The Wall Street Journal has an interesting, if somewhat disorganized, front-page article today on how internet retailers vary the prices and the selection of goods they offer to different customers. The article addresses several different topics, which it doesn’t clearly distinguish:
—different pricing in different countries. Who doesn’t do this?
—dynamic pricing, where prices of goods or services change depending on time and the availability of inventory. Airline tickets or hotel rooms are the model of this type of price change. There have also been attempts by bricks-and-mortar stores to vary pricing by time of day, so that a gallon of milk costs 50% more at midnight than at noon–though I’m not aware of a single successful experiment of this type.
—customer assessment. Four aspects:
—-The merchant uses the IP address of the customer as a proxy for zip code and offers different merchandise based on area demographics.
—-The merchant offers different merchandise depending on the device the customer uses to access the site–phone, tablet, PC.
—-The merchant offers different merchandise or pricing based on how the customer arrives on the site–mobile app, social media, search engine.
—-The merchant varies merchandise/pricing depending on the customer’s on-site behavior.
—proximity to bricks-and-mortar alternatives. Here the online merchant varies pricing, based on how far away the customer is either to its own bricks-and-mortar store or to those of its rivals.
The first three of these seem to me to be staples of traditional retailing. So it’s hardly surprising that once enabling technology became available these tactics would emerge in the online world.
The fourth is the problematic one.
There may be legal or ethical problems with charging higher prices in poor or rural areas where bricks-and-mortar alternatives aren’t readily available. It seems to me, though, that this pricing behavior trains consumers not to use the sites of these merchants but to automatically go to online-only merchants like Amazon instead.