Price discrimination

In the past few years, the increasing popularity of online shopping has allowed customers to better compare prices between competitors but has also allowed companies to collect a large amount of data on its customers through click-through rates, IP geo-localisation and cookies.

This important quantity of data is sometimes used to better target ads or customize a search but can also be used for price discrimination purposes.

A few years ago, Amazon.com started using information collected on different buyers to charge individual customers different prices for the same DVD titles. One buyer reportedly deleted the cookies on his computer that identified him as a regular Amazon customer and watched the price of a DVD offered to him for sale drop from $26.24 to $22.74. The strategy, as soon as revealed, was the source of strong customer outrage that forced the company to stop this pricing discrimination.

First, it is interesting to know that the practice is not exclusively reserved for the online market. The same product often costs more in a store located in a fancy area than in a store located in poorer one…

Secondly, a recent study revealed that two-thirds of adult Internet users believed that it was illegal for online retailers to charge different people different prices. It might surprise a lot but charging different customers different prices for the same product is actually legal unless the discrimination is based on a "suspect category" such as race, religion, national origin or gender.

Now if you’re wondering how to protect yourself or even take advantage from this discrimination, the answer is pretty simple: the same way you wouldn’t wear your fanciest outfit to a flea market, you should "hide that you have money to spend" by often checking bargain hunter websites, following a few online tips such as booking airline tickets on weekends when big corporations aren’t and finally you should delete the cookies installed on you computer to limit the amount of information accessible about you.

http://www.isr.uci.edu/pep06/papers/PEP06_Spiekermann.pdf

http://www.cnn.com/2005/LAW/06/24/ramasastry.website.prices/

http://vulkan.worc.ox.ac.uk/wp-content/images/combined-paper.pdf

Mobile payments

It is the new big thing in e-commerce!

With the launch of Passbook compatible apps on IPhones and the introduction of Google and Paypal’s virtual wallets, mobile payment is really starting to take off.

Now, you can pay for your Starbucks coffee by simply scanning a barcode on your phone, you can have a virtual movie ticket that you can just scan at the theatre entrance, avoiding all the lines… Even more revolutionary, Google wallet can store all your debit and credit cards on highly secure Google servers and allows you to pay in any store using Paypass or  GoogleWallet terminals by tapping the back of your phone to an NFC point of sale terminal at checkout.

On February 2011, the mobile payment market was estimated at 300 billion dollars and this number is expected to double by the end of 2013 as more banks, credit card companies, mobile network operators and big firms like Google and PayPal expand their offering and more merchants adopt them.

There are four basic technology models that allow mobile payment:

•     Premium SMS based transactional payments was one of the first mobile payment technologies used and allows a consumer to pay for a service by sending a payment request via text or USSD to a short code. The consumer is then charged through his phone bill or his online wallet.
•        Direct Mobile Billing: The consumer uses a PIN and a one-time password and is charged for the purchase on his mobile account. This was a very popular payment method, particularly in Asia but is now being replaced by WAP and NFC
•     Mobile web payments: the consumer can use the web pages or apps combined with a payment service such as paypal or a credit card to make the purchase. The WAP technology is used to purchase an item the same way it would be on a desktop.
•     Contactless near field communication technology or NFC: the consumer stores credit card and/or debit card information on his phone and make a payment by just waving his phone over the card reader. Some virtual wallets will even allow you to pre-load coupons and customer reward points on your smartphone and will apply them to your total automatically when you check out. This is the technology used by Google Wallet for instance.

http://www.theglobeandmail.com/report-on-business/canadian-banks-rushing-to-offer-virtual-wallets/article4404561/

http://www.google.ca/wallet/

http://en.wikipedia.org/wiki/Mobile_payment

Online bidding and penny auctions

Read till the end

A couple weeks ago, a friend of mine came to me bragging about her brand new IPad and assuring me she got it for $50! I could only believe her after I saw her receipt, it was just incredible!

How did she manage to get such a good deal?

The answer might be surprising to some of you but she bought it by bidding on one of the many rising penny auction websites.

Quibids, Happy Bidday or ZBiddy are all part of this new trend of e-business: penny auctions.

