Dynamic pricing: Internet retailers are treating us like foreign tourists in Egypt
| Cairo
Fewer things frustrate tourists in Egypt more than skin-dependent pricing. Have Irish freckles? Expect to pay double in a Cairo taxi. An Italian tan? The price of that basalt model of the Sphinx just shot up 200 percent. Have glowing blue eyes? Some restaurants suddenly have no menus and prices are delivered orally. I鈥檝e been overcharged by more merchants in this country than I can tally in Excel.
Overcharging people based on their features makes them mad. Indeed, there鈥檚 some evidence that Egypt鈥檚 relentless retail harassment costs the country big, as some beleaguered tourists are reluctant to return. Turkey, a country roughly the same size as Egypt but one that is a bit more forthright with sightseers, hosts nearly twice as many visitors as Egypt every year.
It鈥檚 a lesson that online businesses would be wise to heed. In a bid to boost profits, more online merchants are launching 鈥渄ynamic pricing鈥� schemes (euphemistic for 鈥減ricing based on how much we think we can bleed you鈥�), which adjust prices for online goods and services based on perceived willingness to pay.
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鈥淥nline customers are more fickle than their brick and mortar brethren, more likely to window shop鈥nd much less loyal to any particular store,鈥� said Brooke Gladstone on NPR鈥檚 鈥淥n the Media.鈥� 鈥淩etailers have tried to level the playing field with some digital tricks, among them 鈥榙ynamic pricing鈥欌�hanging the price of a good based on what they think a consumer is willing to pay.鈥�
Gazing at that BMW is going to cost you
If, for example, you鈥檝e recently searched for and purchased first class airfare to Paris, completed online customization of a new BMW, and surfed for a new Bose Wave Radio, you could later get a somewhat pricier quote for a new sofa.
But if your cousin Ralph doesn鈥檛 have the Tiffany & Co. search history on his browser that you have, he might get a fire-sale quote if he goes after the same sofa. Or if he considers splurging on the same Bose radio, the audio giant might offer him five percent off and free shipping.
Dynamic pricing has long existed online for a number of goods and services, such as airfare, credit cards, car rentals, and hotel rooms, Slate reporter Annie Lowrey said on NPR. 鈥淲hat we鈥檙e looking at now,鈥� however, 鈥渋s how dynamic pricing is influencing the sales numbers and purchase prices for goods that aren鈥檛 time-sensitive and that there isn鈥檛 any logical explanation for why one person should pay a set price for a DVD and another person should pay a different price.鈥�
Dynamic pricing, or peddling goods online through the eyes of a used Chevy salesman, may work for merchants if it encourages stingier customers to spend and squeezes more out of wealthy ones. But many customers 鈥� like tourists in Egypt 鈥� might not be so fond of it.
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And they鈥檒l know. In the past, were you and Ralph to go the same Chevy dealer at different times, he in sweatpants and you in tailored conference-room digs, you鈥檇 probably get two different quotes for the same car. But the pettifogger鈥檚 dishonesty might not be falsifiable; the dealer could claim that demand had changed in the time between your visit and Ralph鈥檚, or that the dealership had two of the same model and the one Ralph test-drove was more weathered.
Consumer backlash
Online, though, this shyster is laid bare. If Best Buy adopts a dynamic pricing scheme, you need only to e-mail Ralph the link to the iPod docking station you鈥檙e searching for and ask him to run a test search. Or you could download a new browser to your computer and do a search from that unadulterated portal. An Egyptian merchant might insist to your face that a basalt mini-Sphinx cost $150, but if he starts offering quotes online, the jig is up.
Online shoppers seem to have made peace with some forms of dynamic pricing. If AmericanExpress.com believes I鈥檓 broke and a flight risk, it鈥檚 going to charge me more to borrow. Fine. But consumers don鈥檛 like being pitched for manufactured goods based on what they look like, whether in person or based on cookie patterns. If there鈥檚 one thing that web mobs unite against it is the sin of digital retailers. Just ask Dell and Comcast, two giants brought to their knees by a handful of noisy webizens to whom they gave the shaft. Mark my pixels: If many online retailers embrace dynamic pricing, their sales could go static.
Justin D. Martin is a journalism professor at The American University in Cairo. on Twitter or e-mail him.
