In Scott Adams' The Dilbert Future (1997), he introduced the word confusopoly. The word is a portmanteau of confusion and monopoly (or rather oligopoly), defining it as "a group of companies with similar products who intentionally confuse customers instead of competing on price". Examples of industries in which confusopolies exist (according to Adams) include telephone service, insurance, mortgage loans, banking, and financial services. [from wiki]
The central idea is that if companies made it easy to compare their products, then those companies would be forced in to a detrimental competition on price. So instead, if each company offers a slightly different package, with different feautres and prices, then simple comparison doesn't exist.
This strategy was very successful in extracting differential payments from consumers. Prior to some recent regulatory reforms, the most successful 5% of mortgage shoppers negotiated fees of $6,000 on a $200k mortgage. The least successful 5% were charged fees of $18,000. These are borrowers with equivalent financial circumstances and credit rating.
Much of this is due to the complexity of mortgages. So I'm dubious that this sort of apocalypse will prove true for all types of products. But I do expect to see it increasingly in categories where there is high product complexity, the product isn't easily compared based on technical specifications, brand reputation isn't important, and/or there is little value in cultivating customer loyalty (for example, I may purchase a couch once every 15 years).
With the tools and information available now only a fool would get stuck with $6000 on fees (unless they're intentionally paying points to knock down the interest rate).
That said, thanks to recent reforms, an individual brokerage can no longer charge two borrowers will different commissions for the same mortgage. However, two different brokers can each charge very different fees. Quicken Loans, one of the largest mortgage originators out there, is notorious for charging much higher commissions than nearly anyone else. And thanks to the difficulty of comparison shopping, they're still successful in obtaining premium prices... even in the age of Zillow and Google.
I always point to this as an example of how something reasonably close to a large, lightly-regulated market can still produce inefficient and negative outcomes for our society.
I'm dubious that this practice is going to work so well for, say, socks. There is no law against trading socks on the secondary market.
So maybe there's more mileage in the idea of "airlinification" than I initially thought. Though Amazon gets away with it (to the extent that they do) mainly because their "convenience" argument is pretty strong for virtual goods: You don't have to warehouse the books, tote them around, re-buy them if your house burns down, etc. These selling points do not apply so well to airline tickets (though airlines will certainly try to sell you on the awesome convenience of non-tradable non-refundable e-tickets), let alone my metaphorical socks.
Still, though. More and more things can be virtualized or time-shared. It is not at all hard to imagine carshares like Zipcar going the way of airline pricing, for example. Yikes.
I suspect that there will always be people who prefer the more straightforward style of pricing. After all, knowing exactly how much you're going to pay and knowing you won't be paying for any unnecessary hours counts as a feature for a lot of people. It's like buying a Linode. It might not be the cheapest option for all use cases, but it gives you peace of mind.
People who are less price sensitive don't clip generally coupons.
The same argument applies to socks - if you aren't price sensitive then you'll pay for new socks. Others may well be happy buying socks on a secondary market, so stores can provide different pricing for them (using coupons or whatever).
But this hardly rises to the level of an incipient retail apocalypse. It isn't even new. This is nineteenth-century stuff.
The question is: Will differential pricing be pushed farther, now that computers are available to dynamically segment the sock market in real time? (Perhaps wool socks will cost more depending on the current local wind chill factor?) Probably. But there's a real cost in trust and goodwill and complexity that must be balanced against the advantages of differential pricing. In general, customers don't love being segmented, particularly in ways that aren't long-standing traditions (as clippable coupons are) or that don't fall along culturally accepted lines (we'll pay more for goods with famous people's names on them, or with made in the USA labels on them - these are just and proper activities in American culture - but we will be less pleased to pay significantly more for goods at 4pm than we do at noon, or to pay more if we're a woman than if we're a man). And so customers will tolerate only so much market segmentation before they start looking for cheaper or more transparent alternatives: Join Costco, shop Priceline, bid for the goods on eBay from a grey-market reseller, use your wife's Amazon account instead of your own, make up some fake demographic information, whatever.
And my hypothesis is that, if you think about pricing from the perspective of the airline industry, you're going to overestimate customer tolerance for fancy pricing games, because the airline-ticket market is constrained in unique ways that don't apply to other industries.
Personalised pricing, complex pricing structures (to prevent comparison) and other newer retail tricks can be overcome fairly easily. For example, proxying purchases through intermediate parties that have access to pricing closer to the point of equilibrium. Or grouping buyers together to starve an industry or supplier of cash flow until pricing requirements are met.
This is a game theory exercise where both buying and selling agents are involved. It is unwise to assume that sellers will have the upper hand. As many cost comparison websites have shown, a market also exists amongst buyers to force prices down to a level of equilibrium.
