Many retailers, like Staples, Home Depot, and Rosetta Store, are now offering different prices to different consumers based on the consumers’ location, history, or even the device the consumer is using to make the purchase.  The Wall Street Journal (WSJ) recently conducted an investigation into the practice and found that many retailers display different prices to shoppers based on the shoppers’ locations.  Staples, for example, acknowledged that it uses variable pricing based on the geography of the customer and the differential costs are the “costs of doing business.”  However, WSJ’s study found that the pricing differences could be explained primarily by the distance the customer was from a rival company.  Orbitz, for example, shows customers using Apple devices higher prices on services versus customers using Windows devices.  Browser history, in addition to type of device, is also a tool that retailers use to fine-tune prices.

WSJ identified inherent privacy concerns with the practice.  In addition, the investigation proves that the Internet is no longer an equalizer in making prices comparable to traditionally hard to reach consumers. E-commerce should eliminate higher prices in areas of less competition, rather than increase them.  Regulators in the United States are attempting to implement a “do not track” system to protect consumer privacy.

The practice of variable pricing is not illegal, unless the retailer is varying the price based on race discrimination or other sensitive areas.  Some retailers argue that brick and mortar stores already use variable pricing strategies because of real estate costs, inventory, competition, and other factors.  Proponents of the practice also suggest that consumers can receive more relevant information and promotions from retailers that mine their browsing history and location data.

 

Discussion Questions:

1. How are retailers using variable pricing?

2. What type of price discrimination is variable pricing?

3. Do you believe variable pricing is an ethical pricing practice?

 

SOURCE: Tom Ryan, Retail Wire, December 26, 2012