Tag: prices

The Amazon con

When Alexander Turney Stewart opened a brand new store in New York in the 1820s, he adopted a radical and original policy.

All goods had a fixed price. No longer would salesmen size up the apparent wealth of a customer and see how much they could get away with charging.

Rival retailers predicted the Irishman would be bankrupt within a week. Instead, he became a multi-millionaire and A. T. Stewart & Co was, for some time, the world’s biggest department store.

The idea that shops charge a set price for goods has been the norm for almost 200 years — but that’s changing thanks to the internet.

Most of us assume that prices at Amazon, the online retail giant, are not just low, but stable.

However, remarkable new analysis of the price of 100 random products during the course of year showed prices fluctuated by up to 260 per cent between the highest and lowest points, leaving customers who bought at the wrong time hundreds of pounds out of pocket.

The research, using data from CamelCamelCamel, a price-tracking website, found that a paddle board, for example, could be bought for as little as £234.87 or as much as £699 — a difference of £464.13 over a year.

A Jamie Oliver stainless steel induction saucepan changed price 51 times between first going on sale on Amazon in November 2016 and August this year, ranging in price from £44 to £18.27.

New analysis of the price of 100 random products during the course of year showed prices fluctuated by up to 260 per cent between the highest and lowest points, leaving customers out of pocket.

Some prices changed by large amounts on a weekly basis. On average, each product changed price every five days and one product changed price 300 times in a year. For example, the DVD of Stephen King’s 1990 thriller It changed price 24 times a month.

This strategy of prices moving up and down on a regular basis — and in real time — is known in the industry as ‘dynamic pricing’.

It is a technique that has long been used in the airline industry to sell as many seats as possible, as profitably as possible.

Some consumers have also experienced it with Uber, the app-based minicab company, which offers low fares compared with black taxis most of the time, but which sometimes adopts ‘surge pricing’ during periods of high demand.
Dynamic pricing is increasingly being used by online retailers, particularly Amazon.

Philip Downer is the former managing director of Borders, the High Street bookstore chain that faced fierce competition from the online giant.

He now runs small gift shops in Dorking, Surrey, and follows Amazon developments closely.

‘This price instability means the only certainty is that you can never be certain you are getting the best price for anything,’ he says.

‘Indeed, you probably never are getting the best price for anything. One senses as a consumer that they are playing games with you.’

Earlier this month, Amazon in the U.S. came under fire for allegedly using dynamic pricing to take advantage of Hurricane Irma.

Customers in storm-hit Florida took to social media to complain that packages of Nestle water were selling for $25 on Amazon, yet prices for those in the north-east of the country showed the same case of water selling for $18.50.
Amazon strongly denied that it was adopting ‘surge pricing’ for bottled water and insisted it did not alter prices according to the area of the country.


That, in turn, was leaving higher-priced offers from third-party sellers that use Amazon.

However, there is strong anecdotal evidence that all online retailers, not just Amazon, tweak prices of some products according to supply and demand.

Another price-tracking website is Idealo, which monitors 183 million live prices across 30,000 shops in Europe, including Amazon, Argos, John Lewis and Asos.

Over the course of three months, it studied a selection of consumer electronics, such as Fitbit fitness devices and computer games, to see how the average price fluctuated throughout the week.

In nearly all cases, prices were lower on a Monday or Tuesday — the least popular days of the week to shop online, according to retailers, and they were more expensive in the run-up to the weekend, when the bulk of online shopping takes place.

For instance, the average price of a Fitbit Charge HR was £89 on a Monday but £94.64 on a Saturday. Call of Duty: Black Ops III, a computer game, cost £12.49 on a Monday but £16.99 on a Friday and Saturday.

The average difference between a Monday and Saturday across all video games is 15 per cent, according to Idealo.

The price difference for a selection of four family games, including Monopoly and Articulate, was 18 per cent depending on the day of the week.

‘It is supply and demand driven, absolutely,’ says John Hoad at Idealo, which is based in Germany.
‘Just look at the Lego Millennium Falcon, which is a marriage of two very popular toy trends: Lego and Star Wars.’

On May 2, it was priced, on average, at £81.66 across all the retailers it monitors, including Amazon. On May 3, the day before so-called Star Wars Day, which occurs each year on May 4 and is hugely popular with fans, it shot up to £94.90, a 16 per cent leap — ‘a simple case of taking advantage of demand around Star Wars Day,’ says Hoad. On May 5, the price went back down to £83.99.

A retailer is perfectly within their rights to fluctuate prices according to supply and demand, but consumer experts worry that retailers have the potential to take it a step further.

