November 4, 2019 • 32 mins
Bethany talks with Jerry Useem, contributing editor to The Atlantic, about online shopping. Who has the power in the ever-expanding world of online shopping - the retailer or the consumer?
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Episode Transcript
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Speaker 1 (00:01):
I'm Bethany McLean and this is making a killing interviews,
exploring the headlines you thought you understood and finding the
lessons we can all learn from them. Already in this series,
I've spoken with Sehiel Patel about Netflix, Mike Isaac about Uber,
and Peter Robeson about Boeing. I'm at Bethany Mactwelth on Twitter.
(00:23):
So I have to admit I always thought that I,
the consumer had the power in online shopping. I thought
I could outsmart any seller. But now I'm beginning to wonder.
Just consider this recent headline in the Atlantic how online
shopping makes suckers of us all, Oh dear. The piece
asks could the Internet, whose transparency was supposed to empower consumers,
(00:46):
be doing the opposite. This worries me as a working mom.
I buy everything, and I mean everything online. I don't
like to think that I might be losing. There are
broader implications to this question too. Rob Kaplan, president of
the Federal Reserve Bank of Dallas, recently positive that continued
low inflation, something that is confounding economists, might be because
(01:08):
the Internet is bringing consumers so much transparency about the
cost of everything that businesses have to perpetually match or
even discount prices to win sales. It may be that
business pricing pressure has been fundamentally reduced as a result
of technology, Kaplin told a recent conference. But if that's true,
(01:29):
and I'm now questioning whether it is, it appears that
business isn't going down without a fight. Let's back up. So,
in what are beginning to seem like the old days,
there was a one price system, meaning when you walked
into a store to buy something, that was the price
for you and for any other customer who would happen
to walk in. It turns out there's a whole history
(01:50):
as to how the one price system came to exist
and a tail in why it's going away and being
replaced with something retailers called dynamic price. What Jerry you
see Him explains in his recent Atlantic piece is that
this new system of dynamic pricing most closely resembles high
frequency trading on Wall Street. Prices are never set to
(02:13):
begin with. In this new world, they can fluctuate from
hour to hour and even minute to minute, a phenomenon
familiar to anyone who has put something in her Amazon
cart and bet alerted to price changes. While it's at there.
Of course, it's not just Amazon. An investigation by a
local TV station found that Target was offering different prices
(02:33):
on its app depending on where customers were located inside
or outside of an actual Target store. Jerry also writes
this about us. They are content to be fooled into
paying more if they can keep the belief that they're
paying less, that they have agency and agility to find special,
unbeatable deals only for them. Wow. I thought I was
(02:54):
doing just that, But maybe I am, because it's indisputably true.
At the very same time that we, the consumers, are
also getting significantly smarter. Gone are the days where the
sellers of goods at all the inside info and control,
or even market leadership. In many cases, you can compare
prices in real time. So if sellers are getting smarter
(03:15):
and buyers are also getting smarter on the same exponential
curve fueled by technology, well who's winning. I'm delighted to
have Jerry, you see him here with me to answer
all those questions and more. Jerry, who is now a
contributing editor at the Atlantic, as a longtime business journalist.
He and I worked together at Fortune back in the
glory days. Of the nineteen nineties and early two thousands.
(03:36):
So we've known each other for oh, I don't want
to count how long, And amazingly enough, we now both
live in Chicago, so this episode is being recorded in
the Windy City. So we have to start with what
happened to the price of pumpkin pie spice as Christmas
two fifteen approached? How did you zero in on pumpkin
pie spice? I sort of stumbled upon it. I was
(03:57):
looking through a bunch of prices, three charts of different
products on Amazon, and this kind of thing didn't exist before.
But there's a few services ones called three camels that
literally you can see the fluctuations of a price day
to day, hour to hour, over the last month, over
(04:19):
last year. And I had no idea about this until
I read your piece. By the way, some of these
you know, charts, it's like looking down in a stock chart.
That one just struck me as funny because it's a
seasonal ingredient. We all do it and we all know
what it is. So how did you get interested in
this story? Anyway? What made you decide to pursue this? Well,
it's become kind of a commonplace that as consumers were
(04:41):
more empowered than ever with data. We can go to showrooms,
we can go to Best Buy and see products that
we intend to buy elsewhere. We can know the price
of anything anywhere at any given time through technology. But
I and my editor at The Atlantic started to notice
there were some weird things going on with Amazon's seeing strategies.
At the same time, we also noticed that Amazon had
(05:03):
been hiring a lot of economists, and really top flight
economists who would sort of disappear into the Amazon world,
and so it was kind of like going down a wormhole.
We looked at what's happening with price online, and the
deeper I got into it, the more I realized that
the whole notion of price that's something that is a
fixed price out there, that it's set, you know, how
(05:25):
much does it cost is becoming sort of an outdated
questioned the fluctuations that retailers have learned to do based
on what they know about our shopping habits. For instance,
at four pm in the afternoon, we're all at work,
we've had lunch, we get kind of lazy, and they
raise their prices because we just get less discriminating at
(05:47):
that hour. So you'll see this uptick in the morning,
they'll then like lower the price because we're more meticulous.
I think this whole idea is terrifying, and I want
to come back to the notion of the royal Amazon
played with this, but where there's a character in your
story who's really fascinating This guy Guru Harri harror on
how did you find him? And who is he? He
would be what you call sort of an arms dealer
(06:08):
in this an arms dealer, and in this contest is
sort of consumer and retailer, or you can think of it.
He says, it's more of like a three way battle.
There's Amazon where he used to work, and he's one
of the guys who's set up the system that lets
other people sell their stuff on Amazon third party sellers,
and he started this company called Boomerang Commerce that basically
(06:29):
other retailers used to match Amazon's pricing algorithms. And it
was kind of my window into like, you know, it's
very hard to you can't interview an algorithm, but I
went out there to Californi and basically tried to you
found a human algorithm essentially hand grew Harry. Yeah, and
he showed me this dashboard and would. It had was
(06:51):
this is what a retailer sees, and it had a
bunch of rules you can put in, like if Amazon
moves its price down, we respond by moving our price
down ten percent until it gets too costs or something
like that. These were what you're called guardrails, and if
you don't put those in, things can get out of hand.
There was there was one book that because of two
(07:11):
algorithms interacting with each other, the price got driven up
to twenty three million dollars at one I wish, I
wish that were one of my books. Well, speaking of whigs.
Before coming on here, I went in and checked out
the price history of some of your books. Oh well,
it's really really interesting and I can't discern any pattern.
