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Google Shopping: Premium prices for consumers?

With Google (GOOG) the top dog in search, you might think Google Shopping would be a great resource for consumers. According to a non-profit advocacy group, though, consumers are more likely to see higher prices with the service than if they used other comparison-shopping engines.

In a new report, Consumer Watchdog says that its test of shopping sites found that people pay up to two-thirds more for a product using Google Shopping than if they had used a competing service. As part of the assessment, the consumer advocacy group shopped for 14 different items, including a camera, iPad, electric mixer, games and laptop. It picked one of the products in the Google Shopping results box, noted the price, clicked through to the merchant's site and then performed the same search on three competing shopping engines: Shopzilla, Pricegrabber and Nextag.

In eight out of 14 products, the group says that it was able to find a lower price using a shopping site other than the Google service. Consumer Watchdog, which has often been critical of Google in the past on privacy grounds, claims that the reason is two-fold. One is that although Google's previous shopping service consisted of a straight search based on best price, the company now charges retailers for placement, with higher placement in search results costing more.

As a result, the organization claims, retailers pass the additional costs on to consumers in the form of higher prices.

Consumer Watchdog also contends that Google favors its own services in search results, so consumers are more likely to use its price shopping service and, as a result, pay more.

However, the structure of Consumer Watchdog's test is questionable in a number of ways. It assumes that a product's price should be the only criterion in listings and not availability, product rating, customer service, retailer reliability, shipping charges or other factors that might affect a consumer's decision. If an online retailer generates many consumer complaints, it might be that the low price also purchases a major headache.

Consumer Watchdog also only compared the low price found on Google to the lowest price of the other three engines. When Google's indicated price was more expensive than the lowest of the other three, were the remaining two search engines also delivering prices lower than Google's? There is no way to know, because the presented data doesn't show whether all the sites took turns being the most expensive.

Furthermore, to really argue that retailers had to increase prices because of paying Google for placement, a test should determine whether the prices from the same retailers remained the same. CBS MoneyWatch searched for the TRO480BS Black and Decker toaster oven model that Consumer Watchdog used as a test item in which it listed the Google-provided low price as $42.28, versus a lower price of $34.99 made available on one of the other engines.

When searching this way, Google Shopping showed new unit prices starting at $34.99. Shopzilla showed a price of $39.99, Pricegrabber had the product for $37.93, and Nextag, $34.99. And that doesn't even take into account the potential differences between retailers.

Using search engines can be tricky, because a slight change in how search terms are arranged can significantly change the results. It makes a test such as the one Consumer Watchdog undertook far more difficult and unreliable than it seems.

That said, consumers might have reason to be wary. With the amount of information that Google collects on users, adjusting prices to behavioral patterns through automated coordination with retailers could be all too easy, putting people at a significant disadvantage.
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