With all the data that online retailers hold on customers, could they alter the prices according to who was doing the shopping?

In 2012, a Wall Street Journal investigation discovered online companies, including office-supply shop Staples and furniture retailer Home Depot, showed customers different prices based on ‘a range of characteristics that could be
discovered about the user’.

Customers, for instance, in locations with a higher average income — and perhaps more buying choice — were generally shown lower prices. Another study, in Spain, showed that the price of the headphones Google recommends to you in its ads correlated with how budget-conscious your web history showed you to be.

The travel site Orbitz made headlines when it was revealed to have calculated that Apple Mac users were prepared to pay 20 to 30 per cent more on hotels than users of other computer brands, and to have adjusted pricing accordingly.

Ratula Chakraborty, senior lecturer in business management at the University of East Anglia, and an expert in pricing, says: ‘So-called first-degree price discrimination, when prices are aimed at the individual by identifying them, is a very contentious subject, as Amazon found to its cost several years ago when it started trialling targeted higher prices to consumers based on their shopping history, which it could monitor.’

This was back in 2000, when online retailing was just taking off. Amazon was found to have charged some people more than others for the same DVD, with some alleging that older people were charged a higher price.

Within a fortnight Amazon was forced to apologise, issue refunds and strenuously state it never tests prices based on customer demographics.

An Amazon spokesman reiterated its position to the Mail this week, saying it might alter prices according to a customer’s location but does ‘not engage in surge pricing or vary its prices by demographics. Retail prices fluctuate all the time, and we simply seek to meet or beat the lowest competitive price for our customers.’

But, as Chakraborty makes clear, it is increasingly easy, in theory, for online retailers to use data they have gathered to change prices according to the customer.

Every time you visit a website, the company behind it downloads a tracker onto your computer, known as a cookie. These monitor what pages of the website you use and how frequently you click on a particular page.

In addition, in nearly all cases you have to hand over your email address to an online shop when you make a purchase; this can then be easily linked to your actual postcode, and other details available about you online, which in turn can be used to estimate your wealth thanks to large consumer databases that segment the population of Britain into about 60 different socio-economic categories.

John Readman, marketing director at Summit, a company that helps online retailers use this sort of customer data to boost their sales, says: ‘What’s fascinating with dynamic pricing is the amount of audience data that is now available to retailers, as consumers move around the internet.

‘Potentially, an unscrupulous or profit-hungry retailer could change the price of a product based on how much they want that product. That is technically possible.’

He insists that no retailer he has ever worked with has used data in this way to profiteer.

Instead, ‘it’s more about reducing the price to returning customers or to loyal customers to get them over the line’.
In other words, most retailers want to convert a browser into a buyer rather than make a bit more profit out of an individual buyer.

What is revealing, however, is how Readman shops online.
He does his initial searches for high-value products and then makes his purchases using an ‘incognito logged-out browser’.

This is a button most web browsers, such as Chrome or Internet Explorer, have (see box above for how to find this). Once clicked, users can visit web pages without the sites being able to track the identity of the consumer.
‘I have certainly seen different results from when I am logged in than when I am on an incognito browser,’ says Readman.

He says this is mostly true for travel and hotel websites, but he has also spotted different prices for the same product on Amazon.

Amazon’s strength is in ‘bundling’, he adds.

He is referring to the practice by which once you’ve selected your purchase, up will pop a selection of related items that, apparently, are ‘frequently bought together’ by other customers, in order to tempt you further.
‘Nearly 10 per cent of all their sales come from that extra bundling,’ Readman says. ‘I wouldn’t be surprised if they are not showing you the cheapest one on the bundle, but the one they are making the most [profit] margin on.’

In the UK, only £16 in every £100 is spent online. But dynamic pricing could soon enter the High Street thanks to technology called electronic shelf-edge labelling.

A number of retailers have started to experiment with electronic displays, rather than paper labels on their shelves.
Andrew Dark, is the chief executive of Display Data, which has developed electronic labels which are so high resolution they look like a printed ticket.

‘People can’t work out it isn’t paper,’ he says. The main benefit of this technology for retailers is cost-cutting.
Display Data has worked with both Morrisons, at its Guiseley branch in Leeds, and Tesco, at Braintree in Essex, to install a trial of electronic price displays.

‘It means the retailer doesn’t have to laboriously print a label, get a human being to cut it out, walk it to a specific location in an aisle and put it in the shelf,’ says Mr Dark.

‘Changing 50 items in 1,000 stores just isn’t easy to do manually. If you speak to store colleagues, they hate it. It’s so laborious.’

