It’s the most wonderful time of the year, but it could also be the most expensive. As the holidays quickly approach, shoppers across the country will purchase gift items, make travel plans and search for holiday events online. The amount of money they spend along the way could depend on some surprising factors.
Price steering and price discrimination could affect the rate that online shoppers see for many of their holiday purchases. For instance, a consumer in Boston could find a 7-foot Christmas tree online from Home Depot for a price of $438. Meanwhile, a consumer in Miami could find the same Christmas tree from Home Depot for the more appealing price of $399. That’s exactly what happened in one recent study – and it appears to be an instance of price discrimination, likely based on region.
Price discrimination exists when two shoppers see entirely different prices for the exact same product, from the exact same retailer. Price steering occurs when consumers see different product results – or the same results in a different order – from the same search. In both cases, e-commerce companies can use data such as a shopper’s location, search history and device type to determine what prices to show. Both price discrimination and price steering are technically legal, but they certainly don’t seem fair to consumers.
The concern about online price discrimination started to grow significantly in 2014. That’s when researchers at Northeastern University found instances of price discrimination on e-commerce sites such as Home Depot, Travelocity, Orbitz and more. According to their findings, shoppers sometimes found different search results on mobile devices than on desktop computers. Travel sites – such as Travelocity, Orbitz, Expedia and Hotels.com – showed price inconsistencies more often than other retailers.
Shady pricing practices aren’t just troublesome for consumers; they’re tough on small and locally owned businesses, as well. E-commerce sites already enjoy important advantages over their small, brick-and-mortar counterparts, including tax loopholes that may allow them to avoid paying state and local sales tax. Now, discriminatory pricing practices are another legal avenue for large online retailers to trounce the competition.
Competition is a key part of the American marketplace, but discriminatory pricing short-changes consumers and local communities: Consumers could pay higher prices than they should, and local communities could miss out on important tax revenue and the economic engine of small business activity. Particularly around the holidays, there’s money to be made in the retail and travel industries. November’s Cyber Monday shopping set a new sales record this year, with consumers spending some $3.45 billion online. However, as more and more of those dollars go to large online retailers like Amazon and Home Depot, the cost to local communities and their citizens is only rising.
Consumers can try to protect themselves from price discrimination and steering by doing their research before making an online purchase. Whether it’s airline tickets, a hotel reservation or perfect holiday gift, compare prices from online with prices in the local brick-and-mortar store, travel agency or boutique hotel. Meanwhile, locally owned businesses can work to level the playing field in the marketplace by celebrating their local brand and revamping their online strategies.
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