GAINESVILLE, Fla. — Finding a great deal online can be a satisfying feeling, but new research suggests many sellers on Amazon are being less than honest to shoppers. A collaborative study finds over a quarter of vacuum cleaners sold on Amazon have at some point pretended to offer a discount when in actuality the price increased.
Researchers at the University of Florida, the University of South Carolina, and Arizona State University explain that when raising prices, many Amazon sellers will also add a previously unadvertised “list price” to the listings. The page crosses out the even-more-expensive list price, giving shoppers the impression that they’re getting a better deal.
According to the findings, this practice signals to shoppers that they are taking advantage of a discount when they’re actually paying 23 percent more, on average, for a new vacuum than they would have just one day earlier. A few days later, the price drops and both the list price and misleading discount claim disappear.
This tactic applies to more than just vacuums. Study authors saw sellers of digital cameras, blenders, drones, and books employing the same misleading strategy, albeit not as often as vacuum sellers. These false discounts, predictably, usually lead to more sales, which in turn help the products improve in Amazon’s sales rankings.
“When you see this list-price comparison, you naturally assume you are getting a discount. It’s not just that you didn’t get a discount. You actually paid a higher price than before the seller displayed the discount claim,” says Jinhong Xie, a professor in the Warrington College of Business at UF, in a media release.
Is this even legal?
Current regulations ban deceptive pricing practices and require sellers to display truthful price comparisons. In the past, consumers have filed class-action lawsuits (and won) against retailers like JC Penny and Ann Taylor for making discount claims using illegitimate values displayed for price comparisons.
The tricky aspect of this latest sales scheme is that it doesn’t always meet the definition of “a lie.” List prices can be truthful while being simultaneously misleading. Simply displaying the list price alludes to a discount when the price is really going up. However, most of the time the product sells at a cheaper price without any list price comparisons. A major aspect of the consumer deception is when the price comparison appears.
“Current regulations are all about the value of the list price, and they don’t say anything about misleading consumers by manipulating the timing of the list price’s introduction,” Prof. Xie adds.
The team assessed prices for household products on Amazon posted between 2016 and 2017 for this project. Researchers tracked more than 1,700 vacuums and gathered nearly half a million individual price observations. Most new list price introductions had an association with either a price drop or no price change, but 22 percent resulted in a price increase.
“We found that by increasing the price by 23% on average, the seller achieves an 11% advantage in their sales rank among all products in the home and kitchen category,” Prof. Xie reports. “This allows firms to achieve the impossible: increasing margins and increasing sales simultaneously.”
Other goods sold on Amazon used this deceptive tactic anywhere from three percent of the time (books) to over 13 percent of the time (blenders, digital cameras, and drones).
How can you avoid fake discounts?
In summation, study authors believe consumers need to be wary while shopping online of ubiquitous “discounts.” Don’t automatically assume a discount claim means a lower price. Comparison-shopping across multiple websites is always a good idea. There are also online tools available that provide item price histories.
“We think consumers need to be aware so they can protect themselves,” Prof. Xie concludes. “And we think that consumer organizations and regulators should evaluate this new marketing practice to determine whether and how to manage it.”
The study is published in the journal Marketing Science.
