Wednesday, February 10, 2010

If Amazon Can't Advertise Its Low Prices, Why Bother Setting Them?

For this home theater system, Amazon is legally prohibited from displaying its price.

From the New York Times:

Where's the price?
On some pages of e-commerce sites selling products like televisions, digital cameras and jewelry, a critical piece of information is conspicuously missing: the price tag.
To see how much these items cost, shoppers must add the merchandise to their shopping carts — in effect, taking it up to the virtual register for a price check.
The missing prices are part of a larger battle sweeping the world of e-commerce. Wary of the Internet’s tendency to relentlessly drive down prices, major brands and manufacturers — and now, book publishers — are striking back, deploying a variety of tactics and tools to control how their products are presented and priced online.
...
Manufacturers consider the product pages on sites like eBay and Amazon.com to be ads, and they complain whenever e-commerce sites set prices below the minimum price.
This leads the sites to replace prices with notes that say things like “To see our price, add this item to your cart.” One day last week, prices were missing on Amazon.com for an array of products like the Milwaukee Sub-Compact Driver drill kit, a Movado men’s Esperanza watch and an Onkyo 7.2-channel home theater receiver.
Setting aside how this mandate by manufacturers no doubt hurts consumers, I'm interested why Amazon and other retailers don't just charge whatever the advertised minimum is. Going any lower seems counterproductive, as it triggers the mysterious "To see our price, add this item to your cart. You can always remove it later" message and this pop-up.

Many customers will no doubt be confused by this process or think it's some sort of scam, and thus walk away.

Amazon sells many books and other items because of its low prices, but low prices are only effective if customers know about them. I would argue that showing whatever the advertising minimum is would generate more sales than charging a lower price that customers can't see, as the latter adds a layer of transactions costs to the purchase.

It seems very unlikely that customers will add the same item to their virtual carts on several different sites in order to compare prices and then buy the item wherever it's cheapest.

2 comments:

Josh Hattersley said...

While it adds a slight inconvenience to the process, I don't mind the gimmick is Amazon is indeed choosing the sell the item for below whatever the minimum list price is, as that means I'm (likely) saving some money. (I can't say for certain, as manufacturers could begin to set ridiculously high minimum sale prices in an effort to make items with their prices hidden appear to be on sale at what would actually be normal or above-average prices.)

Also, $10 says it won't take that long--if it hasn't already happened--for price aggregators like Google Products to employ some sort of script that adds the item to a bot-controlled cart, checks its price, then removes it. That, or they could use a human-driven method similar to Mechanical Turking.

Greg said...

You've got a good point about price aggregators. With our Internet tools today, it's hard to keep a secret online for long.