His system allows someone to change the price in thousands of stores within 17 seconds with the push of a button.
The supermarkets are adamant that they have no intention of using ‘dynamic pricing’ to push up the price of bottles of wine to commuters in the evening, for instance, or the price of umbrellas when it is raining.

A source close to Morrisons said: ‘Our customers would murder us if we did that. Yes, it’s technically possible, but as it is so competitive out there, we would be crazy to try this.’

However, electronic shelf-edge labelling has been used to cut prices throughout the day, explains Dark, one of whose customers is Kaufland, a large supermarket group based in Germany, which uses it particularly to encourage customers to buy fresh fruit and vegetables near to their use-by dates.

‘We buy so much with use-by dates and if it doesn’t get sold, it gets thrown away. That’s one of the biggest drivers in dynamic pricing: to reduce that wastage by lowering prices,’ he says.

Mr Dark believes that major British supermarkets as well as DIY shops and electronics stores will start to adopt the technology.

‘This is no longer a trial. The system works. You will see chains roll out this technology from the end of this year; you will start to see mass deployment across various UK retailers.’
If customers really do benefit, by seeing more promotions and discounts towards the end of the day, undoubtedly they will cheer this development.

But so much of dynamic pricing, especially online, with the continual fluctuation of prices, seems designed only to confuse the consumer. As Mr Downer says: ‘What I can’t stand is the message you get from politicians that if you are ripped off it is somehow your fault for not shopping around.

‘As if people have the time, let alone inclination or capability, to do all this.’

By Harry Wallop for The Daily Mail

Petrol price shock for motorists

Fuel prices are to rise sharply this week, mainly as a result of climbing oil prices and a slightly weaker local currency against the dollar.

The latest information from the Department of Energy on Tuesday (29 August) indicated that the price of gasoline 93 (ULP & LRP) in Gauteng is likely to increase by 57.8 cents per litre next week – Wednesday, 6 September 2017.

The price of diesel with a 0.005% sulphur content meanwhile, is expected to increase by 45.2 cents per litre, said independent economist Fanie Brink.

The economist pointed out that the price of Brent crude oil increased to an average of $51.70 a barrel over the past month compared to an average of $49.50 a barrel in July.

“This increase resulted in sharp rises in the average international price of gasoline by 54 cents per litre and an increase in the diesel price by 41.4 cents per litre,” he said.

The average R/$ exchange rate traded around R13.16 last month and was slightly weaker at R13.22 which resulted in a further increase of 3.8 cents per litre in both the gasoline and the diesel prices, Brink said.

South Africa’s economic woes are expected to continue into the last quarter of the year, according to CEO of Debt Rescue, Niel Roets, who said that all indications are that the rand will continue to weaken in the coming months, which will further increase the fuel price as well as the cost of all imported goods.

“Food inflation is also outstripping general inflation running at about 6.9%. Despite the bumper maize harvest, prices of all grains are actually expected to rise in the short-term because the new harvest prices will only feed through into the economy by next year,” Roets said.

“This (September) fuel price increase is going to hit consumers like a ton of bricks. If current trends continue we could see more of the same in October.”

Here’s what you can expect to pay in September:

Petrol (93) – R13.40
Petrol (95) – R13.63
Diesel – R11.72

Source: BusinessTech

Daylight robbery: Eskom drives up prices

The average four-person South African household should pay R290 a month for electricity, yet Eskom is charging them roughly R1,200, says a lobby group.

Now Eskom is seeking a 20% tariff increase from the National Energy Regulator of South Africa (Nersa).

Energy analysts have described Nersa, which starts its public hearings into the proposed tariff increase in Pretoria today, as the only thing preventing disaster.

Presentations by the Organisation Undoing Tax Abuse to parliament’s public enterprises portfolio committee this week reveal the power utility should be relying on its capital expenditure budget and the government and not on ordinary South Africans to float it.

Finance Minister Malusi Gigaba this month said the government was considering granting Eskom a favourable loan or possible bailout.

StatsSA yesterday released its findings of Capital Expenditure by the Public Sector 2016 report, which showed that capital expenditure by public sector institutions rose to R284-billion from R265-billion.

The report shows that capital expenditure by state institutions has increased by R1.2-trillion over the past five years. Eskom accounted for R73-billion, with the new Medupi, Kusile and Ingula power stations accounting for R70-billion.

Outa’s energy specialist Ted Blom said they revealed to parliament Eskom had a qualified audit of R3-billion in irregular expenditure without supporting documents.

