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Report: Amazon BTS Shoppers Are Overpaying By 15%

RETAIL DIVE
http://www.retaildive.com/news/report-amazon-bts-shoppers-are-overpaying-by-15/447415/

Dive Brief:

  • Amazon’s prices changed hour-by-hour, state-by-state and shopper-by-shopper, according to a May analysis of online school supplies prices from Chrome deal-hunting extension Wikibuy. The extension searches other sites, including Walmart, Jet and eBay, and its price comparison tool pops up a potentially cheaper option, including tax, shipping and any coupons that apply for Chrome browser users. For the study, Wikibuy analyzed the prices of more than 200 back-to-school products over 30 days.

  • On average, prices on common school supplies were 15% more on Amazon than other sites, the study found. The research was conducted by using suggested school supply lists for kindergarten, 3rd grade, 5th grade, 7th grade and 9th grade from the Chicago Public Schools, Los Angeles Unified School District and the New York City Department of Education and found that U.S. families with 5th graders could shell out $119 million more shopping on Amazon than if they had bought the same products for the lowest available online price.

  • Meanwhile, another study, conducted in June by Consumer Watchdog, found that Amazon’s new comparison pricing scheme, which as of last year has meant fewer “price drops” from manufacturer list prices in favor of “was” prices, “sale” prices or prices with a line through them (“strikethrough prices”), is at least as deceptive as before. A request for comment from Retail Dive to Amazon regarding these reports wasn’t immediately returned.

Dive Insight:

 

Much of Amazon’s successful disruption of the retail marketplace came from undercutting traditional retailers on price (notably books in its first retail foray). The stark price competition with brick-and-mortar retailers has largely dissipated as many now price-match (though price wars, especially in consumer products and groceries, continue).

These pricing differences aren't occurring just because legacy retailers have lowered or price-matched many items, but also because Amazon isn’t competing on price as much anymore.

“Amazon already has a bunch of other prices on its site,” Jason Goldberg, who leads commerce and content strategy at interactive digital agency Razorfish, told Retail Dive last year. “Actually you generally see items being offered by 10 or 20 vendors, so Amazon already has this price competition clearly visible on the page. Those Marketplace sellers are essentially bidding for the lowest price, or the ‘fast follower’ price. [Amazon founder and CEO] Jeff Bezos’s flywheel strategy is to offer a low price, and get more consumers, more sellers and more competition in a virtuous circle.”

But consumers’ expectations that Amazon’s prices will be the best online deal, plus Prime members’ stickiness to the site, may lead many to over-pay on identical items, these studies show.

Someone searching the Amazon site for a box of Crayola crayons at 7 a.m. in Arizona, for example, was likely to see a different price than someone else searching for them later that day in New Hampshire, Wikibuy found. The prices of common back-to-school items tended to be higher in the morning, and the top 10 states overpaying on Amazon for a T1-84 calculator were Rhode Island, Iowa, Minnesota, Arkansas, Louisiana, Kansas, Oklahoma, West Virginia, Washington and Tennessee, Wikibuy found.

“Parents of ninth graders spend the most on supplies,” according to Wikibuy’s study. “They should be wary of relying on Amazon for the lowest price. During our study period, they could have saved nearly $50, on average, by buying from other retailers.”

In its analysis, Consumer Watchdog said Amazon’s new price listing practice could be considered deceptive to the point of running afoul of Federal Trade Commission consumer-protection regulations, and said that it should be a factor in regulators’ scrutiny of its proposed acquisition of Whole Foods.

“Amazon has displayed a consistent pattern of behavior over its pricing strategies: it changes the most egregiously deceptive only when regulators and consumer lawsuits are closing in,” according to the Consumer Watchdog report. “Once the threat has passed, Amazon then creates a new reference pricing mechanism that is equally deceptive to consumers, to avoid losing sales.”

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