So What, Who Cares (vol 3, issue 26) Why retailers will charge you higher (or lower) prices than your pals
Hello!
My daughter has a Batman bank and a passel of Batgirl figurines, ranging from an Yvonne Craig figure to a Funko Mopeez soft toy to two Fisher Price Little People versions (one in a Batmobile) to Lego Batgirl to a few iterations of the DC Superhero Girls. I walked by the other day as she had surrounded Batman with all the Batgirls, and she had Batman saying, "What am I going to do with all my teenaged daughters?"
I am here to say, if DC Comics ever decides to abandon the Batfleck for a comedy about Batman dealing with eight high school-aged daughters, I am here for it. Pitch me your superhero remakes, preferably with a passel of daughters in the plot, at @lschmeiser.
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When I was a biology undergraduate, one of the perpetual subjects of study was co-evolution, i.e. when two species -- usually in an effort to eat one another or avoid being eaten -- will develop adaptations and counter-adaptations. A bat uses echolocation to eat moths; tiger moths evolve to emit a toxin bats dislike, then develop the ability to send out their own echolocation signal that effectively signals to the bats, "We're the bad-tasting ones."
I think of the relationship between online shopper and e-commerce merchant as another study in adaptive arms races. First, the consumer had the advantage: It was easy to go comparison shopping. But now, the e-commerce retailers have developed an adaptation -- and like the best adaptations in nature, this one is a clever re-appropriation of a trait found in its rival.
Behind every e-commerce consumer is a staggering body of data, one that shows spending triggers and patterns, goods purchased and tolerance for price increases. That data provides e-tailers the means to price goods so as to maximize the sale.
There's a company, Boomerang Commerce, that's been quietly trickling into the business press lately. It uses machine learning to help retailers price items on-the-fly, in response to specific conditions. Think: sunblock before Memorial Day, punch bowls before Thanksgiving, or books right as the movie adaptation comes out.
The result: Not only can retailers more accurately forecast inventory -- reducing the odds of great merch at end-of-season sales -- they can also boost their margins by catching people at just the right time.
Imagine a future in which the app a woman uses to track her menstrual cycle sells that data to a marketing group, which passes it along to an e-tailer, who then surge-prices their chocolate and sends an e-mail with "Hey, this seems good right now" on the days when the PMS is likely to hit. That's the end result of marrying data to adaptive pricing strategies.
So what? There are regulations in place that dictate what bricks-and-mortar stores can do with pricing. They vary by state, but the baseline across all commerce is this: Don't change the price depending on the customer. Sure, prices are more expensive in some parts of the country -- ask me about the $12 coffee-and-scone I had at Starbucks in Las Vegas -- but the thing is, everyone in those parts pays the same.
By contrast, some e-commerce companies try to rig the prices based on different data: Five years ago, Orbitz got some unwanted press when reporters noticed it showed Mac users more expensive hotel listings. The company claimed that their research showed Mac users spent more money, so why not show them what they were likely to buy anyway? That the site had taken the element of choice from the Mac-using consumer seemed to escape the company's attention.
Insurance companies have been experimenting with data-crunching to see whether they can smack their customers with triple-digit premium increases, the theory being that if a customer has a track record of not caring too much about "price optimization" (i.e the lowest price) on other goods, they'll shrug and pay a higher premium than, say, a customer with the exact same profile but more of an eye for bargains. Again, this is a case where not all customers are treated equally, based purely on what companies have decided is actionable in a data profile.
And let's not forget that Amazon.com is so notorious for trying to optimize prices for each customer that there are websites devoted to tracking the price history on items to see when and how the e-commerce giant raises or lowers prices.
Who cares? It's hard to imagine privacy advocates being thrilled by the notion that the best possible price for something is to be had online only if there's a comprehensive demographic and financial dossier attached to each shopper.
Civil liberty types might also worry about whether or not certain genders, religions or ethnicities would be targeted for increased prices. The one great thing about going to a big box store right now is knowing that everyone pays $2 for a giant bar of Hershey's; when online retailers roll out adaptive pricing, there's a very real risk that the data they'll use to set pricing strategies will tilt against a specific gender, sexuality, zip code or ethnicity.
And finally, shoppers may simply decide to stop patronizing places if it becomes too much work to figure out whether they're getting a fair value for their money.
Comparative shopping has made it challenging for retailers to compete for customers based purely on price alone. But adaptive pricing may provide short-term sales gains at the expense of long-term customer spending. After all, every organism evolves a defense against whatever is trying to exploit it as a resource.
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Your pop culture recommendation for the day:
If there is a long Swedish word for "reading a bunch of vaguely related books," then I'm in the middle of that, having started some sort of Scandinavian readabout. Titles include:
The Edge of the World: A Cultural History of the North Sea and the Transformation of Europe by Michael Pye;
The Almost Nearly Perfect People: Behind the Myth of the Scandinavian Utopia by Michael Booth;
The Year of Living Danishly: Uncovering the Secrets of the World's Happiest Country by Helen Russell;
The Nordic Theory of Everything: In Search of a Better Life by Anu Partanan;
Nordicana: 100 Icons of Nordic Cool & Scandi Style by Kajsa Kinsella;
And finally, Norse Mythology by Neil Gaiman. Since I had also read my daughter Treasury of Norse Mythology: Stories of Intrigue, Trickery, Love, and Revenge by Donna Jo Napoli and Christina Balit, and thus was familiar with many of the stories, it was interesting to be able to see how Gaiman's authorial sensibilities shaped his telling of the same myths.
I have enjoyed every single one of those books, and they are either marked up or Kindle-highlighted all over the place. I've got a few more items on the list for reading -- if anyone can tell me whether or not Viking Economics by George Lakey is worth a go, I'd be appreciative.
In the meantime, let's close out this norskeblürb with perhaps the best use of Led Zeppelin's "The Immigrant Sound" since a bunch of kittens went marauding, i.e. the two-minute teaser trailer for Thor: Ragnarok.
If you follow me on Twitter or listen to Phil and Lisa Ruin the Movies, you already know of my appreciation of director Taiki Waititi, and this teaser does not disappoint. If Thor: Ragnarok's closing credits contain anything half so deft as Waititi's haka-meets-Thriller mashup at the end of Boy, we'll be all the better for it.
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