“Explanations are needed as to how the R3-billion was processed without the documentation. Either there is a magic password which allowed this or there is an old chequebook lying around. Either way Eskom’s chief financial officer, Anoj Singh, must explain.”

Blom described the electricity tariffs the average four-person household was paying as “daylight robbery. There are three cost drivers to the power utility. They include the financing costs of money borrowed, their power plants and the operations.”

Only Eskom’s operations were subject to inflation, so increases should be a third of inflation, as two-thirds of costs were fixed.

He said on the assumption Eskom was efficient in 2005, and the cost of electricity for a four-person home was R160, the cost now for electricity, based on an annual escalation of a third of CPI, would be R290.

Blom said compounding Eskom’s financial problems was the building of Medupi and Kusile power stations.

Blom said Eskom recently announced that they need to borrow R325-billion over the next five years to finish off the two stations, 10 times higher than initial estimates.

He said Nersa should, and could, dramatically reduce the electricity tariff.

Nersa spokesman Charles Hlebela would only say that Eskom’s application would be considered in terms of the law.

Eskom spokesman Khulu Phasiwe said they would respond to allegations in parliament and not through the media.

By Graeme Hosken for TimesLive

South African consumers have hit hard times over the past few years as a creeping GDP growth, high unemployment and many political shocks continued to weigh on the economy.

In June, GDP data from Stats SA showed that South Africa has officially entered into a recession, with economists predicting tough times ahead for consumers, as more ratings downgrades are in the pipeline, which will ultimately put further pressure on the pocket.

One of the key components of South Africa’s slide into recession was a cut in consumer spending, in everything from recreation, clothing and transport, to even basic needs categories like food.

And South Africa’s biggest food retailers are feeling the pinch.

In April, Pick n Pay missed expectations for its full year earnings citing strained consumer spending as shoppers sought out cheaper options – which appeared to drive them to Shoprite’s doors, who reported a 14% growth in turnover in its latest financial year.

Woolworths, which has consistently positioned itself as a ‘premium’ food store, has seemed to weather the storm, with its latest results for FY2016 showing a 24% growth in profit from its food segment – which makes up 37% of the group’s total turnover.

A weakening economy and drought conditions hit South African food prices hard in 2016, with food inflation hitting close to 12% throughout the year. With a record yield from crops expected in 2017, some relief is on the cards – but the recession and other expected economic woes are likely to keep the pressure on consumers.

In the latest assessment of prices across South African retailers, we found that there has not been much a shift among South Africa’s food retailers.

When shopping for the BusinessTech basket of goods, Woolworths still checks out at the highest price – though it is apparent that, with the exception of Shoprite, competitors have struggled to keep prices low.

The BusinessTech Basket of Goods

For our basket, we look at some essential and non-essential food products. The basket contains 12 items, with store-brands priced for each item where available. The table below shows the pricing:


Prices were sourced in-store from stores around Centurion and cross-checked online, where applicable.Promotional prices, where marked, were not taken into account. Woolworths self-raising flour prices were determined on a per kg basis. In-store prices are subject to change depending on individual regions and promotions.

Prices have increased significantly in some cases, compared to the mid-2015 review. This is most notable in sugar and maize, which were impacted by drought conditions in the country during the interim period.

The most striking difference between the 2015 and 2017 reviews is that Pick n Pay, which was ranked as the cheapest basket in 2015, is now extremely close to being the second-most expensive, a few rands under Spar.

Checkers, which has positioned itself as the more affordable option, has lived up to that reputation, with many of its prices actually decreasing between 2015 and 2017.

Source: www.supermarket.co.za

Low paper prices hurt Mondi 

South African packaging and paper company Mondi said on Thursday underlying operating profit for the first quarter of 2017 was down 6% due to lower selling prices and inflationary cost pressures.

Underlying operating profit fell to 252-million euros ($274-million) in the three months through March from 269 million euros a year ago, Mondi, which is also listed in London said in a statement.

The figure was up 12% on the fourth quarter last year due to higher sales volumes and prices.

“Strong sales volume growth was more than offset by a significantly lower forestry fair value gain, inflationary cost pressures and lower average selling prices,” the company said.

The packaging paper division was impacted by lower selling prices for containerboard, while significantly lower gains on the value of its forestry assets, lower average export selling prices for hardwood pulp and white top kraftliner products, and a stronger rand impacted the South Africa division.

“As previously advised, we are experiencing some inflationary cost pressures across the Group and the forestry fair value gain is expected to be lower than in 2016,” the company said.

*($1 = 0.9195 euros).

By Nqobile Dludla for www.moneyweb.co.za

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