Online shopping: Price wars

LEE SUCKLING
Last updated 09:46 18/09/2012
Online shopping
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BEST DEALS: Savvy sellers have migrated en masse to the online world.

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Ever get a great deal from a website - a new pair of shoes from the US, a hotel in Bali or a coat from the UK - only to recommend the same product to a friend and have them complain, "The good deal you got isn't available anymore!"

While you may have scored in an online sale, there's a high likelihood you and your friend have been unknowingly using websites that employ "price customisation".

Price customisation software is used worldwide to adapt product and service pricing online to an individual consumer, based on factors such as location and the kind of computer they use. Mac users, for example, are assumed to be more affluent than PC users. Price customisation software enables detection of the system used to access a shopping website, and can then offer a higher price to the Mac user, because there's an assumption he or she has more cash to burn.

This form of user-specific pricing isn't a new phenomenon. It's been around for over a decade, most notably in 2000, when Amazon.com was changing the prices of DVDs for customers, dependent on which web browser they accessed the shopping site from.

Should consumers be dismayed at what could be called "online pricing discrimination"? In theory, yes; internet shopping is supposed to offer anonymous purchasing and equal prices for all. However, we should remember than in real world shopping, pricing is often customised to individuals based on circumstances.

Petrol, for example, is cheaper in central Christchurch than in a small town in the Hurunui. Petrol company honchos will argue it costs more to get the product to a rural location - which is true to some extent - but the real reason is simply because a rural consumer doesn't necessarily know the lesser "city price", and, of course, that consumer isn't afforded the option of comparison, owing to significant distance. The same goes for buying a car. A dealer will offer higher/lower prices off the mark based on perceived affluence and tailored to age, sex, ethnicity, and assumed socio-economic status.

In late June this year, travel website Orbitz disclosed to the Wall Street Journal that it utilises price customisation software, stating that it believes Mac users will pay US$30 to $40 more per night for a hotel than those using PCs. On average this was found to be an 11 per cent increase, with some customers on Macs spending up to 30 per cent more than their PC-using counterparts. Orbitz also claims Mac users are "more likely" to commit to four and five-star hotels, thus the site highlights them when an Apple computer is used in an accommodation search.

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Price customisation software isn't just at work with laptop and desktop computers; it is also detecting mobile devices. In a study by Forrester Research and Shog.org, nearly 50 per cent of surveyed online retailers said users of tablet computers placed bigger orders than those using regular computers. Therefore, if you're shopping online with not only a tablet, but an Apple iPad, you meet the double-whammy criteria and have the highest chance of being charged top prices.

The identification and compilation of user-specific data is called "data mining" - the collation of information that will attempt to increase revenues in an ever-competitive online shopping sphere. But as more information becomes commonplace around this profit-grabbing online trend, more users will decree it foul play, and, preventative measures for data mining and data-blocking software will become increasingly popular.

WHY ARE WE PAYING MORE?

Despite a relatively high NZ to US dollar, we're still paying top prices in New Zealand for iTunes music downloads. In Australia they're even worse off - the Aussie dollar has even overtaken the greenback in the last year, yet they're normally paying AU$16.99 per album and AU$1.69 per single, while in the US the prices for the same product are US$9.99 and US$0.99, respectively.

Tech items are generally more expensive in New Zealand than stateside; largely owing to both higher consumer demand and increased retailer competition in the US.

However with digital downloads, prices should be adjusted to exchange rates, right? According to Apple, not so. The company told the Sydney Morning Herald that iTunes content is not delivered on a global agreement, so converting from US dollar is “not relevant” as “each iTunes store is relevant to the country within which it resides”. In New Zealand we're paying from $1.79 to $2.39 per single and an average of $18.99 per album, which doesn't measure up to the US conversion rate, but we are at least better off than countries such as Switzerland - they're paying up to 78 per cent more for the same digital song download.

- The Press

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