The idea of an unbiased, impersonal Internet is fast giving way to an online world that, in reality, is increasingly tailored and targeted.
It was the same Swingline stapler, on the same Staples.com website. But for Kim Wamble, the price was $15.79, while the price on Trude Frizzell's screen, just a few miles away, was $14.29.
A key difference: where Staples seemed to think they were located.
A Wall Street Journal investigation found that the Staples website displays different prices to people after estimating their locations. More than that, Staples (SPLS) appeared to consider the person's distance from a rival brick-and-mortar store, either OfficeMax (OMX) or Office Depot (ODP). If rival stores were within 20 miles or so, Staples.com usually showed a discounted price.
"How can they get away with that?" said Frizzell, who works in Bergheim, Texas.
In what appears to be an unintended side effect of Staples' pricing method -- likely a function of retail competition with its rivals -- the Journal's testing also showed that areas that tended to see the discounted prices had a higher average income than areas that tended to see higher prices.
Presented with the Journal's findings, Staples acknowledged that it varies its online and in-store prices by geography because of "a variety of factors" including "costs of doing business."
For years, the Internet, with its promise of quick comparison shopping, has granted people a certain power over retailers. At the click of a button, shoppers could find a better deal elsewhere, no travel required.
But the idea of an unbiased, impersonal Internet is fast giving way to an online world that, in reality, is increasingly tailored and targeted. Websites are adopting techniques to glean information about visitors to their sites, in real time, and then deliver different versions of the Web to different people. Prices change, products get swapped out, wording is modified, and there is little way for the typical website user to spot it when it happens.
Not popular with shoppers
The Journal identified several companies, including Discover Financial (DFS), Rosetta Stone (RST) and Home Depot (HD), that were consistently adjusting prices and displaying different product offers based on a range of characteristics that could be discovered about the user. Office Depot, for example, said it uses "customers' browsing history and geolocation" to vary the offers and products it displays on its site.
Offering different prices to different people is legal, with a few exceptions for race-based discrimination and other sensitive situations. Several companies pointed out that their online price-tweaking simply mirrors the real world. Regular shops routinely adjust their prices to account for local demand, competition, store location and so on. Nobody is surprised if, say, a gallon of gas is cheaper at the same chain, one town over.
But price-changing online isn't popular among shoppers. Some 76% of American adults have said it would bother them to find out that other people paid a lower price for the same product, according to the Annenberg Public Policy Center at the University of Pennsylvania.
"I think it's very discriminatory," said Wamble, an insurance account manager who recently priced the Swingline stapler for the Journal. She was just 10 miles or so down the road from Frizzell, but she saw higher prices on the Staples website than Frizzell did for all five products tested. Items tested included a pack of Bic pens, a case of orange masking tape, a set of crimped-end mailing tubes and a big safe.
Distance to a rival's store
It remains unclear precisely what formula Staples used to set online prices. Staples declined to answer detailed questions about the findings. It told the Journal that "in-store and online prices do vary by geography due to a variety of factors, including rent, labor, distribution and other costs of doing business."
It is possible that Staples' online-pricing formula uses other factors that the Journal didn't identify. The Journal tested to see whether price was tied to different characteristics including population, local income, proximity to a Staples store, race and other demographic factors. Statistically speaking, by far the strongest correlation involved the distance to a rival's store from the center of a ZIP Code. That single factor appeared to explain upward of 90% of the pricing pattern.
What economists call price discrimination -- when companies offer different prices to different people based on their perceived willingness to pay -- is commonplace and can be beneficial. Movie theaters give senior-citizen discounts. One traveler's willingness to pay top dollar for an airplane seat might mean other people will pay less.
In other cases, though, shoppers can be the loser. That same airline might easily just pocket the big spender's extra money and leave other prices unchanged.
Reinforcing patterns e-commerce promised to erase
Of course, not all price differences are instances of price discrimination. Prices driven down by competition wouldn't generally be considered discriminatory, for example.
Basing online prices on geography can make sense for various reasons, from shipping costs to local popularity of a particular item. Some retailers might naturally cluster in specific areas as well -- a prosperous suburb, say -- boosting the competitive pressure to discount.
But using geography as a pricing tool can also reinforce patterns that e-commerce had promised to erase: prices that are higher in areas with less competition, including rural or poor areas. It diminishes the Internet's role as an equalizer.