It's just one of your books. Today. It's offered to
(07:33):
ask prices seventeen ten, that's respectable. It's been as high
as thirty five dollars for one day, like maybe four
or five years ago. It is available for dollars twenty
three cents, which I think someone just stay wow, that
is crazy. Okay, but wait, come back to this notion
(07:53):
that it's a three way battle. It's not just a
battle between the consumer and the retailer. But your guru
says that it's actually a three way battle. There's the consumers,
there's the retailer, and there's Amazon. Amazon just has so
much data at their disposal, and with that data, it
exerts a gravitational pull of all this talent. These really
(08:15):
really top level economists are going there and not only
using the data to say, like what can we see about? Basically,
you know where we should price things and when what hour.
In some cases it seems like personalize it to your
own shopping history. If you came from a bargain hunting
website and they think you're sort of a bargain hunter,
they will sometimes offer you a lower price. Some studies
(08:37):
show Amazon says it doesn't do this. Well, that's what
I wanted to push on. Amazon says that it's price
changes are quote not attempts to gather data on customers
vending habits, but rather they're just trying to give shoppers
the lowest price out there. What do you think about that?
A few years back they did admit to running price experiments.
(08:58):
Price experiments. That's a scary phrase, yes, and so it's
kind of weird to think that in buying you know,
a seasonal pie ingredient, pumpkin spice, you might being part
of a social experiment. And ECON one on one, if
you go back, they had the concept of elasticity of demand. Basically,
if you raise the price, how much to sales fall off?
(09:19):
But retailers for most of existence have just been just
kind of had to guess. Now they can actually, well,
let's try at this level, what's measured of demands? What's
the optimal? So we've moved from ECON one on one
And I never took an ECON class to John Nash
as a beautiful mind and game theory, right, Okay, that's
that a way to think about it. Yes, they're literally
(09:41):
using game theory and some of their and some of
their models. Let's back up and go back to some
pricing history, which you lay out in your story in
such an interesting way. But how did the price take
come into being in the first place? Well, this is
an interesting question, and as I was reporting this story,
I thought, well, prices have always been fixed, and I
thought it was that true, And I went back and
(10:01):
it turns out not true. Price tag was invented sometime
in the eighteen sixties. Probably it's credited to John Wannamaker.
Wannamakers in Philadelphia is one of the first big department stores,
and he was a Presbyterian, but operating in a Quaker city,
and Quakers, including another Quaker, was rolling h Macy of
(10:23):
Macy's didn't believe in offering different prices to different people.
They thought it would because they thought it was immoral.
They thought it was immoral interesting, so Wannamaker opened his
quote unquote Grand Depot onto the principle he called one
price to all, no favoritism, and this was soon copied
not for moral reasons, but for economic reasons by others.
(10:45):
In the very beginning of department stores, basically they tried
to train everyone in the art of haggling, which is
how everything was done up to that point, and in
fact there was no price tags on goods. Sometimes they
would have cryptic symbols that would the salesman or saleswoman
know what the cost of the good was and what
should their sort of walk away point be, and only
(11:08):
they could decipher these symbols. But as these stores they
found it basically impossible to train thousands of people in
the art of haggling. Just as they scaled up and
became huger. It allowed them to advertise fixed prices, and
newspapers allowed them to higher floor people. So price tag
(11:29):
was a move toward a more efficient economy in a sense,
at least at that time. You know, in doing that,
retailers sort of gave up a little bit of their
power to kind of extract the last farthing that a
shopper might be willing to give up on a given day. Right,
but maybe they made it back on the shopper who
was not so intent or skilled at extracting the last
(11:51):
farthing right right, right, which brings us back a little
bit to where we are today. So what does this
concept now from moving from the fixed price tag to
personalized pricing? How would you explain that concept? I would
explain it as there was a sort of a truce
that reigned after the invention of the price tag that
basically between the consumer and retailers. In fact, there was
(12:14):
a French sociologist who had a theory that the marketplace
was a battle and a price was the negotiated truce
in the outcome. And there was a few sort of
asterisks to this truce. So like you could clip coupons,
you know, as a way, if you were more motivated,
companies differentiated higher end things lower end things. But basically
(12:35):
the people who broke the truth are us, the consumer shoppers.
And I was at a shoe store the other day
and a woman said, you know, yesterday someone was in
here and they were trying on a shoe while they
were sitting in there, went online and bought the shoes
on AMTMS and just walked out of the store and
walked out of the store that brazen. Did the person
atly say sorry to waste No, not even apology. Oh man,
(12:58):
I'm feeling sorry for retailers right now. So, I mean,
this has a lot you know, just sort of what's
going on in storefronts right now and what they call showrooming,
walking around with armed with all this information basically sort
of strips a lot of places of their pricing power
to ask anything above what is the lowest rate out there.
(13:19):
So you see retailer's response as having been driven by necessity.
This breaking of the truth began with consumers, and now
retailers are fighting back. Is that the right way to
think about it? Essentially, yes, And that they're staring back
through the screen and comparison shopping us and trying to
figure out what is our walk away point? Because there's
(13:41):
something also an economics called the consumer surplus. Consumer surplus
is basically money you would have been willing to spend
if the price had been higher, but you didn't have
to spend it because the price was set at whatever,
seven dollars. But the consumer surplus is like if you
would have been willing to pay twelve dollars, that's five
dollars right there. Does the surplus go to the consumer's
(14:01):
wallet or does the surplus just get spent elsewhere because
the consumer sees it as free money, just get spent elsewhere? Right? Yeah,
how much of a surplus is it? Actually? Right exactly?
Retailers are now trying to find ways to make more
of the surplus their own. So one expert said this
that in five to ten years, everything you buy will
(14:22):
be based on personalized offers everything. Do you think that's
true or do you think that's an overstatement? You know,
as a great question, and I think in reporting this
the issue of fairness, you know, this comes up. You know,
if you're sitting on an airplane and the person next
to you is paid less, there's an element in us
that kind of objects to that. That said, someone pointed
(14:45):
out fairness is sort of a social construct, and it's
possible that our notions of this could change. I mean,
for instance, with stocks, if someone bought Microsoft stock at
forty and you bought it at ninety, you don't hold
anything again, right, right, But going back to your pricing
Macy right, who thought it was immoral? How do you
(15:06):
think about that? Do you think it's immoral for consumers
to pay different prices? For instance, if you buy a Mercedes,
should the diapers you're buying for your kid costs more
than the diapers somebody who drives Undai is paying. I
don't know. I honestly don't know there is. I think
if there's a degree of transparency what's going on, then
(15:28):
I think maybe it's fair where I think some of
the things that really raise my eyebrows, or where they're
doing things and profiling you in ways based on the
fact that you have been browsing elsewhere that some retailers
have been accused of doing this. But can it be
fair given that when we're talking about retailers manipulating prices,
(15:49):
we're not really talking about human head buyers manipulating prices.
We're talking about algorithms manipulating prices based on big data, right,
So how transparent can it be? Doesn't that fly in
the face of transparency? Yes, yes, and and yes, And
actually what kind of troubles me is that when some
(16:11):
of these sort of irregularities surface, Amazon and other places
can very easily say we're sorry, there was flying on
the oitment. There was something bad with the algorithm, the
algorithms at fault. It was unintended, and we will never know.
