Amazon Shoppers Beware: Some 'Bargains' May Actually Cost You More

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KEY POINTS

  • A new report highlights ways online sellers can frame a price increase as a discount.
  • Amazon says the research, which tracked prices in 2016-2017, doesn't represent current practices.
  • Always compare prices, even when you think you've found an unmissable bargain.

A report shows how sellers upped their prices and made "sales" look like a discount.

Today is the second day of Amazon's latest bargain bonanza -- the Amazon Prime Early Access Sale. But a new report suggests that some online deals may not be as good as they seem. Retailers have a trick that involves manipulating the way on-site comparison prices are displayed. You might see an item that seems to be heavily discounted, but in reality you could wind up paying more than it cost the week before.

How so-called 'bargains' can be anything but

Everybody loves a bargain. Back when shoppers had to haggle the price of eggs at the local market, good salespeople knew how to strike deals that played on that emotion. Indeed, the practice of creating the impression of a discount is probably as old as selling itself. But in many states, deceptive pricing laws make it illegal to pump a product's price shortly before you put it on sale.

A new report from Marketing Science shows how Amazon sellers were able to get around these laws. The report's authors tracked prices and other indicators every day on Amazon from July 2016 to July 2017. They identified a practice by which some sellers could give an inaccurate impression of how much a product really cost. It centers around something called a list price, which sellers don't have to include in a product description.

Bear with me. The list price is an indication of what something should cost. It's a bit like a shop giving customers a manufacturer's price as a reference point. But here's the trick: If a seller increases the price of a product and at the same time includes a list price where there hadn't been one before, it can make a price increase look like a bargain. It doesn't need to manipulate the list price. Instead it sets a high list price and then controls whether or not it is displayed.

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For example, the report tracked the price of a specific vacuum cleaner. A customer who logged on at the end of May 2017 might have seen that vacuum on sale for $189.95 with a list price of $249.99. It looked as if they'd save over $60 or almost 25%. Days later, the retailer reduced the sale price and removed the list price altogether. A customer who logged on in the middle of June would see that same vacuum cleaner on sale at $114.99.

The report authors said this phenomenon was widespread and found similar behavior in the pricing of blenders, cameras, drones, and, to a lesser extent, books. It also showed that products with positive reviews were more likely to use the trick. The practice skirts existing regulation because sellers aren't actually inflating prices -- though consumers are misled all the same.

In Amazon's defense, the report authors monitored prices on the site in 2016 and 2017 and a lot has changed on the site in the past five years. An Amazon spokesperson told Bloomberg that the study doesn't accurately represent the shopping experience today.

How you can protect yourself

Whether this specific practice is still prevalent, it's a timely warning that bargains are not always what they seem. These two tips can help consumers in every apparent discount situation.

1. Compare prices

One of the best things about shopping online is that you can quickly check a product's price in several different stores. There are even price comparison apps that will help you do the job. If there's a sale at one online store, other stores may well match its prices. Even if they don't, take a few minutes to check -- it's the best way to know you're getting a good deal.

2. Know what you want to buy

Having a clear idea of what you want to buy can help you both avoid impulse purchases and ensure you've found the best price. Let's say you're planning to buy a big item such as a washing machine and you know there's a big sale event coming up. Start checking prices in the weeks or even months beforehand. If you figure out what makes and models stand out, as well as what price is normal, you'll be able to act immediately when the price is right.

Bottom line

Sales can be a chance to snag a great bargain. But even when there's no trickery involved, they are designed to part you with your hard-earned cash and it's easy to get carried away. Don't let a low price tempt you into spending money you don't have in your bank account. And if you're paying by credit card, make sure you'll be able to pay it off at the end of the month. No matter how sweet the deal, it's not worth taking on high interest debt.

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