Penny auctions are a type of pay-to-play auction format. Potential buyers must register with the penny auction site and purchase a number of bids that they can then use in the auctions. Bids commonly cost around $0.60 and most penny auction sites offer packages in which users can save money by purchasing larger quantities at one time.

What is particularly interesting is that those websites offer products varying from small gift cards to higher ticket items such as computers, tablets or TVs, however they always tend to start at very low values (often 1$) and each new bid adds one penny ($0.01) to the price.

Other than that, it's just like any other auction, people bid on items they’re interested in, and when the auction clock runs out, the final bidder wins the item for its closing price.

Another interesting fact is that some of those websites such as Quibids offer the option to buy the item for the full price if the bidder loses. That way, the bids count towards the full price, limiting the amount of money wasted on bids.

You still think it’s a scam? Well you’re not wrong!

In order to get her Ipad, my friend bided exact 453 times, at a price of 0.60$ a bid, my friend actually paid $271,8 in fees!

Considering the regular price of her IPad is around $400, it could still be considered a deal, just clearly not as appealing as the website lets it sound like.

The Washington post article linked below has a very interesting psychological view of how such websites exploit our mind.

http://www.onlineauctionreviews.org/strategies/auctions-101/

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/11/AR2009071100684.html

Group buying trend

Groupon, Tuango, Linving social, Dealfinder, Dailydeal.com, all those sites are part of the big social media marketing trend that’s group buying. The trend originated in China where tuángòu or team buying allowed to get discount prices from retailer when a large group of people were willing to buy the same item. Nowadays, the whole world had adopted the trend and some of those group buying sites have had a triple digit growth rate in the past couple years.

How does it work?

The concept is fairly simple: group-buying sites contact local businesses willing to offer big discounts online. Each site sends its subscribers a daily e-mail with the deal and a description of the business offering the deal, the minimum number of purchasers required for the deal and the time remaining. If enough people buy, the deal is "on" and purchasers can use their coupons to get the service they paid for.

Why does it work?

For customers, group buying gives access to exceptional discounts that allow the coupon buyer to experience services that would be otherwise inaccessible or too expensive, it allows the customer to discover new restaurants, new spas, new shops and new activities. For the seller, it is a “free” marketing and promotional tool that allows businesses to get their business known by all the subscribers of the deal’s website and getting them to try the service or product offered for a cheap price, hoping those customer will return in the future. It also works for luxury businesses such as spas or fancy restaurants by providing them with the opportunity to fill their tables. Finally, it is a great way to get rid off excess inventory especially when the holding cost is higher than the loss from selling at a discount.

A lot of new websites are appearing everyday and a lot of people are now questioning whether the business has a future but what is certain is that group buying has definitely changed the way Canadians buy and customers now think twice before paying full price.

http://www.canadaone.com/ezine/apr11/group_on.html
http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/im-not-yet-buying-the-group-buy-trend/article4327638/
http://www.wazua.co.ke/inner.aspx?sec=groups&aid=74

Online shopping Intro

There was a time, shopping implied struggling to find a parking spot, wasting time going from shop to shop trying to find that perfect dress, waiting in line at the cash, carrying all those heavy bags and even with all that, the choice was limited and you might end your shopping trip without what you were looking for.

Nowadays, a significant number of people go online and after a few clicks, have browsed more dresses than what any brick and mortar shop could ever hold and have their order delivered to their own door.

Online shopping has been growing exponentially: in the U.S., Forrester Research shows that $248.7 billion online sales are expected by 2014. A compounded growth of 10% is forecast for the next five years. Even more impressive, online sales have increased by over 25% in China in 2012. A number of technological innovations including new security measures to protect credit card’s information as well as the improvement of shipping procedures and the increase in online deals and coupon offerings are some of the main innovations that have helped online shopping.

In this blog, I will discuss the main innovations that encourage shoppers to shop online, the main trends in online shopping, how websites like Amazon, Beyond the rack or Zappos are revolutionizing the retailing sector and how more traditional companies are trying to catch up with the trend. I will also discuss the new business models that have emerged after the introduction of online shopping and the main disadvantages of this mode of shopping.

Sources: Forrester Researh, Global times China, WWWMetrics