‘Jittery’ prices will come back to hurt Amazon
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
Amazon, famous for its continual price changes and (maybe) dynamic pricing, might well be killing the goose that laid the golden egg. A recent experience really caused my head to snap back.
A couple of years ago, I found out about camelcamelcamel.com, a site that sends alerts when the price on a particular item on Amazon drops below a user-defined level. At one point, I set an alert to inform me when Unicel pool filters dropped below $45, well below the $65 my local store charges. A $20 difference is incentive enough for me to do some “pantry packing” and buy a new filter well in advance of need.
I don’t receive the alerts often, in fact, I couldn’t remember the last time I’d gotten one, and wasn’t even sure the site still existed. Recently, however, an alert arrived revealing the site had made some significant enhancements. The high-water mark for the pool filter price was pretty close to what I’d pay in a store, and the low had just been reached. Of course I bought one.
The alert system has become quite sophisticated, but the notable part for me is the graphic showing the entire price history of the item. I can kinda sorta understand why there would be a price drop in August with pool use winding down in many U.S. cities. But generally, the price history is borderline senseless: high prices at odd times, low prices at odder times.
When price becomes this transparent to the end-consumer, even a retailer like Amazon will find itself in some trouble.
Basically, this kind of behavior erodes trust. Rather than just blithely asking Alexa to please ship a new item, or push a “dash” button, it encourages the consumer to look around for better pricing.
This is the long way around suggesting that perhaps it’s time to wind down the incessant price changes that the industry has been using. The transparency on steroids shown in the graph above will erode trust quite quickly. As an industry, we’re better off with the old fashioned EDLP and promotions. Bouncing prices around like this is a bad thing.
DISCUSSION QUESTIONS: Do continual online price changes undermine consumer trust? Will ever-increasing transparency of price changes become a problem for retailers? What’s the solution?