When a holiday toy catalog from Amazon arrived in the mail in late October, Krista Hoffmann noticed something wasn’t quite right.
In 100 pages of Lego sets, princess castles, action figures and the impossible-to-find Sony PlayStation 5, the catalog presented just about everything – except the prices.
“At first I thought I wasn’t looking hard enough, so I flipped through a few more pages,” says Ms. Hoffmann, a stay-at-home mom of three in Colorado Springs. “Then I realized, ‘Oh, this is intentional.’ Why not put the prices there?”
The lack of prizes was no mistake; it was the natural evolution of two decades of online shopping.
In the early days of the internet, there was a breathless excitement that e-commerce would lead to greater price transparency, allowing shoppers to know exactly where to find the best deals. This would be good for consumers and bad for retailers who were forced to compete with each other in a profitable race for the lowest prices.
Instead, another reality has emerged: Shoppers lose sight of what things cost.
Retailers have an incentive to shift the lens away from prices, and let other roots such as convenience and ease of use dangle. At the same time, shoppers are increasingly overwhelmed by the complexity of product options, prices, discounts and payment plans.
Furthermore, it is not an easy time to be a consumer. The pandemic has changed shopping behaviour. Shortages of everyday items like toilet paper and disinfectant spray were a painful reminder of the fragility of supply chains — an issue consumers still grapple with as they face delays on everything from furniture to cars. It has contributed to price volatility, exacerbated by inflation at its highest level in four decades, raising the cost of energy, food and housing.
All this happens on top of a system developed by Amazon that keeps prices moving through algorithms.
When Amazon raises and lowers product prices millions of times a day using a complex algorithm based on competitors’ prices, supply and demand, and shopping habits, its rivals often follow suit. And because prices fluctuate so often, Amazon’s catalog can’t promise a specific price, and consumers have to follow the swings if they want the best deals.
Glenn Ellison and Sara Fisher Ellison, economics professors at the Massachusetts Institute of Technology, published a paper in 2018 stating that technology had made product searches easier, but that retailers had obscured prices by obscuring prices—often a precursor to higher prices.
“To the extent that there is more embezzlement going on, consumers are paying more for everything,” says Glenn Ellison, adding that consumers are also wasting time looking for deals or choosing an alternative that isn’t quite what they wanted. “For consumers, it’s almost exclusively negative.”
That description — “almost exclusively negative” — is how Ms. Hoffmann, 29, felt about shopping for the holidays.
“I had to scan every single item and hope the prices didn’t fluctuate as I compared them to other stores,” she said.
Amazon’s price for the Pokemon Celebrations Elite Trainer Box, a wish list item from Ms. Hoffmann’s 7-year-old son, flipped in the weeks leading up to Christmas. There have been at least 14 changes since August, ranging from the suggested retail price of $49.99 to $89.99 in October. The average during that time period was $67.12, according to Camelcamelcamel, which tracks prices on Amazon.
When she noticed that there were no prizes, Mrs. Hoffmann said wondered why on twitter† An Amazon customer service account responded promptly, explaining that prices are constantly changing because Amazon “works to maintain competitive prices on everything we carry.”
In a statement about its pricing practices and price fluctuations, Patrick Graham, an Amazon spokesperson, said the company’s systems benchmark prices in other stores to ensure customers get the best price from Amazon.
“If we find a better price at another retailer like Walmart, Target, Home Depot and others, we will systematically match or offer a more competitive price if we sell the product ourselves,” he said.
Like many of the other toys on Ms. Hoffmann’s kid wish list, the Pokemon box offered directly from Amazon sold out. Some third-party sellers, who pay Amazon a fee to list products on their website, charged exorbitant prices. So Ms. Hoffmann bought another box of Pokemon cards from Target on Black Friday.
Dynamic pricing – when prices move in line with market conditions – is just one reason people lose touch with what things cost.
Discounts tied to loyalty programs or annual subscriptions like Amazon Prime and Walmart+ also complicate the math. At the same time, features designed to save time and increase convenience, such as automated monthly deliveries of household items, have made buyers less price-conscious.
“The general playbook for retail after the 2000s is that it’s all about clouding prices,” said Jason Murray, who spent 20 years at Amazon and is now chief executive of Shipium, an e-commerce start-up. “This is the game companies are playing by removing the reference points so that people think they are getting a good price.”
Retailers and brands bombard shoppers with discounts, one-off offers and various gimmicks that bombard them with numbers while giving the impression that they are getting a good deal. And even when price comparisons become easier and more frequent, such as for airline tickets or hotel reservations, the fees give consumers an incomplete picture of the true costs.
