Online retailers offer fake discounts on Black Friday, UF researchers say
GAINESVILLE, Fla. (WCJB) - New University of Florida research reveals the way online retailers raise product list prices to offer fake discounts to customers that are actually more expensive than the list price just weeks earlier. It’s a practice sure to impact many holiday shoppers searching for Black Friday deals online.
UF Professor of Business Jinhong Xie and colleagues studied hundreds of Amazon listings for vacuum cleaners to better understand the way advertised sales mislead customers about the normal price of a product.
The study found sellers would drastically increase the list price of a product for a short period of time and list a discount. The discounted price would still be higher than the list price before the advertised sale.
“We believe it is important for consumers to be aware of this practice because it harms buyers,” Xie explained. “For example, we found on average shoppers paid 33% if they buy during the display of the discount.”
They found that the tactic is effective. Shoppers were more likely to buy products during the promotion with higher prices than when prices were lower with no advertised sales.
According to the research on vacuum cleaners, a price increase of 23% resulted in an 11% improvement in the product sales rank on Amazon. When sellers increased prices without offering a discount, the number of sales decreased.
“This practice is quite profitable for sellers. Usually, when a seller raises prices he sells fewer units. But with this practice when a seller raises prices, he sells more units,” she said.
There’s a simple way, according to Xie, to avoid these “price traps.” She advocates for consumers to learn the price history of products to know when they are being taken advantage of.
Shoppers can use a number of price history websites to find out if they are getting a good deal or ripped off. As an example, Xie explained how on camelcamelcamel.com shoppers can just copy and paste the product listing to get the price history. Shoppers can also compare prices across multiple online platforms to make sure they are getting the best price.
“If in the product category, the consumer is more familiar with the price, it’s less likely the consumer will be fooled because they have better information about price.”
The same type of fake discounts on online platforms like Amazon can also occur at brick-and-mortar retail stores, however, the prices are less likely to change frequently. Online prices can change instantaneously while stores must manually adjust prices on shelves.
“During the holidays, there will be more shoppers who will shop online so the damage for consumers will be higher,” Xie said. “If there is a time limit, the pressure is high so even more incentive for consumers to not search for more information. They believe they got a good deal.”
Xie says regulation has yet to catch up with online retailers who are framing increased list prices as discounts in an effort to trick consumers. She hopes the study will help raise awareness among shoppers about the practice and get the attention of regulators.
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