The power of a bargain is an alluring thing to consumers. Many times, people can be compelled to purchase for a number of reasons – fear of missing out, competition, whatever. There is a good bit of psychology behind that.
Powerful price comparisons where we feel we are saving 30-60% percent can be very compelling (PS: the entire psychology behind Groupon).
Amazon in the cross hairs
Creative price points indicate opportunities for businesses to possibly engage in unethical practice. FTC regulations require businesses be “up-front” with customers, and price deception can be a way to influence consumer decisions.
In 2013, retailer Kohl’s was accused by a retailer about marking up prices that may make bargains seem questionable, giving prices a more dramatic difference.
Consumer Watchdog recently sent a letter to the FTC encouraging them to review the advertising strategies of Amazon during the review of the merger to purchase grocer Whole Foods for 13.7 billion.
Consumer Watchdog alleges that a great deal of sales were never actually sold at the original price at all. This would mean a product mentioned at a price point of 200, but listed as 40% off at 120, may have never been sold at all at 200 when compared to other retailers.
Of the over 1000 products they reviewed, they showed that just under half of their products had completive pricing listed, 61% of those had a higher completive price listed as to what was listed 90 days before.
Clients on the hook
This is problematic for consumers, many of whom do not have the time to validate price differences across online and brick-and-mortar retailers, or who are not tracking an item over time. (Also relevant: Amazon has been removing reference prices for some products.) The results of that probe are not yet available.
The verdict is still out on what this means for Amazon, but the company has expressed that it feels the FTC probe is a bit misleading: they remain committed to reporting accurate pricing.
This may be bad timing, given the review of Amazon’s merger and the likelihood that the same auditors are going to be reviewing this claim and the deal. Given that Whole Foods had some challenges with price gouging during a NYC probe in 2015, and a case that is moving towards appeals court, it is not clear what this will mean for the merger or for consumers.
Price points continue to be a major part of consumer purchasing decisions, so retailers and consumers alike should be checking to ensure they are getting the best bargain. Amazon is a big marketplace, and continues to be strong performer.
The outcomes of this case will have impacts on how amazon reports its pricing, and may change the way we decide to buy things on our prime accounts – let’s see if that FTC probe delivers anything worth considering.