“We’re inundated with so many prices, an abundance of numbers, that it’s hard for specific numbers to really stick with you,” said Nick Kolenda, an author and creator of YouTube videos about consumer psychology and tricks marketers play to entice shoppers. .
The prices of some goods, such as gasoline, a cup of coffee or a liter of milk, are easier to remember because people buy them regularly and personally. When you shop online, the picture can get blurry – although the experience may not be universal, especially for those living with limited resources.
“Losing track of prices has a lot to do with how sensitive a particular household budget is,” says Chi-En Yu, who runs Goodbudget, a budget-tracking app. “If your household is quite sensitive to consumer goods prices, then at some level you don’t have the luxury of losing track of prices.”
It could also indicate that wealthier consumers shop more online. Unlike brick-and-mortar retail stores, where changing prices can be labor-intensive, the Internet provides the perfect sandbox for experimenting with exactly what consumers are willing to pay.
In 2000, Amazon sparked outrage when it was revealed that it was charging different prices for the same DVDs that were moments apart. (Amazon charged one customer $65 for a “Planet of the Apes” DVD and another shopper $75.) Jeff Bezos, Amazon’s CEO at the time, apologized for creating buyer uncertainty with a “random price test.” .
While Amazon said it didn’t have discriminatory pricing — charging different people different prices based on demographics — it’s all about dynamic pricing. Profitero, an e-commerce analytics company, estimated in 2013 that Amazon adjusted prices 2.5 million times a day. (It’s safe to assume the numbers have grown.)
As a result, prices for household items fluctuate back and forth and are sometimes subject to price increases that are more common in taxi services.
“The problem today is that you have no idea whether prices are rising or falling. It’s like the stock market,” said Venky Harinarayan, a partner at Rocketship.vc, a venture capital firm. He was an early employee at Amazon, helping Walmart with its pricing technology.
Even paper towels are subject to Bitcoin-like volatility. A year ago, according to Camelcamelcamel, a pack of 12-roll Bounty paper towels sold on Amazon for about $30. The price dropped to $23 in April, then rose to $35 in October. Last week it was around $28.
For the eager shopper, the time saved shopping online and avoiding stores has been replaced by time spent scouring the internet looking for a bargain.
The move to a cashless economy has also eased the psychological pain of paying, said Ravi Dhar, a behavioral scientist and professor at the Yale School of Management. Digital payments and credit cards make transactions so friction-free that people lose awareness of their spending.
According to a 2009 research paper by Amy Finkelstein, a professor of economics at MIT, prices rise when people use less cash. dr. Finkelstein studied what happened when states introduced electronic toll collection. After enough drivers installed the toll readers in their cars, she estimated, the tolls became up to 40 percent more expensive than they would have been if only cash had been accepted.
As part of her research, Dr. Finkelstein, she asked drivers at a rest stop on the Massachusetts Turnpike how much they paid at the toll booths they’d just passed. She found that 85 percent of people who paid electronically got the price wrong, compared to just 31 percent of people who paid in cash.
“The people who paid electronically had no idea what they were paying,” said Dr. Finkelstein.
Even for budget-conscious shoppers, keeping track of everything becomes a challenge.
“The average person won’t know what the right price is, what to spend, what to buy, and when,” says Mike Stouber, 32, of Freehold, NJ. “It’s become so analytical and so much based on numbers that the normal person won’t realize it or pay attention to it.”
Mr. Stouber, vice president at a communications company, is no ordinary budget-conscious shopper. He is a bell.
On “The Price Is Right” in 2019, he took home $262,743, the most money ever awarded to a daytime contestant. He reached the show podium with the best estimate price for a diamond tennis bracelet. Then, in a game called Plinko, he accurately guessed the prices for a hair dryer, humidifier and video game console to win more chances of cash prizes. (He couldn’t guess the correct price of a digital meat thermometer.)
Today, Mr. Stouber is playing a different kind of game with the fluctuating prices on Amazon. He ordered shower and sink fixtures for a bathroom remodel from Amazon in February last year. When he noticed a month later that the prices for the products were significantly lower, he contacted the company to see if it would refund the difference — something other stores do.
Amazon refused. So he returned the fixtures and bought them again at the lower price. Since he is an Amazon Prime customer, shipping was free and saved $80.
“Consumers want a deal and companies want to find a way to get the most money out of you,” said Mr Stouber. “It’s a game. It’s really just a game.”