Maybe it was, maybe it wasn't, And it almost doesn't
matter if it was unintentional. It's a little bit like
the malfunctioning robot. Hell, right off, how is malfunctioning? Doesn't
(16:33):
matter why exactly? When reading through this, I was fascinated
to find that sometimes Yeaho's Finance did a piece on
how clothing prices are affected by this too, and address
that's available in a size small might cost more and
a size large, And that seems maybe there's a lot
of big data going into why that's happening. But doesn't
that just seem wrong on the surface, or are we
(16:56):
just are we just living in an old construct? Well, interestingly,
the technical economics term for this is price discrimination, which
economists use not in the way that you and I
mean discrimination, but it's a great question, like is this
basically discrimination? There was three researchers from Spain who did
an interesting study where they set up three different sort
(17:18):
of phony personas based in different places in the US. Basically,
these were like dummy terminals where one of them just
did a whole bunch of bargain shopping for you know,
a couple of weeks, one of them looked at high
end goods, and the third was somewhere in between. And
they found indeed that these people got offered different prices
(17:38):
even when they typed in on the search engine, like
different products would be shown to them. Wow. So I
think there is something kind of a haunting and spooky
about the unknowability. It's almost sort of like Heisenberg's uncertainty.
If you can't know where the electron is just by
the very fact you're looking at it. In some cases,
you know, the price could really not exist until you
(17:59):
look at it, and the act of looking at it
sort of creates the price. So I think there's going
to be We're gonna have to think about this a
lot that's actually fascinating because it all does once again.
I mean, Heisenberg's uncertainty principle couldn't be more removed from
your concept of transparency. Right, The price not existing until
you look at it is again the opposite of transparent.
(18:20):
And that's the thing we all feel like if we
could just understand why right exactly? And here's the thing is,
there's studies showing that even when people are shown their
own irrational biases, that they still don't adjust, like we
are just suckers for seeing twenty percent off thirty percent off.
And you know the work by knomen In Tversky which
(18:43):
has been heavily used in this field, that we hate
the feeling of loss. We want to avoid that, and
when we see the possibility of a deal going away,
we experience that as a possible loss. And there's been
he studies showing that we are hardwired to jump at
(19:03):
the feeling that we've won, even if economically we end
up with fewer dollars at the end. Well, that's part
of what MADEI based so compelling, Right you won, which
all that it meant was that you were willing to
pay more than anybody else. Yes, but you won you
write about another fascinating concept that existed in the old
world of retail as well. So, but the left digit
bias just touch on what that is, the left digit bias.
(19:25):
So in the dark ages before there was any data available,
I was talking to an economist used to teach at
University of Chicago back in the early nineteen eighties, and
they acquired data from the new scanners at the grocery
chain Jewel, and he said it overturned a lot of
what he'd been teaching in class. For instance, he'd been
(19:46):
teaching that the notion that pricing something at two ninety
nine or two ninety eight increased sales was a myth.
He says, actually it was an artifact from the days
when retailers were suspicious of cashiers taking something out of
forced them to make changed so they wouldn't pocket any
of money themselves. Well, he says, they got the data,
and he says it turned out the effect was huge,
(20:06):
that two ninety nine will sell a lot on especially
on a car, you know, maybe not so, but on
a can of tuna exactly. And that just basically gets
to our kind of limited attention spanner or ability to
process that much information where we can't function like a computer.
We walk into a store, and so we pay the
(20:27):
greatest attention to the most important digit, which is the
one on the left and rose. For years have known that,
which is why, for decade or for time, you know,
time out of mind, they've known to set the price
of milk and eggs quite low because they know that
people have a pretty good fix on what that price
(20:47):
should be, and so they use that to as a
proxy to be like, is this place price well or not?
And then knowing that they're not going to be as
comparative scrutinizing numbers of other products as much. So. The
interesting point there, too is that it's not like this
old world was perfectly fair to consumers. We were getting
(21:09):
We were getting scammed in the old world, perhaps just
in a different way than we are in the new world. Yeah,
but in a much smaller way, in a much smaller way. Yeah, Yeah,
I guess I can see that paying to ninety nine
or missing out on the slightly cheaper artichoke at the
grocery store is a little bit different than having an
entirely different price for an expensive dress presented to you online,
(21:32):
right right, Yeah, that makes sense there was another piece
of data, more proof that man is not a rational
animal in your piece that Amazon would drop prices on
expensive items like TVs on Black Friday, and then that
hike the price of the less expensive stuff needed the cables,
for instance, needed to connect the TV, knowing that we
would not look as closely at we being the consumers,
(21:54):
would not look as closely at that. Right Exactly, there's
you bought the TV. Now you do the cheaper at all.
But they're maybe the lost margin could be made up
hugely just in the price of cables, so they can
figure out ways to take advantage of how uneconomic we
actually are, how irrational we can be, just on a
whole new scale. Now then then the old world. I mean,
(22:16):
it's made me think about my own shopping Happit's like
when do I stop? I don't always like to think
about that, but but when do we stop and actually
think about the price, and when do we just sort
of buy, Yeah, that looks right, and you know it
varies hugely, and when do you what makes you stop
and think when something's more expensive? I mean, if you're
buying a house or car, you're not going to be like, oh,
(22:37):
it's it's only ninety nine, that's ten. You know this, right,
you know, just all the micro purchases that you do
online where you've got your credit card out and yeah,
I'll buy this Starbucks. Great example. You know people who
then tally up how much Starbucks coffee they've drunk in
the past year, and it's like three thousand dollars right right,
And they could have paid a month of rent with
(22:57):
their Starbucks bill. So to this notion that it's a battle, okay,
I'm going to start with just us and retailers. Who's winning.
After you reported this piece, did you feel like, oh,
the well educated consumer who's willing to invest time in
price shopping can come out ahead in this game, or
did you feel like we're screwed. Person who's stuck with
(23:18):
me most is someone knows a great This name is
Bonnie Patton. She had a Truth and Advertising dot Org
and I asked her about her own shopping habits sort
of at the end of the interview, just like what
about yourself? And she said, as a general matter, I
find it so difficult to determine the actual price of
the product that when she's shopping for her kids, she
(23:38):
just makes all her decisions at the cashier. She just
picks up clothes, doesn't think about price until she gets
to the register, and if it comes out to be
too much, she says, I don't want it. And then
I asked, well, what about for yourself? And she says, well,
I don't shop for myself. I mean, what do you mean?
She's like, I don't shop for myself, and she basically explained,
like this has gotten so crazy. It's twenty percent off
(24:00):
of fifty percent and this adds like ice. She can't
handle the math and she just as a result, stopped
buying things. For one good practical piece of advice is
you just like ignore anything with a percentage symbol after it.
