Retailers Hiding Prices Online
By Tom Ryan
Much like some fine jewelry shops, some e-commerce sites are making
prices for items difficult to spot. Only by adding the merchandise to their
shopping carts are consumers able to see the cost. According to an article
in The
New York Times, keeping the price tag somewhat hidden is part of a strategy
by major brands to counter the internet’s tendency to drive prices down.
"You
are seeing firms of all types test the waters" with strategies to control online
pricing, Christopher Sprigman, associate professor of intellectual property
at the University of Virginia School of Law and a former antitrust lawyer at
the Justice Department, told the newspaper. "They feel they have more freedom
to do it now."
Manufacturers’ ability to control prices got a shot in the arm
with a 2007 Supreme Court ruling (Leegin Creative Leather Products v. PSKS)
that gave them considerably more leeway to dictate retail prices. Brick & mortar
retailers can no longer drop prices in circulars below minimum levels. But
manufacturers also consider any price online as an advertisement and complain
whenever e-commerce sites set prices below the minimum.
That’s why statements
such as "To see our price, add this item to your cart" frequently appear on
e-commerce sites. The Times noted that last week,
prices were missing on Amazon.com for a number of products, such as the Milwaukee
Sub-Compact Driver drill kit, a Movado men’s Esperanza watch and an Onkyo 7.2-channel
home theater receiver. One noticeable result is that the items don’t show up
on search sites like Google Product Search and PriceGrabber.com. The article
noted that this trend "has arguably weakened one of the implicit promises of
e-commerce: that quick searches and visits to comparison shopping sites will
yield the best deals."
Most online retailers complain that the missing prices
confuse consumers and give an advantage to big chains, which have circular
restrictions but can mark down prices at the store level. They also say the
practice of enforcing minimum advertised prices has spread from consumer electronics
to other industries like sporting goods and jewelry.
"We think consumers are
best served when the retail marketplace is open and transparent and retailers
have an opportunity to offer the best prices and services, and are not controlled
from above by manufacturers," said Brian Bieron, eBay’s senior director for
domestic government relations.
But manufacturers contend the frenzy around
ever-lower prices online, fed by search engines and comparison shopping sites,
has some websites selling product at a loss to capture market share. Another
concern is that their largest retail partners will not match online price cuts
and may stop carrying their products altogether.
"At the end of the day, it
will become a race to zero if you don’t do anything to manage the issue," said
Jon C. Jordan, chief executive of Southern Audio Services.
Discussion Questions:
Do you think being evasive with pricing is a good policy for e-retailers?
Do you agree that brands should be allowed to establish a minimum advertised
price for their products? Should a product in an online store be considered
advertising in this context?
I must be confused. I thought the primary reason behind hiding the prices was so that competitors and price comparison sites couldn’t “scrape the screens” and read what they were. I suppose this could apply to manufacturers scraping the screens as well.
It is definitely an annoyance to the consumer, and results in a LOT of shopping cart abandonment (because they were never really carts to start with)…but I don’t think retailers think of it as “being evasive.” I believe they think of it as a competitive necessity.
RSR’s research has found that multi-channel shoppers are more profitable than single channel shoppers. The idea behind it is that the more engaged a shopper is, the more opportunity you have to make a profitable customer. But more and more eCommerce people tell me that they don’t buy it–that the eCommerce channel specifically is not as profitable as the store channel, in part because price transparency drives down margin, and in part because online has become the preferred closeout channel for getting rid of overstocks. “How do you resolve the conflict?” I have been challenged. My response is, we’re talking about two different things–channels vs. customers.
That’s the challenge here with prices. Price transparency squeezes margins, but hiding prices removes you from a traffic driver–these shopping sites. I know that a lot of these comparison sites, worried about retailers hiding prices and removing themselves from searches, are happy to come up with ways that allow retailers to put more forward to the customer than just price. Sounds like retailers and these meta-sites need to get creative.
Being evasive with pricing is an irritant and could become more of a negative than a positive. Consumers aren’t dumb and they are researching products online. This theory could very well backfire. Consumers don’t want to be fooled or feel like your scamming them, and being evasive on pricing feels like a used car sale.
Hiding prices online is like covering shelf tags at the store; you just don’t do it. I noticed that Walmart.ca has no prices (which could be because you can’t buy anything online) posted. I can assure you customers are coming to the site looking for info but Wal forces them to come into the store to verify pricing. Good strategy in my opinion. You can’t buy anything online anyways, might as well force them into the store to see if you can build a bigger basket. As for other merchants that engage in monkey business when it comes to pricing, you are setting yourself up for cart abandonment. In a recent study I took part in for a large Canadian telecom, I discovered that a confusing pricing structure created a huge distraction for customers which led to inflated cart abandonment stats. Price should be visible and easy to find. Always. That’s retail. My crotchety mentor used to say: “If it doesn’t have a price, it’s too darn expensive.”
The more clicks you need to make to find something, the more people you lose. If you make me click to find the price or put in contact information, I go away.
The neat thing about the web is you can measure everything; it would be interesting to run a blind test with some people having to add it to a cart to see the price and others seeing the price up front.
I’d like to know what school of psychology those who think hiding prices will result in more sales went to. My response is ‘If they’re hiding that from me, what else are they hiding?’ And heck no I’m not going to ‘call you for pricing’!