A wrinkle for the retail apocalypse: wonder why X/Y/Z is closing but you can find a bank branch and cell phone shop within one block of any arbitrary location in a middle class neighborhood in an American city? Answer: lucrative backends to their retail transactions. (Starbucks is essentially the same, in that siting is less about selling coffee and more about selling habitual coffee consumption.)
It's one of the things that WalMart makes their money on. They grow traffic to their stores with huge discounts on visible necessities like toilet paper, competitive grocery prices, etc.
But when I look at their prices for less common items, their audacity is sometimes staggering. I remember once being unable to find a cheap surge protector for less than $30, and thinking, "I wonder if that's by design. I came here for milk and a car battery -- they know I'm not going somewhere else for my 'in-between' items."
I seem to remember a discussion on HN once around the legality of variable pricing -- it seems a fascinating topic and I'd love to read a writeup on the process, and especially the software that WalMart or any other large chain has for pricing their goods.
I don't know particular US laws, but I imagine it would be a legal issue for me to have a separate "for whites" price and "for blacks" price where there were significant differences.
And, if it'd be possible for someone to, taking into account the above, point me what exactly I did wrong in the original comment, so that I can avoid such mistakes in the future, please do so, as being a non-native speaker there's no other way for me to know other than asking someone who is. I'd love to read it, and be sure I'll start applying the lesson immediately!
In informal settings, you can generally call people of western European descent "white" and people of African descent "black," but for other races, referring to them by stereotypical colors will get you pegged as culturally insensitive at best.
Couple that with the fact that blanket statements about races are treading on thin ice even in the most benign circumstances and you'll see what happened here.
Last month I had to choose an ISP in Spain. The experience was painful. Every company has only "special offers" in the front page and I had to dig to the very deepest of their webs to find the real numbers and, even then, cut through a lot of BS, intentional poor phrasing, and all kind of misleading statements.
The provider I chose was not better than the rest. The real price was striked-out and a lower price, only valid for exceptional circumstances presented as the norm.
On the phone it's worse. They consistently scam people.
I spent several hours hating all them. But that's a recurring expense of forty euros a month, plus a hundred up front. If this scheme was imposed for small purchases, no way. Either I would choose a simpler retailer, even if more expensive, or wouldn't buy at all.
UK mobile phone contract pricing is very frustrating. Free market should mean customers shop around to get the best deal. Providers thwart that by including lock-ins of various forms (contract lengths, cost of new phones, making it tricky to keep the same number, making it tricky to move a phone to a different network.) and by having a bewildering array of different contract types.
> If you earn 50% more than average you can expect your grocery prices to begin creeping up, because your suppliers can infer what's in your wallet
Or maybe the retailer wants your custom, and thus offers you cheaper prices to secure it. Poorer people spend less money and generate more cost per visit, thus are not as attractive. Retailers don't want to exclude those customers, but do want to get more cash out of them.
Have you tried to compare prices of mattresses? One way mattress sellers prevent price comparison is by identifying mattresses with unique names. They may have the same brand, or even specifications.
In addition, we are now seeing a steady growth of private label offerings by retailers. Initially these are in the low priced/budget segments, but increasingly the retailers are moving into mid-range products, where margins are higher, and effectively pushing out branded goods, where margins are driven down by price competition.
If sellers want to make brand names, model numbers and other identifiers redundant, buyers will eventually be the beneficiaries.
Have you ever tried to go to a mattress shop and ask them about spring density, the gauge of steel used, and the spring layout on a mattress? These information is totally proprietary and the average salesman wouldn't know either.
In the case of mattresses, the size of springs isn't as relevant as the amount of sag in the bed when a 70kg person is lying on it. A more advanced measure could be the evenness of weight distribution across the mattress. These measurements are unlikely to be performed by consumers because of the time and effort required. However product review companies could generate revenue from selling consumers detailed comparisons/analysis of products.
Geek: "Hey, if you use this browser extension you won't get tracked."
Geek: "Did I mention you'll also get better prices when you shop online?"
User: "Sign me up!"
As someone intimately familiar w/3rd party seller feedback on Amazon, I can tell you that the feedback there is taken very seriously by 3rd party sellers, by customers, and by Amazon. If a seller drops below a rating threshold, they are warned, and if the poor ratings persist, they're given the kiss of death: their "Featured Merchant" status is revoked.
I've never heard any suggestion of these ratings treading "dangerously close to defamation."
IMO, online feedback / reputations are very successful at rewarding good sellers and punishing bad ones. So this paragraph is a pretty weak dismissal of customer ratings as a way of proving a value add.
Amazon sucks for discovery of things imo. At least for serendipity - in an extreme case, an acquaintance met his lover in a library...
Will those small retailers simply be replaced by affiliates who are content with earning 10% on their referrals? Is 10% a fair price for that kind of thing? And Amazon even seems to have a cap on how much you can earn, like if the item is really expensive you won't even get the full 10%?