Why percentage? Why do you ignore the percentage symbol? Percentage
symbols speaks to our like human craving to win at
(24:21):
a deal. But if you looking at a lot of stores,
you know everything will be twenty percent off fifty percent
off the whole MSRP Manufacturers suggests retail price that increasingly
is seen as kind of a joke that the FTC
doesn't enforce the rules. I mean, notionally, it has to
(24:41):
be sold somewhere at the listed price. But the few
times people have looked into it, often that product was
never sold at its quote unquote list price. Okay, but
wait before we go back to that, So you're essentially
telling me that you came out of this piece thinking
the only way to win is to just drop out.
There's no oh, wait, win other than just drop out.
(25:02):
I guess I'll stop looking at percentages. Okay, I just
look at the dollar amount, which is hard and thinking.
Sometimes it's a huge percentage savings, but it's it's a
tiny dollar amount that you're saving. And I did all
this extra work to save seventy five cents. So if
you can, maybe as a consumer, level the playing field
(25:22):
a little bit by ignoring percentages, perhaps by checking out
what about between the third combatant in this Amazon who
wins there? Between retailers and Amazon and US? If you
had to rank them in order, what's Amazon? Amazon wins Amazons?
So how does this play out? I mean, in the end,
what retailers are trying to do? And I found this
(25:43):
fascinating survey here that retailers argued only three percent of
retailers believe their current model is going to remain sustainable
in the next five years. So they're trying to do
this to survive two right, and you can see back
to your point about economic irrationality and see how this
doesn't win for them if they're just slashing prices in
(26:03):
response to what Amazon's doing. So how does that aspect
of it shake out? Well? Guru at Boomerang Commerce had
a really interesting and from a retailer's standpoint, scary chart.
The title of it was I think the crushing point,
and it was that's frightening. But it was a chart
that showed like years from nineteen ninety till now, and
(26:25):
it mapped different categories like similar electronics, books, toys, and
the percent of those sales that move online and what
did show and then it lists bankruptcies in each sector.
So Circuit City that got the toys are us so
called category killers who are now being killed themselves. It
(26:46):
happens around the twenty five percent mark, so twenty five
percent of sales are online and in that industry, and
that means the retailers start to go bankrupt. Yes, because
the consumers at that point have so much power and
so much power to comparison price online, comparison shop online,
that it's just um. It usually sets off a vicious cycle,
(27:07):
like they start cutting prices, cutting back on staff, cutting
back radio, shack trapping, this kind of cycle. They offered
really cheap batteries for a long time, but that just
killed their margins. And meanwhile, you're taking away all the
things that would drive people to a physical store in
the first place, like some customer service, you know, human touch.
(27:29):
You know. So freetailers are gonna win at this game
or have a chance. It's going to be online. They're
they're not going to win in a physical setting. Well,
I wouldn't go that far. I don't know. I don't know.
I mean, if the past present anything is that we
don't know what's coming in the past. It passed this prologue.
Who the hell knows, right, Yeah, exactly, you know. But
(27:50):
I talked to one interesting company called Everlane, and so
they did this thing where they were like, we're gonna
be radically transparent about our costs on our website. They say, well,
we're making this pashmina shawl, and it's the price is increasing,
but that's because of the following things are happening in Mongolia,
and so that's why we're increasing the price. They don't
(28:12):
do discounts and their hope and the CEO who I
talked to was, you know, he was hopeful that this
might work. He was sort of skeptical. Okay, if he
used the word hope and hopeful, I hope it's not
a strategy. Who said that, Well, is this? Is this?
So is everlain just the lone resistance and doomed resistance
(28:33):
to this or or do you think they've got a chance. Well,
there's been other cases where you see, like pay what
you want models, radio hit, Radiohead did that early with
one of their albums and yeah, and the findings on
that are sort of interest, you know, like some people
will actually pony up what they consider to be a
(28:53):
fair amount of money. Maybe it's not unlike being in
a museum. Whether it's a suggested donation. I have no
idea if that's sustainable or doable thing. But it's being tried,
so you're not really making any bets between who comes
out on top. It's just all a moving puzzle right now. Yes,
but it sounds like if you had to place your
bets in one place, it would probably be on Amazon. Yes, yes,
(29:16):
So do you see are there markets where it's different
where consumers have more likelihood of coming out on top.
And are there markets, whether it's for online goods where
you're more likely to be suckered? Does it vary by
category of purchase? For example, if clothing is maybe more
emotional and perhaps I don't know, electronics are less emotional,
that might be totally wrong. Would be for me, but
(29:38):
maybe not for everybody. Yeah, I think the more it's
a commodity and less specific. I mean, if it's a
coat that you're only going to see at this one store,
then we're probably less price sensitive to something than like
getting the TV, where there's a lot of places we
can get a TV. And what do you think happens
on the legal side? Have you seen any did you
(29:58):
hear of any cases being around this concept of discrimination
or is it a murky area legally? Thus far it
is a murky area legally, to say the least. There
was a famous gaze back in two thousand and seven,
or the California man bargain hunter who he thought he
had scored big when he found a patio set on
overstock dot Com. When I showed up at his house,
(30:22):
he's unpacking it and he noticed is a price tag
on it. But it was a nine hundred ninety nine
that it was on sale at overstock for four forty nine.
Walmart price was two forty seven. That was on the
price tag. Oops. Yeah, so o our bargain hunter doesn't
feel so good at this point. Yes, so, in fact,
(30:42):
he had not scored the deal he had thought. He
sued and actually won in a California judge awarded him
six point eight million dollars in civil damages. Wow. Yeah,
but these cases are fairly rare and it takes like
a lot of In that case, they got access to
internal emails of the company, were it made cleared that
(31:03):
they were aware of what was going on. But it
comes back to this point you made earlier about the
MSRP or manufacturer suggested retail price even in the old world,
not being all it was cracked up to be, right exactly. Yes,
so well, thank you. I think I'm going to be
far more frightened and aware in my online shopping from
now on. And thank you for coming on, thanks for
(31:25):
having me. Okay, Well, that Overstock lawsuit raises an interesting prospect.
Maybe we can win back the money we're losing to
newly empowered retailers by filing lawsuits. I'm kidding, of course,
but the questions raised by this are pretty disturbing and
even profound. How can we keep ourselves from being yes
suckered by retailers? Can most retailers find a way to
(31:50):
compete with Amazon? And is this brave new world what
any of us would consider fair? My takeaway there are
no easy answers. Stay tuned and shop smart. Makia Killing
is a co production of Pushkin Industries and Chalk and Blade.
It's produced by Ruth Barnes and Laura Hyde. My executive
(32:12):
producers are Alison McClain, no relation in making Casey. The
executive producer at Pushkin is Mia Loebell. Engineering by Jason Rostkowski.
Our music is by Jed Flood. Special thanks to Jacob
Weisberg at Pushkin and everyone on the show. I'm Bethany mcclin.
