Amazon’s "Trick" With Prices Isn’t Exactly New
Based on a report from a new market analysis firm Boomerang, Re/Code reported:
The study of Amazon’s pricing uncovered some interesting tactics. First, Amazon doesn’t have the lowest prices across the board, which may not surprise industry insiders but might surprise Amazon shoppers.
Instead, according to Boomerang’s analysis, Amazon identifies the most popular products on its site and consistently prices them under the competition. In one example, Boomerang observed Amazon testing price reductions on a $350 Samsung TV — one of the most popular TVs on Amazon — over the six months leading up to Black Friday. Then, on Black Friday, it dropped the price to $250, coming in well below competitors’ prices.
But when it comes to the HD cables that customers often buy with a new TV, Amazon actually pushed up the price by 33 percent ahead of the holidays. One reason is that the cables weren’t among the most popular in their category, meaning that they have little impact on price perception among shoppers. Secondly, Amazon most likely figures (or knows) it can make a profit on these cables because customers won’t price-compare on them as carefully as they would on more expensive products.
In another example, Amazon priced one of the most popular routers on its site about 20 percent below Walmart’s price. But when it came to a much less popular router, Amazon priced it almost 30 percent higher than Walmart did. Again, Amazon knows which products will drive price perception among shoppers.
Yep, those are all pretty common pricing patterns which most retailers use.
The only way this could be called a trick is that Amazon is better and faster at gaming the system than their competitors. As anyone who has followed indie author news can tell you, Amazon constantly scans the websites of their competitors, tracks the selling price for key products, and sets their prices accordingly.
And not only is these tricks basically SOP for retailers, Amazon isn’t even the outrageous example. I happened on a discussion on Hacker News where one commneter pointed out other tricks, including:
- Marking items up 30-45 days ahead of a big sale. This allowed our price to be 25% off instead of 10%. Or sometimes, our sale price probably should have been the regular price. This happened all the time, and people fell for it hard. Usually this would happen before a 10% off everything sale.
- Some price adjustments occurred to game the competition. We did this a lot with appliances where we’d mark up a model we knew the manufacturer had a ton of inventory. The competition would buy a few truckloads and then we’d run $200 off when they ran their $100 off add.
And another pointed out that:
According to my friends that have worked furniture retail, it was common practice to mark everything up 300% for a week then have a "40-60% Off!!!" sale. Customers would be very excited about how much money they were "saving" even though the reality was that they were buying at a net markup compared to a few weeks ago. But, a few weeks ago the shop was much, much quieter even though the prices were lower. So, what’s a shopkeeper to do?
These tricks are common because they are effective.
For example, a few weeks ago I got a Dell laptop "on sale". The reason I use the quotes is that I looked back today and can see that I paid the retail price for the laptop, and not a special sale price.
I feel I was had, but I’m fine with that. I did need a laptop, and while I feel I was tricked I don’t think I was cheated. (If the laptop cost less today, I would feel differently.)
As always, caveat emptor.