THE internet was supposed to be the consumer’s friend. By making it easy to shop around, it would drive prices lower. But online sellers of all sorts of goods and services are taking a keen interest in new software that promises to help them spot customers who are well off, or whose money is burning a hole in their pockets, so as to charge them more (see article).
Online shoppers let slip plenty of information about themselves that could be of use to crafty salesmen. Cookies reveal where else they have been browsing, allowing some guesses about their income bracket, age and sex. Their internet address can often be matched to their physical address: the richer the neighbourhood, the deeper the pockets, it may be assumed. Apple computer-owners are on average better-off than Windows PC users, and firms may offer them pricier options, as Orbitz, a travel website, is doing. Your mouse may also be squeaking on you: click too quickly from home-page to product page to checkout, and the seller can conclude that you have already decided to buy—so why offer you a discount?
Armed with the new software, retailers are likely to make increasing use of this information to discriminate between customers. Sellers will eye up buyers arriving on their home-page, make some assumptions, then charge accordingly. This will be especially true for products whose pricing is complex, variable and therefore unpredictable to buyers, such as insurance, air travel, mobile-phone plans and hotel rooms. The makers of price-customisation software are eagerly promoting its potential for boosting profit margins; those firms trying it out are, perhaps unsurprisingly, less keen to talk about it.
There is nothing particularly novel about price discrimination. A 2006 study of Fulton fish market in New York found that dealers charged Asians significantly less than whites because they believed that Asians were readier to walk away if the prices were too high—and better than whites at ganging together to boycott any dealer who ripped them off.
Yet customers may feel it unfair for retailers to charge customers differently for the same product, based on hunches about how much they can be stung for. That makes the practice risky, as Amazon found in 2000, when it tried varying DVD prices according to which browser a customer was using. A public backlash forced it to compensate those it overcharged. Governments in search of crowd-pleasing but cost-free measures might relish an excuse to crack down on “rip-off pricing”. They may argue that the use of price-customisation software by sellers amounts to tacit collusion to overcharge particular groups of buyers. If so, one remedy would be to make them tell shoppers if others had paid less. Such openness would be deadly for profits, making online firms wish they had never bothered.
Dress down, and don’t appear too keen
Maybe the rise of price-customisation software will spawn rival apps that help consumers defeat it, by disguising their trail of clicks. In the meantime, online shoppers might look at ways to avoid appearing like moneybags. Surf on a PC, not an Apple. Start by visiting a price-comparison site, then—on arrival on a seller’s site—feign interest in its cheapest stuff. Having made your choice, dawdle on your way to the checkout page. The internet may make price discrimination easier for retailers; but in online stores, as in bricks-and-mortar shops, two can play at that game.
Article Link: Online prices: Caveat emptor.com | The Economist
no way? That’s funny although I don’t think I’ll be needing that as it will be online.