I have always been a library lover, and even took a library science course (cataloging and classification) as an undergraduate elective. But from the beginning on Amazon I have liked the "customers who bought this also bought . . . " recommendations built from Amazon's database, and I have learned of many interesting books by Amazon's recommendations that I later bought. In library science, "browsing function" is discovery of books by scanning the shelves where books of similar classification are put, which groups books differently in each library (each library has a different collection, and some libraries are classified by the Dewey system, and some by the Library of Congress system, in English-speaking countries). Amazon does very well as a place to apply the browsing function, because its collection size is huge, and similarities of books can be scanned by author, by subject (Amazon has subject classifications for most of its books), by what readers have written reviews of them, and by what buyers have bought them. I now wish that my friendly local public library, which I use VERY heavily and where my second son volunteers, would implement browsing paths as varied and as powerful as Amazon's, and my local public library is already famous in many parts of the United States for having some of the most detailed cataloging and one of the most powerful and convenient online catalogs in the country.
starting with some of your favorite books to see what browsing turns up in each online catalog.
I've been trying to watch some of Amazon's free Prime video content, but it's very difficult - I have to wade through page after page of My Little Pony to get to anything I'm interested in. There is practically no discoverability features besides "customers who watched this also...", which is generally not very useful.
Moving ratings? They are so highly variable for media, and so subjective to personal taste, that they are practically useless. Global reviews work fine for electronics, but they fall apart utterly when applied to content. Go look at the star rating distribution for any reasonably controversial book - all over the place, and tells me nothing about how I would like it.
The MP3 store is similar. iTunes does a pretty decent job with Genius, but is still pretty poor discoverability-wise. Spotify's new-content discoverability is also extremely poor. Rdio is pretty good, but I would pay for a Pandora that plugs into a music store/subscription service. IMO this is some pretty lazy engineering - what works for selling DVD players does not work for selling content, but Amazon's UI for browsing digital video is practically identical to their physical-shopping UI, and that's entirely unacceptable.
How does the subject classification work? Maybe I don't see some features because Amazon Germany doesn't have them :-/
And regarding the small shops and discovery: The web is flooded with sites telling us about interesting products. do you really feel a lack of interesting stuff to purchase?
How do you stumble across a small online toy shop with a choice selection?
http://www.drtoy.com/ - seems more geared towards adults , helping them choose best toys for children.
http://www.scientificsonline.com/ scientific toys
http://www.yoyo.com is by amazon, looks pretty nice
http://www.designertoyawards.com/categories/20 they won an award
http://www.toptoysblog.com/ toys with reviews
It isn't harder than discovering interesting programming tools, for example , which is to say, pretty easy. But it's a lot of text.I wonder if there's something a lot more visual , video based for the children.
I would probably be able to pick something from the sites you found, but a real shop would still be more fun for now. Especially with the toys, it would for example be nice to check the kind of sounds they make. We just got two toys for Christmas that are unbearable...
I'm pretty sure that the much publicized "different customers see different prices on Amazon" debacle was just a simple A/B test, and not some complex scheme along the lines of, "Joe can afford to pay more!"
So you have a product that is priced like:
Amazon.com: $14.99 with $5 shipping (free for Prime)
3rd Party: $12.99 with $3 shipping.
Amazon will show Prime members the first one, and non-Prime members the 2nd one.
 Ignoring the $75 annual fee for Prime, of course.
But are you sure there's no evidence of what he references? He seems pretty explicit, and it seems a very odd conclusion w/no specific evidence: "prices on offer to different customers varying for the same product, presumably on the basis of the customer's willingness to pay more for goods in prior transactions."
Maybe someone has a real example though... I just remember the debunked ones.
different merchant offerings
limited availability offers disappearing
the "chosen" offer changing over time
multiple detail pages for the same item with different merchant offers
I am not ignorant of using them either, I used OSX and iOS for years and I say Android ICS is better, Ubuntu is better and new iterations of Windows certainly don't seem to be worse (although I have less data there).
People like to compare the latest OSX to Win95 or even XP (2001) but don't compare as often to the most recent offerings. There is a total intolerance to criticism. Android ICS has been said to be better than the latest iOS by multiple reviewers, so it's at least neck and neck with the last bit probably depending mainly on personal preference, but say that here and you will risk a downvote. In fact it's almost certain to get downvotes and they will only sometimes be balanced out but people appalled at the abuse of the voting system being used to just hammer someone who doesn't belong to the group.
But neck and neck is sufficient for my point, they don't have a monopoly on good design and they certainly aren't in some class of their own "luxury" above the normal products. They are just another computer company, as they always were. People who, in modern capitalism, have tied part of their egos and identities to the fate of one of the largest corporate legal entities in the world will no doubt be hurt by this.