Thanks so much for listening. Find me on Twitter at
(32:33):
Bethany mac twelve and let me know which episodes you've
most enjoyed.
I'm Bethany McLean and this is making a killing interviews,
exploring the headlines you thought you understood and finding the
lessons we can all learn from them. Already in this series,
I've spoken with Sehiel Patel about Netflix, Mike Isaac about Uber,
and Peter Robeson about Boeing. I'm at Bethany Mactwelth on Twitter.
(00:23):
So I have to admit I always thought that I,
the consumer had the power in online shopping. I thought
I could outsmart any seller. But now I'm beginning to wonder.
Just consider this recent headline in the Atlantic how online
shopping makes suckers of us all, Oh dear. The piece
asks could the Internet, whose transparency was supposed to empower consumers,
(00:46):
be doing the opposite. This worries me as a working mom.
I buy everything, and I mean everything online. I don't
like to think that I might be losing. There are
broader implications to this question too. Rob Kaplan, president of
the Federal Reserve Bank of Dallas, recently positive that continued
low inflation, something that is confounding economists, might be because
(01:08):
the Internet is bringing consumers so much transparency about the
cost of everything that businesses have to perpetually match or
even discount prices to win sales. It may be that
business pricing pressure has been fundamentally reduced as a result
of technology, Kaplin told a recent conference. But if that's true,
(01:29):
and I'm now questioning whether it is, it appears that
business isn't going down without a fight. Let's back up. So,
in what are beginning to seem like the old days,
there was a one price system, meaning when you walked
into a store to buy something, that was the price
for you and for any other customer who would happen
to walk in. It turns out there's a whole history
(01:50):
as to how the one price system came to exist
and a tail in why it's going away and being
replaced with something retailers called dynamic price. What Jerry you
see Him explains in his recent Atlantic piece is that
this new system of dynamic pricing most closely resembles high
frequency trading on Wall Street. Prices are never set to
(02:13):
begin with. In this new world, they can fluctuate from
hour to hour and even minute to minute, a phenomenon
familiar to anyone who has put something in her Amazon
cart and bet alerted to price changes. While it's at there.
Of course, it's not just Amazon. An investigation by a
local TV station found that Target was offering different prices
(02:33):
on its app depending on where customers were located inside
or outside of an actual Target store. Jerry also writes
this about us. They are content to be fooled into
paying more if they can keep the belief that they're
paying less, that they have agency and agility to find special,
unbeatable deals only for them. Wow. I thought I was
(02:54):
doing just that, But maybe I am, because it's indisputably true.
At the very same time that we, the consumers, are
also getting significantly smarter. Gone are the days where the
sellers of goods at all the inside info and control,
or even market leadership. In many cases, you can compare
prices in real time. So if sellers are getting smarter
(03:15):
and buyers are also getting smarter on the same exponential
curve fueled by technology, well who's winning. I'm delighted to
have Jerry, you see him here with me to answer
all those questions and more. Jerry, who is now a
contributing editor at the Atlantic, as a longtime business journalist.
He and I worked together at Fortune back in the
glory days. Of the nineteen nineties and early two thousands.
(03:36):
So we've known each other for oh, I don't want
to count how long, And amazingly enough, we now both
live in Chicago, so this episode is being recorded in
the Windy City. So we have to start with what
happened to the price of pumpkin pie spice as Christmas
two fifteen approached? How did you zero in on pumpkin
pie spice? I sort of stumbled upon it. I was
(03:57):
looking through a bunch of prices, three charts of different
products on Amazon, and this kind of thing didn't exist before.
But there's a few services ones called three camels that
literally you can see the fluctuations of a price day
to day, hour to hour, over the last month, over
(04:19):
last year. And I had no idea about this until
I read your piece. By the way, some of these
you know, charts, it's like looking down in a stock chart.
That one just struck me as funny because it's a
seasonal ingredient. We all do it and we all know
what it is. So how did you get interested in
this story? Anyway? What made you decide to pursue this? Well,
it's become kind of a commonplace that as consumers were
(04:41):
more empowered than ever with data. We can go to showrooms,
we can go to Best Buy and see products that
we intend to buy elsewhere. We can know the price
of anything anywhere at any given time through technology. But
I and my editor at The Atlantic started to notice
there were some weird things going on with Amazon's seeing strategies.
At the same time, we also noticed that Amazon had
(05:03):
been hiring a lot of economists, and really top flight
economists who would sort of disappear into the Amazon world,
and so it was kind of like going down a wormhole.
We looked at what's happening with price online, and the
deeper I got into it, the more I realized that
the whole notion of price that's something that is a
fixed price out there, that it's set, you know, how
(05:25):
much does it cost is becoming sort of an outdated
questioned the fluctuations that retailers have learned to do based
on what they know about our shopping habits. For instance,
at four pm in the afternoon, we're all at work,
we've had lunch, we get kind of lazy, and they
raise their prices because we just get less discriminating at
(05:47):
that hour. So you'll see this uptick in the morning,
they'll then like lower the price because we're more meticulous.
I think this whole idea is terrifying, and I want
to come back to the notion of the royal Amazon
played with this, but where there's a character in your
story who's really fascinating This guy Guru Harri harror on
how did you find him? And who is he? He
would be what you call sort of an arms dealer
(06:08):
in this an arms dealer, and in this contest is
sort of consumer and retailer, or you can think of it.
He says, it's more of like a three way battle.
There's Amazon where he used to work, and he's one
of the guys who's set up the system that lets
other people sell their stuff on Amazon third party sellers,
and he started this company called Boomerang Commerce that basically
(06:29):
other retailers used to match Amazon's pricing algorithms. And it
was kind of my window into like, you know, it's
very hard to you can't interview an algorithm, but I
went out there to Californi and basically tried to you
found a human algorithm essentially hand grew Harry. Yeah, and
he showed me this dashboard and would. It had was
(06:51):
this is what a retailer sees, and it had a
bunch of rules you can put in, like if Amazon
moves its price down, we respond by moving our price
down ten percent until it gets too costs or something
like that. These were what you're called guardrails, and if
you don't put those in, things can get out of hand.
There was there was one book that because of two
(07:11):
algorithms interacting with each other, the price got driven up
to twenty three million dollars at one I wish, I
wish that were one of my books. Well, speaking of whigs.
Before coming on here, I went in and checked out
the price history of some of your books. Oh well,
it's really really interesting and I can't discern any pattern.
It's just one of your books. Today. It's offered to
(07:33):
ask prices seventeen ten, that's respectable. It's been as high
as thirty five dollars for one day, like maybe four
or five years ago. It is available for dollars twenty
three cents, which I think someone just stay wow, that
is crazy. Okay, but wait, come back to this notion
(07:53):
that it's a three way battle. It's not just a
battle between the consumer and the retailer. But your guru
says that it's actually a three way battle. There's the consumers,
there's the retailer, and there's Amazon. Amazon just has so
much data at their disposal, and with that data, it
exerts a gravitational pull of all this talent. These really
(08:15):
really top level economists are going there and not only
using the data to say, like what can we see about? Basically,
you know where we should price things and when what hour.