It is difficult for online shoppers to know why, or even if, they are being offered different deals from other people. Many sites switch prices at lightning speed in response to competitors' offerings and other factors, a practice known as "dynamic pricing." Other sites test different prices but do so without regard to the buyer's characteristics.
The Journal's tests, which were conducted in phases between August and December, indicated that some big-name retailers are experimenting with offering different prices and products to different users.
Some sites, for example, gave discounts based on whether or not a person was using a mobile device. A person searching for hotels from the Web browser of an iPhone or Android phone on travel sites Orbitz and CheapTickets would see discounts of as much as 50% off the list price, Orbitz said.
Both sites are run by Orbitz Worldwide (OWW), which in fact markets the differences as "mobile steals." Orbitz says the deals are also available on the iPad if a person installs the Orbitz app.
"Many hotels have proven willing to provide discounts for mobile sites," said Chris Chiames, Orbitz's vice president of corporate affairs. Hotels on Orbitz mobile sites also offer discounts "that might target shoppers in a specific geographic region," as determined by the physical location of the user, as well as "other factors."
At home-improvement site Lowe's (LOW), prices depend on location. For example, a refrigerator in the Journal's tests cost $449 in Chicago, Los Angeles and Ashburn, Va., but $499 in seven other test cities. Lowe's said online shoppers receive the lower of the online store price or the price at their local Lowe's store as indicated by their ZIP Code.
Home Depot's website offered price variations that appeared to be based on the nearest brick-and-mortar store as well.
More from The Wall Street Journal
The wireless carrier reportedly is nearing the launch of its own pay-as-you-go service, adding a layer to the carrier's evolving prepaid strategy.
Sprint Nextel (S) reportedly will launch its own no-contract, pay-as-you-go monthly mobile phone service later this month.
The Android Police blog reports that Sprint will launch its prepaid service on Jan. 25, initially offering two smartphones and two basic phones. The smartphone plan gives users unlimited talk, text and data for $70 a month. Sprint's basic phone plan costs $50 a month.
The information reportedly comes from internal Sprint documentation.
Shares in the network for professionals have outperformed all other social media IPOs. Don't expect the stock to slow down anytime soon.
There's no such thing as a sure thing in the stock market. Just look at Apple's (AAPL) performance over the last months of 2012. It is particularly dicey to speak of "sure bets" in the social/Internet space. Emotions, noise and media-driven hysteria often dictate what happens with these names.
Consider Facebook (FB), which was adored by the media before its IPO and loathed after it. It got so bad that people were ripping Mark Zuckerberg, the company's co-founder and chief executive, for taking a honeymoon. Now, with the stock rising -- because things never were quite as bad as purported -- there's less hate.
Large-cap technology companies offered wary investors what they wanted in 2012: stable earnings at a reasonable price. And, increasingly, a regular dividend payment.
Blue-chip tech stocks are benefiting from investors' search for stability. Stellar gains by such stalwarts as Oracle (ORCL) and eBay (EBAY) have helped lift the Nasdaq 100 Index ($NDX.X) of major technology companies to a 14.4% gain year to date, a bit better than the broader market, as measured by the Standard & Poor's 500 Index ($INX).
Simply put, big technology has never been stronger.
The industry is sitting on record earnings. In fact, earnings of big technology companies are well ahead of where they were 12 years ago, when the Nasdaq Composite Index ($COMPX) briefly crossed the 5,000 mark.
More companies will build private clouds in 2013 while paying for redundancies from commercial clouds supporting the same system, in effect creating a hybrid cloud.
This has not been a good year for Amazon.com's (AMZN) cloud computing service, at least at its Virginia data center.
That is the facility that on Dec. 24 suffered its fourth outage since April of last year; the latest event spoiled Christmas for Netflix (NFLX) and some of its 30 million subscribers.
This is not the way the cloud is supposed to work. The cloud is not a data center. Even a data center using cloud technology gets you just half-way to the cloud. A cloud is, in fact, a network of data centers, providing you with the redundancy and resilience of the Internet itself.
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[BRIEFING.COM] The major averages punctuated a solid week with a subdued Friday session. The S&P 500 shed 0.2% to narrow its weekly gain to 1.7%, while the Nasdaq Composite (+0.1%) displayed relative strength. The tech-heavy index finished the week in line with the benchmark average.
Market participants went into today's session expecting to hear some new insight from Fed Chair Janet Yellen, who delivered the keynote address at this year's Jackson Hole Symposium. Unfortunately, the ... More
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