience, even beyond altering prices depending on the day of the week or time you are shopping. From the article:

Four researchers in Catalonia tried to answer the question [of personal price profiling] with dummy computers that mimicked the web-browsing patterns of either "affluent" or "budget conscious" customers for a week. When the personae went "shopping," they weren't shown different prices for the same goods. They were shown different goods. The average price of the headphones suggested for the affluent personae was four times the price of those suggested for the budget-conscious personae. Another experiment demonstrated a more direct form of price discrimination: Computers with addresses in greater Boston were shown lower prices than those in more-remote parts of Massachusetts on identical goods.

A final issue raised throughout the article is the psychology of the "deal." The reason list prices likely haven't yet gone away is because they still have a profound psychological effect on consumers, even when they know that everything is the store appears to the "50% off" all the time. For now, the illusion of the fixed price gives a sense of "value" to consumers, particularly for online shopping. But the disturbing aspect of the article is that shopping will increasingly come to resemble the old days of haggling and personalized pricing, except now the seller has a complete psychological profile of you.


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  • (Score: 2) by julian on Tuesday May 09 2017, @03:42PM

    by julian (6003) Subscriber Badge on Tuesday May 09 2017, @03:42PM (#506948)

    I do this all the time and Amazon shows you a message if the price changes while an item is waiting in your cart. It almost always changes UPWARD.

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