Online shopping involves risks, rewards

Retailers tailor offers to buyers

McClatchy NewspapersDecember 5, 2012 

WASHINGTON — Browsing for the best deal on the Internet during this holiday season can make even the savviest shopper feel like a high-stakes gambler.

Online prices for everything from food processors to flat-screen TVs can fluctuate by hundreds of dollars, from site to site, day to day, or even hour to hour. For bargain-hunting Web surfers, such volatility presents a vexing dilemma: Click "buy" now, only to see the product selling for less the next time you log on, or hold off and risk the price jumping out of reach.

A Nikon D7000 digital camera with lens, for example, starts at a list price of $1,496.96. After Best Buy published a Black Friday teaser price of $999, other retailers slashed prices online.

At 12:58 a.m. EST on Thanksgiving, CompUSA offered the camera for $996.95, according to price-tracking website Decide.com. Seventy minutes later, Wal-Mart dropped its price to $999. Within the hour, Target followed suit, and before dawn Friday, competitors Amazon.com B&H and other sellers had done the same.

The following week, the Nikon D7000 jumped to a range of $1,196.95 to $1,396.95 on those same websites.

"It's always been true 'let the buyer beware,' and now we can say that's also true online," said Jeffrey Chester, executive director of the nonprofit Center for Digital Democracy in Washington. "Today's better deal may be tomorrow's raw deal."

Price wars rage with particular intensity during the holidays, but skirmishes go on year-round. Prices rise as often as they fall, and it's all but impossible for shoppers to discern any method in the madness.

"The bottom line is this is so confusing and so data-intensive that it's a job for a machine," said Oren Etzioni, a computer science professor at the University of Washington in Seattle.

Online price changes are driven by software that enables retailers to react to competitors in real time and make personalized pitches to consumers based on their browsing and purchase histories.

Complex algorithms calculate factors such as inventory levels, how many sellers are carrying a product, how long it's been on the market and when a new model is expected. Retailers also use browser data to target customers with discounts or free-shipping offers for products they might like depending on where they live, their demographic profiles, the pages they've clicked on, the items in their baskets or even the local weather.

The information used to customize your online shopping experience is culled from your click history and "cookies," tiny data files saved on a computer's hard drive while visiting a website. If you're a repeat customer or a member of a loyalty program, marketers know even more about your tastes. The goal is to turn the store's website or app into a virtual "personal shopper" for each visitor.

"Retailers have a much better idea of who you are and what you're willing to buy," said Jason Buechel, a senior executive at Accenture, a technology outsourcing and consulting company. "Instead of having you price-compare across multiple websites, they're trying to drive you to close the sale as soon as possible."

Does that mean retailers might offer you a different price from another customer for the same product? It's hard to say. Although the technology exists, industry professionals say it's not a widely accepted practice, mainly because companies fear a backlash.

Retailers often use the Web as a laboratory to test pricing strategies, said Joe Stanhope, a customer intelligence analyst for Forrester Research.

"Sometimes it's as simple as trying to determine if people prefer a certain dollar amount off, or a certain percentage off, and which type of offer resonates better with customers," Stanhope said. "They're trying to understand what the real parameters are in pricing. The reason they like to do it on the Web is you have a lot of traffic and a lot of people buying things."

The lack of transparency troubles consumer advocates.

"Your financial future is increasingly going to be determined by these secret algorithms powered by computers," said Chester, from the Center for Digital Democracy. "All that's happening under the radar or behind the curtain in a digital wizard's lab, and I think it's incredibly unfair."

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