In some cases it seems like personalize it to your
own shopping history. If you came from a bargain hunting
website and they think you're sort of a bargain hunter,
they will sometimes offer you a lower price. Some studies
(08:37):
show Amazon says it doesn't do this. Well, that's what
I wanted to push on. Amazon says that it's price
changes are quote not attempts to gather data on customers
vending habits, but rather they're just trying to give shoppers
the lowest price out there. What do you think about that?
A few years back they did admit to running price experiments.
(08:58):
Price experiments. That's a scary phrase, yes, and so it's
kind of weird to think that in buying you know,
a seasonal pie ingredient, pumpkin spice, you might being part
of a social experiment. And ECON one on one, if
you go back, they had the concept of elasticity of demand. Basically,
if you raise the price, how much to sales fall off?
(09:19):
But retailers for most of existence have just been just
kind of had to guess. Now they can actually, well,
let's try at this level, what's measured of demands? What's
the optimal? So we've moved from ECON one on one
And I never took an ECON class to John Nash
as a beautiful mind and game theory, right, Okay, that's
that a way to think about it. Yes, they're literally
(09:41):
using game theory and some of their and some of
their models. Let's back up and go back to some
pricing history, which you lay out in your story in
such an interesting way. But how did the price take
come into being in the first place? Well, this is
an interesting question, and as I was reporting this story,
I thought, well, prices have always been fixed, and I
thought it was that true, And I went back and
(10:01):
it turns out not true. Price tag was invented sometime
in the eighteen sixties. Probably it's credited to John Wannamaker.
Wannamakers in Philadelphia is one of the first big department stores,
and he was a Presbyterian, but operating in a Quaker city,
and Quakers, including another Quaker, was rolling h Macy of
(10:23):
Macy's didn't believe in offering different prices to different people.
They thought it would because they thought it was immoral.
They thought it was immoral interesting, so Wannamaker opened his
quote unquote Grand Depot onto the principle he called one
price to all, no favoritism, and this was soon copied
not for moral reasons, but for economic reasons by others.
(10:45):
In the very beginning of department stores, basically they tried
to train everyone in the art of haggling, which is
how everything was done up to that point, and in
fact there was no price tags on goods. Sometimes they
would have cryptic symbols that would the salesman or saleswoman
know what the cost of the good was and what
should their sort of walk away point be, and only
(11:08):
they could decipher these symbols. But as these stores they
found it basically impossible to train thousands of people in
the art of haggling. Just as they scaled up and
became huger. It allowed them to advertise fixed prices, and
newspapers allowed them to higher floor people. So price tag
(11:29):
was a move toward a more efficient economy in a sense,
at least at that time. You know, in doing that,
retailers sort of gave up a little bit of their
power to kind of extract the last farthing that a
shopper might be willing to give up on a given day. Right,
but maybe they made it back on the shopper who
was not so intent or skilled at extracting the last
(11:51):
farthing right right, right, which brings us back a little
bit to where we are today. So what does this
concept now from moving from the fixed price tag to
personalized pricing? How would you explain that concept? I would
explain it as there was a sort of a truce
that reigned after the invention of the price tag that
basically between the consumer and retailers. In fact, there was
(12:14):
a French sociologist who had a theory that the marketplace
was a battle and a price was the negotiated truce
in the outcome. And there was a few sort of
asterisks to this truce. So like you could clip coupons,
you know, as a way, if you were more motivated,
companies differentiated higher end things lower end things. But basically
(12:35):
the people who broke the truth are us, the consumer shoppers.
And I was at a shoe store the other day
and a woman said, you know, yesterday someone was in
here and they were trying on a shoe while they
were sitting in there, went online and bought the shoes
on AMTMS and just walked out of the store and
walked out of the store that brazen. Did the person
atly say sorry to waste No, not even apology. Oh man,
(12:58):
I'm feeling sorry for retailers right now. So, I mean,
this has a lot you know, just sort of what's
going on in storefronts right now and what they call showrooming,
walking around with armed with all this information basically sort
of strips a lot of places of their pricing power
to ask anything above what is the lowest rate out there.
(13:19):
So you see retailer's response as having been driven by necessity.
This breaking of the truth began with consumers, and now
retailers are fighting back. Is that the right way to
think about it? Essentially, yes, And that they're staring back
through the screen and comparison shopping us and trying to
figure out what is our walk away point? Because there's
(13:41):
something also an economics called the consumer surplus. Consumer surplus
is basically money you would have been willing to spend
if the price had been higher, but you didn't have
to spend it because the price was set at whatever,
seven dollars. But the consumer surplus is like if you
would have been willing to pay twelve dollars, that's five
dollars right there. Does the surplus go to the consumer's
(14:01):
wallet or does the surplus just get spent elsewhere because
the consumer sees it as free money, just get spent elsewhere? Right? Yeah,
how much of a surplus is it? Actually? Right exactly?
Retailers are now trying to find ways to make more
of the surplus their own. So one expert said this
that in five to ten years, everything you buy will
(14:22):
be based on personalized offers everything. Do you think that's
true or do you think that's an overstatement? You know,
as a great question, and I think in reporting this
the issue of fairness, you know, this comes up. You know,
if you're sitting on an airplane and the person next
to you is paid less, there's an element in us
that kind of objects to that. That said, someone pointed
(14:45):
out fairness is sort of a social construct, and it's
possible that our notions of this could change. I mean,
for instance, with stocks, if someone bought Microsoft stock at
forty and you bought it at ninety, you don't hold
anything again, right, right, But going back to your pricing
Macy right, who thought it was immoral? How do you
(15:06):
think about that? Do you think it's immoral for consumers
to pay different prices? For instance, if you buy a Mercedes,
should the diapers you're buying for your kid costs more
than the diapers somebody who drives Undai is paying. I
don't know. I honestly don't know there is. I think
if there's a degree of transparency what's going on, then
(15:28):
I think maybe it's fair where I think some of
the things that really raise my eyebrows, or where they're
doing things and profiling you in ways based on the
fact that you have been browsing elsewhere that some retailers
have been accused of doing this. But can it be
fair given that when we're talking about retailers manipulating prices,
(15:49):
we're not really talking about human head buyers manipulating prices.
We're talking about algorithms manipulating prices based on big data, right,
So how transparent can it be? Doesn't that fly in
the face of transparency? Yes, yes, and and yes, And
actually what kind of troubles me is that when some
(16:11):
of these sort of irregularities surface, Amazon and other places
can very easily say we're sorry, there was flying on
the oitment. There was something bad with the algorithm, the
algorithms at fault. It was unintended, and we will never know.