Of course the margins have to be there to make it worth being in business at all. But if you’re going to charge a higher price than some discounter, what additional benefits can you bring to the table? Some kind of customization? Set up the HDTV for me? A special bonus? Professional advice? A discount on a service contract? Extended warranty?
I’ve always believed in painting your problems in bright colors. So if you’re price is higher than someone else brag about it and tell people why. Could be a great deal after all!
I agree with most of the comments above. Why would you want to make customers work harder for anything? Anything at all. If your price is being scraped and it’s ‘not worthy’ or price is all you’ve got to go on with that particular product (commodity), it’s your own damn fault. If there’s one thing we know for sure about branding/marketing in this day and age, it’s that you have to be an open book–and that not being such–or being deceiving–is a really bad word-of-mouth tool.
The hidden price tactic is a turn-off for online shoppers, plain and simple. I’m certain it depresses sales and shopper experience ratings.
If manufacturers are uncomfortable with price transparency, they should switch to government contracting.
I have a simple rule. When I encounter a website that does not show the price, I move onto the next one. If I have to go to check out to learn the price, I just don’t buy. The reason is simple; I don’t trust the site enough to do business with it.
The problem for manufacturers is they must have a way to ensure their product is not sold below a specified price level. If their customers will not comply, they should stop selling to them and sell direct themselves. For the online retailer, their greatest problem is one-item selling. Unless you can get the consumer to purchase a basket, it becomes a price play versus completion. The world of limited category online retailers is numbered. The future is large department store websites or industry-wide websites. For example, all electronics manufacturers only sell through one website all their wares.
Using my own experiences (data point of 1); I would sooner be likely to buy a product that was in my physical cart that I then discovered was more than I had anticipated when I approached the checkout counter/register at a brick and mortar store than at an online store site. Not that it happens that I put products into a cart without knowing the price, but if it were to occur–I would have reason to think twice before abandoning the cart or not completing the transaction.
My “time” invested in the store might cause me to think twice before abandoning a cart and seeking another store. However, I will cheerfully click and clack and abandon a virtual cart if the online retailer does not make it transparent and easy for me to purchase. I do not feel the same pressures to complete the sale online.
The extra energy and effort the retailer and or manufacturer “put me through” though will be remembered and it will be something that I recall the next time I am “in the market” for a product they sell. I agree with the comments that suggest it is a poor strategy to not be up front about prices.
I’m with Jamie Tenser. While convenient, online shopping can be time-consuming and complicated. Requiring the customer to jump through an additional hoop seems counterproductive. The last thing a customer needs is a coy retailer….
Like many of the comments above, I believe “hiding” the price until I place an item in the cart is a negative. Two main reasons: First, doing so means none of the shopping services will have the item listed and this places you at a distinct competitive disadvantage in that their users won’t even know you carry the item. Second, I agree with the comments around cart abandonment. Shopping online should be easy and making the customer add items to the cart and fill out the necessary purchase data before knowing the prices isn’t easy.
We’re in an era where customers demand clarity and transparency. You play games with customers, you lose customers. Whatever the competitive reasons might be to conceal prices, violating customer’s expectations of clarity and transparency is bound to cost you customers.
One of the many jobs/bidnesses I was involved with in college was a coupon book my two partners and I sold to local merchants and distributed free of charge to all students each semester as they purchased books in the bookstore. Every semester the major local purveyor of Levis jeans bought a coupon. Until, that is, our little company received a cease-and-desist letter from Levi Strauss ordering us not to promote discounted Levis in any way, shape, or form. In those days, LS notoriously tried to control their pricing nation wide in this and other ways. But they can’t do that any more, and neither should any manufacturer be allowed to. Once the inventory is owned by a retailer, they can give it away if they choose. Manufacturers’ only controls are either not to sell their products to those retailers in the first place, or to exchange promotional dollars for retail price guarantees.
Hiding prices strikes me as bad customer service. On one hand, not seeing a price leaves the e-shopper with the impression that it’s out of stock. On the other hand, if a shopper does add a product to their e-basket without knowing the price, and then finds out it’s more than they want to pay, it’s an aggravating situation. Indeed, it reminds me of how some sites allow consumers to add items to their e-baskets, and then actually begin the checkout process before letting the shopper know that the item is out of stock or on backorder.
I sympathize with manufacturers’ concerns. But for me this comes down to the customer’s shopping needs. If those needs aren’t met, then competing shopping sites and products are just a few clicks away.
Being evasive or hiding prices is like putting the sale items at the back of the store. . . it annoys shoppers who just came in for one thing! There are two kinds of shoppers: those who have a desire to shop and those who have a need to be satisfied with a product or service. Allowing shoppers the option of how they interact with the store, whether bricks and mortar or virtual, is the best way to build trust and customer loyalty. Sounds like some internet retailers should go back and study the basics of customer-centric retail.
It is irritating and a huge inconvenience. However, this is often the result of existing contracts with suppliers who forbid advertising an item at a price less than the manufacturers suggested retail price. I think it would be better if the merchant set up another website under a different business name and placed items there with prices.
As a consumer, there’s no chance in heck that I’m going to use a shopping portal or site that does nonsense like this. What’s the point of comparison shopping if you have to work extra hard just to get the price? No thanks, I’ll stick with my favorites like Sortprice.com and the like that fully disclose their pricing information.