'Stupid' Retailing Tricks

Will Smith poses with his mother, Carolyn, left, and his wife, Jada Pinkett Smith, on the red carpet at the 64th Annual Golden Globe Awards in Beverly Hills, Calif., on Jan. 15, 2007. Pictures: Celebrity moms GETTY IMAGES/Kevin Winter

When two different people decide to click through and add the identical item to their shopping carts on exactly the same e-commerce site at exactly the same time, shouldn't the price also be exactly the same?

Not necessarily.

Amazon.com is on the receiving end of some embarrassing questions about different prices charged to different customers who bought or planned to buy the very same items.

Amazon spokeswoman Patty Smith tells CBSNews.com that the company did do that on two different occasions, last spring and early this month, but was not engaging in dynamic pricing.

Dynamic pricing is the far from rare but little talked about policy in which retailers adjust prices depending on information about their customers -- for example, zip codes suggesting which customers are more likely to be able to pay more.

The strategy isn't new, but e-commerce can provide retailers with new tools to carry it out -- for example, software which automatically sorts out the customers to be treated in different ways.

Amazon.com says it was only doing some random price tests and stopped as soon as complaints began rolling in.

Smith stresses that Amazon.com did not use demographic or any other customer-specific information in the price tests, which were "completely random" and done to determine the impact of price alone as the determining factor in buying decisions.

She says the price tests were done on "only a very small number of DVDs in our store, and if a customer clicked on one of the select DVDs -- for example, the Men in Black DVD -- a customer would have seen one of three prices: our regular price, a price that was slightly higher, or a price that was slightly lower."

Smith could not release the exact number of customers involved but says as a result of the company's new policy on the subject, refunds were sent out to all customers who paid the higher price during the September price test period.

"Amazon, like a lot of online retailers, tests various aspects of our site to see how it resonates with consumers," explains Smith.

"Price is also one area that we test, to determine what impact price has on a customer's decision to purchase an item, because we know that price is just one factor," says Smith, who says "customer reviews, editorial reviews...downloadable clips" all play a role.

Smith says Amazon.com doesn't currently plan any new price tests but if it does, at the end of the test period, customers who paid the higher price will automatically receive refunds.

Another Amazon.com spokesperson, Bill Curry, hit a slightly different tone in his comment on the flap.

"This was not dynamic pricing. We don't do that and have no plans ever to do that," said Curry, in an interview with The Washington Post.

"Dynamic pricing is stupid, because people will find out," Curry told the newspaper. "Fortunately, it only took us two instances to see this."

Amazon's use of different prices for identical items was unmasked early this month when DVD buyers at DVDTalk.com started comparing notes on prices and got suspicious.

Overall, it's been a busy week for Amazon.com founder Jeff Bezos.

The company's partnership with Yahoo!, the world's most popular Internet portal, ended Tuesday and with it, the deal in which all Yahoo! searches also returned links to books on the subject available at Amazon.com.

Yahoo!'s new partnership for that service is barnesandnoble.com.

Amazon.com was actually the one to end the Yahoo! partnership, choosing instead to continue with a similar arrangement with AOL which Amazon.com says has been more "cost-effective" for the retailer.

Speaking at an investors' conference in Reno Tuesday that was broadcast over the Internet, Bezos said he expects Amazon.com to meet the target of 50 percent annual growth in online sales that's been projected through the year 2010.

The company will not comment on when it expects to turn a profit but one analyst says it could be just about a year away.


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  • CBSNews.com staff CBSNews.com staff

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