A more likely scenario? Price will equal convenience. Retail stores will be more connected to the internet so that you can see who has what item in stock within 5 miles of where you are. The Big Box retailers do this already.
We will then see a new breed of startups based on adding impulse purchases to the item that you bought online and are picking up locally (loss leaders online).
The key exceptions to this are with goods or services that are both highly perishable and very expensive -- such as airline tickets. An empty seat on an airplane is a non-storable asset which "perishes" the instant the plane takes off; therefore the airline is highly incentivised to sell it at _any_ price -- but obviously as high as possible -- rather than let it expire. Meanwhile, for most consumers, airline tickets are bloody expensive to purchase, and it's worth no small amount of hassle to find a good price. Thus there's significant motivation on both sides to fuel a constantly-evolving algorithmic war between airline pricing schemes and intelligent price-comparison agents.
A seat at the barber's is also "perishable" in a sense, in that any time a client isn't sat in it, the barber is losing potential revenue. However it's only fractionally perishable: unlike an plane about to close its doors, a barber's seat that is unoccupied in any given minute can still get a client the next. So there's not the same do-or-die motivation to fill that seat, which diminishes the need for clever algorithmic pricing. From the consumer's side, meanwhile, a haircut is a relatively trivial expense -- not worth the time or effort to try to scrounge a better deal. Any barber that doesn't simply list its price in a sign on the window is one that wouldn't be getting my business, in any case.
The cognitive simplicity of making a purchase is an asset that doesn't just extend to pricing. One of the major successes of the iPhone and iPad, for example, is the fact that there is effectively only one model being promoted at any given time. Unlike other brands of mobile devices -- where the consumer is essentially asked to balance out their requirements for price, UX/UI, app availability, form factor, memory, camera, battery life, etc. -- the iPhone customer is asked to make a single choice:
Do I want one?
[ ] Yes
[ ] No
Anyhow, I think that Stross is correct when he says that the disintermediation of tradable goods will cause a price-based race to the bottom. This is probably unavoidable. Furthermore, even for non-tradable goods/services such as locally-delivered services, many of these will inevitably be automated and will also be racing to the bottom. (I fully expect that most fast-food will be cooked and served by automated systems within 10 years; interventions by organised labour my forestall this for a while longer, but not indefinitely). What interests me is how anything non-cheap/automated will survive: it will be, as Stross suggests, anything which creates value in a way that is not based on price. My believe is that the key ingredients in this will be creativity and meaning.
In America, for example, I've seen anecdotal evidence that small local farms are have been withstanding the recession, and even expanding fairly considerably. If this is true, it's certainly not because they offer any price advantage; rather, it's because they form relationships with their customer base that provide layers of meaning that add value beyond the simple raw commodity. Where this kind of relationship can be successfully cultivated, I believe that there's a real future for locally-based retail. Otherwise, the future is all about local automation and disintermediated global markets.
It's amusing to look at just how complex the iPhone buying process has actually become. You have three different models to choose from, two of which come in two colors. For the newest model, you have three storage sizes to choose from.
But those are the easy parts. Once you've chosen those, you must then choose a carrier and a plan. In the US, there are now three carriers to choose from, none of which have anything like identical plans you can just price-shop. Each carrier then has a variety of options, from talk time (4 different ones on AT&T, I believe) to text messaging to data plans, and they can often be mixed and matched in various combinations. If multiple family members have phones it gets even more fun, as you then get into the various family plans.
Compare this with how the iPhone was originally: there was one model with a couple of different storage sizes, one carrier, and one data plan. You still had different voice and text messaging plans, but it was still substantially simpler than it is today.
The iPhone is certainly still much simpler to buy than its competitors, but it seems that the simple yes/no choice is too simple for the customers.
We bought it from a retailer because he wanted it right then, so he could run the backup procedure and have me fix it if it didn't work (yes, family tech support is a joy). We went into the shop, and none of the USB external hard drive manufacturers actually tell you what speed the drive runs at. That is, they don't tell you what RPM the drives run at. As it is a backup drive, it's not like it needs to be fast (the first run may take all night, but afterwards, it will probably only be a gigabyte or so of changed files every few days). But the fact that none of the companies actually advertise the RPM slightly shocked me. Not just on the boxes either, but if I scanned the barcodes with the barcode/QR app I have on my phone, the manufacturers websites don't list the RPM either.
I think Bezos saw this coming a long time ago and so he got Amazon ready to be more than a simple rock-bottom-price retail outlet. People love Amazon, and once they get Prime, they start buying from Amazon because all the hurdles have been taken away. In the meantime, Prime offers them additional benefits like streaming movies & TV. I don't think you can really look at the future of retail without this offering looming pretty large. And I don't even have Amazon Prime!