New research has found that Black Friday and Cyber Monday sales have deceived many consumers, as sellers online raised prices prior, while pretending to offer a discount. Research teams led by Jinhong Xie at the University of Florida, Sungsik Park at the University of South Carolina, and Man Xie at Arizona State University have found evidence of deceptive pricing tactics across Amazon and other major online retailers this year.
Researching the scams
The university research found that in recent years, more than a quarter of vacuum cleaners sold on Amazon have at some point pretended to offer a discount when they had actually just increased the price prior to listing the sale. Sellers of digital cameras, blenders, drones and even books also used the misleading sales practice. This ends with them charging normal or even higher prices than what they would charge throughout the year.
Related: How to Spot Fake Sellers on Amazon
By pairing a price increase with the introduction of a previously unadvertised “list price” for a product, Amazon signals to shoppers that they are receiving a discount. However, they are actually paying 23% more, on average, for their new vacuum than they would have just a day earlier. Days after the price hike, the price drops and both the list price and misleading discount claim disappear.
“When you see this list-price comparison, you naturally assume you are getting a discount. It’s not just that you didn’t get a discount. You actually paid a higher price than before the seller displayed the discount claim,” said Jinhong Xie, a professor at the Warrington College of Business at UF.
A lack or regulations
Currently, regulations prohibiting deceptive pricing require that sellers use truthful price comparisons. Consumers have won class-action lawsuits against retailers like JC Penny and Ann Taylor for making discount claims using illegitimate values in price comparisons.
In the pricing practice that Xie and her colleagues uncovered, the list price can be truthful, yet still misleading. Unfortunately, they are able to circumvent legal trouble while still deceiving customers in the process.
“Current regulations are all about the value of the list price, and they don’t say anything about misleading consumers by manipulating the timing of the list price’s introduction,” Xie said.
Misleading prices and holiday sale scams
The researchers studied the pricing of household products on Amazon from 2016 to 2017. Xie and her colleagues followed more than 1,700 vacuums and gathered nearly half a million individual observations of prices. While most introductions of a new list price were associated with a price drop or no price change, 28% were instead accompanied by a price increase.
Because shoppers perceive they are getting a deal, these misleading discounts actually improved the products’ sales rankings on Amazon.
“We found that by increasing the price by 23% on average, the seller achieves a 15% advantage in their sales rank among all products in the home and kitchen category,” Xie said. “This allows firms to achieve the impossible: increasing margins and increasing sales simultaneously.”
Other products used this practice anywhere from 3% of the time for books to more than 13% of the time for blenders, digital cameras and drones.
Xie says consumers can protect themselves by questioning ubiquitous “discounts” advertised in online stores. Shoppers should not assume a discount claim means the price is lower than usual. Instead, shoppers should comparison-shop across multiple websites. They can also use online tools that provide price histories to learn if the advertised price they are seeing is really a deal or not.
“We think consumers need to be aware so they can protect themselves,” Xie said. “And we think that consumer organizations and regulators should evaluate this new marketing practice. To determine whether and how to manage it.”