Maybe it was, maybe it wasn't, And it almost doesn't
matter if it was unintentional. It's a little bit like
the malfunctioning robot. Hell, right off, how is malfunctioning? Doesn't
(16:33):
matter why exactly? When reading through this, I was fascinated
to find that sometimes Yeaho's Finance did a piece on
how clothing prices are affected by this too, and address
that's available in a size small might cost more and
a size large, And that seems maybe there's a lot
of big data going into why that's happening. But doesn't
that just seem wrong on the surface, or are we
(16:56):
just are we just living in an old construct? Well, interestingly,
the technical economics term for this is price discrimination, which
economists use not in the way that you and I
mean discrimination, but it's a great question, like is this
basically discrimination? There was three researchers from Spain who did
an interesting study where they set up three different sort
(17:18):
of phony personas based in different places in the US. Basically,
these were like dummy terminals where one of them just
did a whole bunch of bargain shopping for you know,
a couple of weeks, one of them looked at high
end goods, and the third was somewhere in between. And
they found indeed that these people got offered different prices
(17:38):
even when they typed in on the search engine, like
different products would be shown to them. Wow. So I
think there is something kind of a haunting and spooky
about the unknowability. It's almost sort of like Heisenberg's uncertainty.
If you can't know where the electron is just by
the very fact you're looking at it. In some cases,
you know, the price could really not exist until you
(17:59):
look at it, and the act of looking at it
sort of creates the price. So I think there's going
to be We're gonna have to think about this a
lot that's actually fascinating because it all does once again.
I mean, Heisenberg's uncertainty principle couldn't be more removed from
your concept of transparency. Right, The price not existing until
you look at it is again the opposite of transparent.
(18:20):
And that's the thing we all feel like if we
could just understand why right exactly? And here's the thing is,
there's studies showing that even when people are shown their
own irrational biases, that they still don't adjust, like we
are just suckers for seeing twenty percent off thirty percent off.
And you know the work by knomen In Tversky which
(18:43):
has been heavily used in this field, that we hate
the feeling of loss. We want to avoid that, and
when we see the possibility of a deal going away,
we experience that as a possible loss. And there's been
he studies showing that we are hardwired to jump at
(19:03):
the feeling that we've won, even if economically we end
up with fewer dollars at the end. Well, that's part
of what MADEI based so compelling, Right you won, which
all that it meant was that you were willing to
pay more than anybody else. Yes, but you won you
write about another fascinating concept that existed in the old
world of retail as well. So, but the left digit
bias just touch on what that is, the left digit bias.
(19:25):
So in the dark ages before there was any data available,
I was talking to an economist used to teach at
University of Chicago back in the early nineteen eighties, and
they acquired data from the new scanners at the grocery
chain Jewel, and he said it overturned a lot of
what he'd been teaching in class. For instance, he'd been
(19:46):
teaching that the notion that pricing something at two ninety
nine or two ninety eight increased sales was a myth.
He says, actually it was an artifact from the days
when retailers were suspicious of cashiers taking something out of
forced them to make changed so they wouldn't pocket any
of money themselves. Well, he says, they got the data,
and he says it turned out the effect was huge,
(20:06):
that two ninety nine will sell a lot on especially
on a car, you know, maybe not so, but on
a can of tuna exactly. And that just basically gets
to our kind of limited attention spanner or ability to
process that much information where we can't function like a computer.
We walk into a store, and so we pay the
(20:27):
greatest attention to the most important digit, which is the
one on the left and rose. For years have known that,
which is why, for decade or for time, you know,
time out of mind, they've known to set the price
of milk and eggs quite low because they know that
people have a pretty good fix on what that price
(20:47):
should be, and so they use that to as a
proxy to be like, is this place price well or not?
And then knowing that they're not going to be as
comparative scrutinizing numbers of other products as much. So. The
interesting point there, too is that it's not like this
old world was perfectly fair to consumers. We were getting
(21:09):
We were getting scammed in the old world, perhaps just
in a different way than we are in the new world. Yeah,
but in a much smaller way, in a much smaller way. Yeah, Yeah,
I guess I can see that paying to ninety nine
or missing out on the slightly cheaper artichoke at the
grocery store is a little bit different than having an
entirely different price for an expensive dress presented to you online,
(21:32):
right right, Yeah, that makes sense there was another piece
of data, more proof that man is not a rational
animal in your piece that Amazon would drop prices on
expensive items like TVs on Black Friday, and then that
hike the price of the less expensive stuff needed the cables,
for instance, needed to connect the TV, knowing that we
would not look as closely at we being the consumers,
(21:54):
would not look as closely at that. Right Exactly, there's
you bought the TV. Now you do the cheaper at all.
But they're maybe the lost margin could be made up
hugely just in the price of cables, so they can
figure out ways to take advantage of how uneconomic we
actually are, how irrational we can be, just on a
whole new scale. Now then then the old world. I mean,
(22:16):
it's made me think about my own shopping Happit's like
when do I stop? I don't always like to think
about that, but but when do we stop and actually
think about the price, and when do we just sort
of buy, Yeah, that looks right, and you know it
varies hugely, and when do you what makes you stop
and think when something's more expensive? I mean, if you're
buying a house or car, you're not going to be like, oh,
(22:37):
it's it's only ninety nine, that's ten. You know this, right,
you know, just all the micro purchases that you do
online where you've got your credit card out and yeah,
I'll buy this Starbucks. Great example. You know people who
then tally up how much Starbucks coffee they've drunk in
the past year, and it's like three thousand dollars right right,
And they could have paid a month of rent with
(22:57):
their Starbucks bill. So to this notion that it's a battle, okay,
I'm going to start with just us and retailers. Who's winning.
After you reported this piece, did you feel like, oh,
the well educated consumer who's willing to invest time in
price shopping can come out ahead in this game, or
did you feel like we're screwed. Person who's stuck with
(23:18):
me most is someone knows a great This name is
Bonnie Patton. She had a Truth and Advertising dot Org
and I asked her about her own shopping habits sort
of at the end of the interview, just like what
about yourself? And she said, as a general matter, I
find it so difficult to determine the actual price of
the product that when she's shopping for her kids, she
(23:38):
just makes all her decisions at the cashier. She just
picks up clothes, doesn't think about price until she gets
to the register, and if it comes out to be
too much, she says, I don't want it. And then
I asked, well, what about for yourself? And she says, well,
I don't shop for myself. I mean, what do you mean?
She's like, I don't shop for myself, and she basically explained,
like this has gotten so crazy. It's twenty percent off
(24:00):
of fifty percent and this adds like ice. She can't
handle the math and she just as a result, stopped
buying things. For one good practical piece of advice is
you just like ignore anything with a percentage symbol after it.
