online shopping continues to evolve

Three studies reported in the press this year about the behavior of online merchants have caught my eye.  They all call into question what I think is the consensus belief that online shopping is not only faster and simpler than going to a bricks-and-mortar store, but that it’s cheaper as well.

–the first concluded that the price Staples showed to an online customer varied with that customer’s location.  More specifically, price depended on how close the physical stores of rival office supplies companies were.

–the second concluded that Amazon has been raising its prices  this year, to the point where for some things AMZN is now 10% more expensive than Wal-Mart and 5% more than Target.

–the third, covering 16 popular online merchants and noted last week in the Wall Street Journal, found that:

—–Travelocity charged users of Apple mobile devices to access its site $15 a night less for hotel rooms than everyone else

—–Home Depot showed cheaper items to shoppers using a desktop than those coming to its site via laptop, tablet or phone.  The difference averaged about $100.

—–Cheaptickets and Orbitz charged on average $12 less to customers who logged into their sites than those who didn’t, without alerting people to the savings.

—–some sites seemingly experimented with pricing by randomly offering customers higher or lower quotes.

my take

Some of this is a little weird–like why an iPhone user should get a discount (I would have thought the pricing would go in the other direction).  A lot parallels the traditional practices of bricks-and-mortar retailing.  Using a phone or tablet is apparently the equivalent of driving up to a sore in a limo and expecting a bargain.

The emergence of the same in online retailing signals a significant maturing of the medium.  We’ve left the early days where to make profits grow it’s enough just to get more traffic.  The game is now all about finding the highest price that will convert browsers to buyers, thereby maximizing the profit per transaction.

We all know some variable pricing happens, both in online and bricks-and-mortar retailing.  But as potential customers become more aware that it occurs a lot more online than they had thought, and as they learn the signals they need to send to get a lower price, the tricks merchants now employ will become less effective.

A so-so economy will accelerate this adjustment process, with negative implications for online-only retailers, I think.


One response

  1. You have written before in terms of tracking “Millennials” behavior.

    And more and more I think a mixed online/brick strategy will win.

    Even within a category, somethings are best shopped online. Others need to be seen in person.

    Example — I went with my GF to Brooks Brothers. She wanted a nice work suit.

    Ended up spending 400 on a blazer — you have to see the fit in person. She loves buying online, but that would have cost BB 40 in shipping and it is a multiple process (buy one size, return, etc).

    She elected to wait until an online sale on a blouse (300).

    The returns costs on clothes have to be tremendous. Perhaps not as tremendous as operating a store but pretty bad.

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