Updated: 9/30/2011 2:11 PM ET|
10 big secrets of online retailers
Listen to the insiders: Free shipping isn't really free. You're better off pretending to be a new customer than showing any loyalty. And those stellar reviews? Forget 'em.
1. "The worse the retail forecast, the better the deals for you."
There's a silver lining for consumers in this rough economy: more-plentiful and better deals, says Lauren Freedman, the founder of online-retail consultancy The E-Tailing Group.
It's a simple rule. When sales slow down, retailers are forced to offer bigger bargains.
Keep an eye on shopping-related headlines as each quarter approaches. The darker the forecast, experts say, the better the deals for shoppers.
2. "Nothing's free -- not even our 'free shipping.'"
Little appeals to shoppers in a tight economy quite as much as the promise of free shipping. But beware, online buyer: Shipping isn't cheap, and the cost is usually covered elsewhere, says Stephanie Miller, of Return Path, an e-mail marketing company. The most common method retailers use to make up the difference is a minimum-purchase requirement. The downside is the temptation to add unnecessary purchases to qualify, goading you to spend more than you'd planned -- often more than the cost of your original purchase plus shipping.
How to avoid the lure of free shipping with strings? Visit price-comparison sites such as PriceGrabber.com to get relative pricing information on specific items, including shipping and taxes. Or if you're a frequent online shopper, sign up for programs like Amazon.com's Amazon Prime, which provides you free two-day shipping on all purchases for $79 a year.
3. "Ignore our stellar reviews."
Shopping for putters at Overstock.com recently presented an interesting challenge: Of the 20 listed with product reviews, 19 boasted an average user rating of at least four stars out of five. Unusual? Hardly. A study of 2.5 million online customer reviews by consultancy PowerReviews found that 84% awarded four stars or more. "It's people's natural inclination to say, 'Yeah, I bought a good product,'" says Christopher Bell, a co-founder of Dealhack, a discount site.
So do you go with the Nextt Pulse Series 1 mallet putter, which had reviewer Minnesota Rick gushing, "It looks great, feels good, and I'm draining everything"? Or listen to Davidt892, who says of the Liquidmetal FA-2, "Everything is dropping . . . because it rolls so nice"?
First, read between the stars. Look for details about the product; the more, the better, says Scott Silverman, the executive director of Shop.org, the online wing of the National Retail Federation. Some retailers such as Toys R Us and RadioShack ask reviewers to list pros and cons. And look for repeating themes: When reviews are at their best, they form a "community consensus on how products perform," says Jay Shaffer, the vice president of sales and marketing at PowerReviews.
4. "You can return anything . . . for a price."
As convenient as online shopping is for consumers, you can't exactly try out or try on what you're buying. Which means a lot of returns -- something many e-tailers seem to ignore. Sending back opened electronics, for example, can often mean paying additional shipping and restocking fees, which can run anywhere from 5% to 15% of the purchase price -- no small amount if you're talking about a $4,000 plasma TV. Repeat returners can even get banned in some cases; Amazon will cancel your account if it sees what it considers an excessive amount of returns for your account. (The company says the decision to close customer accounts is never taken lightly and can be appealed.)
Happily, some e-tailers offer easy, postage-paid returns. For instance, you can buy three pairs of the same shoe in various sizes from Zappos.com and send back the two that don't fit free of charge. (One caution: The prices usually are higher to make up for it -- see No. 2.)
But despite their popularity with consumers, postage-paid returns aren't being embraced by online retailers across the board; only 31% of those surveyed by Forrester Research offer it. "There's a fear it could be really expensive," Forrester analyst Sucharita Mulpuru says.
5. "When it comes to tax-free shopping, location is everything."
Sometimes complicated is good. Like when the Supreme Court ruled in 1992 that state sales-tax laws were too complicated to burden out-of-state vendors with collecting them. That means when you buy from an e-tailer with no physical presence in your state, you pay no state sales tax (although technically it's your responsibility to report it on your income tax return).
But now the issue of what constitutes physical presence is up for debate. Amazon recently fought the state of New York over a 2008 collection law that counts "affiliates" -- that is, anyone who profits from sales -- as a physical presence. In 2009, the New York Supreme Court threw out Amazon's challenge, though, so Empire Staters pay sales tax in Amazon.com purchases, as do residents of Kansas, Kentucky, North Dakota and Washington state. Customers elsewhere in the country don't.
The stakes are high: Sales tax is the No. 2 source of income for most states, after personal income tax.
6. "Our security's a little iffy."
When shopping for a swimsuit online, you're probably already poolside in your mind, not worrying that a hacker might steal your credit card number. Unfortunately, that's exactly what happened to roughly 8,000 shoppers who made purchases at Swimwearboutique.com before March 2008. (The company says it has since switched to a more secure host.)
In most data breaches that affect online shoppers, the stolen data don't go past credit cards, so canceling yours should protect you. But be wary of retailers that ask for a Social Security number and your mother's maiden name, says Sheila Gordon, the director of victim services at nonprofit Identity Theft Resource Center.
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