Why percentage? Why do you ignore the percentage symbol? Percentage
symbols speaks to our like human craving to win at
(24:21):
a deal. But if you looking at a lot of stores,
you know everything will be twenty percent off fifty percent
off the whole MSRP Manufacturers suggests retail price that increasingly
is seen as kind of a joke that the FTC
doesn't enforce the rules. I mean, notionally, it has to
(24:41):
be sold somewhere at the listed price. But the few
times people have looked into it, often that product was
never sold at its quote unquote list price. Okay, but
wait before we go back to that, So you're essentially
telling me that you came out of this piece thinking
the only way to win is to just drop out.
There's no oh, wait, win other than just drop out.
(25:02):
I guess I'll stop looking at percentages. Okay, I just
look at the dollar amount, which is hard and thinking.
Sometimes it's a huge percentage savings, but it's it's a
tiny dollar amount that you're saving. And I did all
this extra work to save seventy five cents. So if
you can, maybe as a consumer, level the playing field
(25:22):
a little bit by ignoring percentages, perhaps by checking out
what about between the third combatant in this Amazon who
wins there? Between retailers and Amazon and US? If you
had to rank them in order, what's Amazon? Amazon wins Amazons?
So how does this play out? I mean, in the end,
what retailers are trying to do? And I found this
(25:43):
fascinating survey here that retailers argued only three percent of
retailers believe their current model is going to remain sustainable
in the next five years. So they're trying to do
this to survive two right, and you can see back
to your point about economic irrationality and see how this
doesn't win for them if they're just slashing prices in
(26:03):
response to what Amazon's doing. So how does that aspect
of it shake out? Well? Guru at Boomerang Commerce had
a really interesting and from a retailer's standpoint, scary chart.
The title of it was I think the crushing point,
and it was that's frightening. But it was a chart
that showed like years from nineteen ninety till now, and
(26:25):
it mapped different categories like similar electronics, books, toys, and
the percent of those sales that move online and what
did show and then it lists bankruptcies in each sector.
So Circuit City that got the toys are us so
called category killers who are now being killed themselves. It
(26:46):
happens around the twenty five percent mark, so twenty five
percent of sales are online and in that industry, and
that means the retailers start to go bankrupt. Yes, because
the consumers at that point have so much power and
so much power to comparison price online, comparison shop online,
that it's just um. It usually sets off a vicious cycle,
(27:07):
like they start cutting prices, cutting back on staff, cutting
back radio, shack trapping, this kind of cycle. They offered
really cheap batteries for a long time, but that just
killed their margins. And meanwhile, you're taking away all the
things that would drive people to a physical store in
the first place, like some customer service, you know, human touch.
(27:29):
You know. So freetailers are gonna win at this game
or have a chance. It's going to be online. They're
they're not going to win in a physical setting. Well,
I wouldn't go that far. I don't know. I don't know.
I mean, if the past present anything is that we
don't know what's coming in the past. It passed this prologue.
Who the hell knows, right, Yeah, exactly, you know. But
(27:50):
I talked to one interesting company called Everlane, and so
they did this thing where they were like, we're gonna
be radically transparent about our costs on our website. They say, well,
we're making this pashmina shawl, and it's the price is increasing,
but that's because of the following things are happening in Mongolia,
and so that's why we're increasing the price. They don't
(28:12):
do discounts and their hope and the CEO who I
talked to was, you know, he was hopeful that this
might work. He was sort of skeptical. Okay, if he
used the word hope and hopeful, I hope it's not
a strategy. Who said that, Well, is this? Is this?
So is everlain just the lone resistance and doomed resistance
(28:33):
to this or or do you think they've got a chance. Well,
there's been other cases where you see, like pay what
you want models, radio hit, Radiohead did that early with
one of their albums and yeah, and the findings on
that are sort of interest, you know, like some people
will actually pony up what they consider to be a
(28:53):
fair amount of money. Maybe it's not unlike being in
a museum. Whether it's a suggested donation. I have no
idea if that's sustainable or doable thing. But it's being tried,
so you're not really making any bets between who comes
out on top. It's just all a moving puzzle right now. Yes,
but it sounds like if you had to place your
bets in one place, it would probably be on Amazon. Yes, yes,
(29:16):
So do you see are there markets where it's different
where consumers have more likelihood of coming out on top.
And are there markets, whether it's for online goods where
you're more likely to be suckered? Does it vary by
category of purchase? For example, if clothing is maybe more
emotional and perhaps I don't know, electronics are less emotional,
that might be totally wrong. Would be for me, but
(29:38):
maybe not for everybody. Yeah, I think the more it's
a commodity and less specific. I mean, if it's a
coat that you're only going to see at this one store,
then we're probably less price sensitive to something than like
getting the TV, where there's a lot of places we
can get a TV. And what do you think happens
on the legal side? Have you seen any did you
(29:58):
hear of any cases being around this concept of discrimination
or is it a murky area legally? Thus far it
is a murky area legally, to say the least. There
was a famous gaze back in two thousand and seven,
or the California man bargain hunter who he thought he
had scored big when he found a patio set on
overstock dot Com. When I showed up at his house,
(30:22):
he's unpacking it and he noticed is a price tag
on it. But it was a nine hundred ninety nine
that it was on sale at overstock for four forty nine.
Walmart price was two forty seven. That was on the
price tag. Oops. Yeah, so o our bargain hunter doesn't
feel so good at this point. Yes, so, in fact,
(30:42):
he had not scored the deal he had thought. He
sued and actually won in a California judge awarded him
six point eight million dollars in civil damages. Wow. Yeah,
but these cases are fairly rare and it takes like
a lot of In that case, they got access to
internal emails of the company, were it made cleared that
(31:03):
they were aware of what was going on. But it
comes back to this point you made earlier about the
MSRP or manufacturer suggested retail price even in the old world,
not being all it was cracked up to be, right exactly. Yes,
so well, thank you. I think I'm going to be
far more frightened and aware in my online shopping from
now on. And thank you for coming on, thanks for
(31:25):
having me. Okay, Well, that Overstock lawsuit raises an interesting prospect.
Maybe we can win back the money we're losing to
newly empowered retailers by filing lawsuits. I'm kidding, of course,
but the questions raised by this are pretty disturbing and
even profound. How can we keep ourselves from being yes
suckered by retailers? Can most retailers find a way to
(31:50):
compete with Amazon? And is this brave new world what
any of us would consider fair? My takeaway there are
no easy answers. Stay tuned and shop smart. Makia Killing
is a co production of Pushkin Industries and Chalk and Blade.
It's produced by Ruth Barnes and Laura Hyde. My executive
(32:12):
producers are Alison McClain, no relation in making Casey. The
executive producer at Pushkin is Mia Loebell. Engineering by Jason Rostkowski.
Our music is by Jed Flood. Special thanks to Jacob
Weisberg at Pushkin and everyone on the show. I'm Bethany mcclin.
Thanks so much for listening. Find me on Twitter at
(32:33):
Bethany mac twelve and let me know which episodes you've
most enjoyed.
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