Amazon’s list prices disappear gradually
The online retail giant no longer needs to compete with deals, as users rely more on e-commerce
SAN FRANCISCO— In a major shift for online commerce, Amazon is quietly changing how it entices people to buy.
The retailer built a reputation and hit $100 billion (U.S.) in annual revenue by offering deals. The first thing a potential customer saw was a bargain: how much an item was reduced from its list price. Now, in many cases, Amazon has dropped any mention of a list price.
The new approach comes as discounts both online and off have become subjects of dozens of consumer lawsuits for being much less than they seem. This occurs while Amazon is in the midst of a multiyear shift from a store selling one product at a time to a full-fledged ecosystem. Amazon wants to be so deeply embedded in a customer’s life that buying happens as naturally as breathing, and nearly as often.
“When Amazon began 21 years ago, the strategy was to lose on every sale, but make it up on volume,” said Larry Compeau, a Clarkson University professor of consumer studies. “It was building for the future, and the future has arrived. Amazon doesn’t have to seduce customers with a deal, because they’re going to buy anyway.”
Or so Amazon hopes. The retailer has been experimenting with another way to close a sale: telling the potential buyer what the price used to be on Amazon.
For example, Amazon originally promoted the Rave Turbo Chute as being discounted by 36 per cent. Then, all mention of a discount was dropped and the 60-foot water slide was simply listed at $1,573.58, with an explanation that it used to be $1,573.59 — one penny more. Then, it dropped the old/new price comparison. Then, it dropped the price to $1,532.01 and put the comparison back.
“They still need to showcase deals, but the question is how,” said Michael Kovarik, who runs a comparison-pricing startup called Rout.
That is why stores love big discounts: They work. In studies by Compeau and others, the perception of a deal is often what makes the purchase happen.
“We’ve been conditioned to buy only when things are on sale,” said Bonnie Patten, executive director of TruthInAdvertising.org, a consumer information site. “As a result, what many retailers have done is make sure everything is always on sale. Which means nothing is ever on sale.”
Amazon has both benefited from that conditioning as well as encouraged it, which is most likely why it is changing cautiously. It began eliminating list prices about two months ago, pricing specialists say, both on products it sold itself and those sold by other merchants on its site. The retailer did not return multiple requests for comment.
“Our data suggests that list prices are going away,” said Guru Hariharan, chief executive of Boomerang Commerce, a retail analytics firm. Last spring, Boomerang compiled a list for The New York Times of 100 pet food products Amazon was selling at a discount to a list price. Only about half still say that.
“What many retailers have done is make sure everything is always on sale. Which means nothing is ever on sale.” BONNIE PATTEN EXECUTIVE DIRECTOR, TRUTHINADVERTISING.ORG
“Amazon is a data-driven company with very few sacred cows,” Hariharan said. “At the very least, it is conducting a storewide test about whether it should change its pricing strategy.”
With a majority of Amazon products, the presentation of a bargain used to be front and centre. Take, for example, the Breville Infuser Espresso Machine. A few months ago, Amazon said this was an $800 machine that it was offering for $500, a discount of 38 per cent.
Two articles in The Times earlier this year on the problems with online list prices drew on a randomly assembled list of 47 discounted housewares, leisure and other products on Amazon, including the Breville Infuser.
Over the July 4 weekend, the list price was gone for 39 of those products. The Infuser page simply listed its current price, $483. Nineteen of the product pages tried encouraging sales by pointing out that the price used to be higher on Amazon, although no time period was given.
The problem with list prices or, as they are sometimes called, manufacturers’ suggested retail prices, is that they are regularly more of a marketing concept than anyone’s actual charge. When Amazon was saying the Breville Infuser’s list price was $800, Breville was selling it for $500 — about the same as Amazon. Other retailers sell it for $500, too. Breville confirmed the price was $500.
Bargains online and off that are not real bargains are breeding legal action, much of it using a California law against deceptive advertising. New cases have been filed in the last few months against Macy’s, J.Crew, Gymboree, Ann Taylor, Ralph Lauren and the website Wines ‘Til Sold Out, according to TruthInAdvertising.org. Twenty-four cases were filed in the first six months of 2016, nearly as many as the 25 in all of 2015.
There have been at least 10 settlements. In April, a Los Angeles judge gave preliminary approval to a $6-million offer by Kohl’s Department Stores. That deal came on the heels of a $50-million preliminary settlement by J.C. Penney.
“They are trying to figure out what product categories have customers who are so tied into the Amazon ecosystem that list prices are no longer necessary,” Compeau of Clarkson University said. In some categories, like groceries, Amazon seems to be using just one price, the buyit-now price.