People will shop at Amazon whether they have the best prices or not

Image: Peter Macdiarmid/Getty Images

As millions of American families look to get a jumpstart on back-to-school shopping, many of them will turn to Amazon.

The company’s use of steep discounting and price-matching to gain market dominance has led many shoppers to almost reflexively expect to pay less for their notebooks and calculators on the site. Sales prices in blaring red below slashed-out higher rates help cement that expectation.

But those savings are often a mirage, according to a study from Wikibuy, the company behind a browser extension that compares prices on a given page against those available elsewhere on the web.

Based on data it collected on its user activity in May, the company found that Amazon’s school supply prices were an average of 15 percent higher than its competitors.

“Certainly Amazon is sort of the price of record,” said Adam Gauvin, Wikibuy’s head of product. “Ithink that most people assume that Amazon has the best price, and what we’ve seen is that’s often not the case.”

Image: wikibuy

It’s far from the first time Amazon’s reputation for bargain prices has been called into question.

News broke last week that the Federal Trade Commission was considering a probe into the truthfulness of the company’s advertised discount sales. A Canadian regulator fined the company $1 million for misrepresenting similar savings earlier this year.

The New York Times reported last year that the company had begun to phase out the practice of comparing its own prices to prevailing market rates in part because of the frequency of consumer lawsuits.

Wikibuy and others have also shown evidence that suggests Amazon’s dynamic pricing model fluctuates prices by demand, a claim which a spokesperson denied in a statement this week. A ProPublica investigation last year found that the company’s search algorithm favored its own deals over cheaper third-party offers.

None of those revelations seem to have done much to dampen public goodwill towards the site. News articles and social media buzz treated its most recent self-conceived promotional holiday as a Black Friday-level event. It recently ranked fourth in a leading index of the world’s top brands in the eyes of consumers.

Amazon has become such a ubiquitous presence in the lives of many Americans that it may no longer even need to talk up savings.

Amazon addiction

The company’s retail empire has now reached a point where you could almost live your entire life only shopping on Amazon.

For many consumers, the name has become as synonymous with e-commerce itself as Google is to search or Facebook is with social media.

Amazon has worked to entrench that notion with convenience factors like two-day shipping, one-click buying, and Prime memberships that condition customers to treat it as their default one-stop shop.

“It’s like an addiction in a way,” said Kit Yarrow, a consumer psychologist at Golden Gate University. “The more people use it, the more they become dependent on it and the less they rely on pricing.”

In general, Yarrow said she’s seen a significant shift in how consumers evaluate purchases in the past two or three years. The equation used to be about bargain prices at almost all costs. But there’s now a growing willingness to pay a significant premium for a level of convenience, she said.

“Consumers tend to love Amazonthey just love it”

While list prices obviously still matter, people oftentimes look to them as a sort of reassurance for their spending guilt rather than with the intention of actually shopping around, Yarrow said.

Yarrow’s spoken to people who say the Amazon cart has replaced a traditional shopping list in their homes. When they realize they need something around the house, their first instinct is to add it to the queue or order it instantly rather than plan for the next store trip.

That type of shopping takes a certain amount of faith.

“Consumers tend to love Amazonthey just love it,” Yarrow said. “They’re willing to put up with a little shadow of doubt in order to have that level of convenience.”

‘Alexa, take over the world’

Customers who own an Amazon home device integrated with voice assistant Alexa or a branded dash button don’t even have to make a click.

A recent research report from Walkers Sands estimated that 16 percent of American consumers own an Amazon Echo and one in five have made a purchase through it or another home device. Around 84 percent have shopped at Amazon at some point in the past year and 55 percent belong to Prime, 14 percent to Amazon Pantry, and 10 percent to Amazon Fresh. Five percent own Dash buttons.

Amazon’s many Dash buttons

Image: amazon

Those numbers speak to the change happening in the way people think about online shopping. While the majority of purchases still happen over a desktop computer, experts expect the e-commerce of the future to incorporate a more balanced mix between apps, smart appliances, subscription programs, and other new platforms.

“We mix and match technology in the digital mesh we live in,” said Gene Alvarez, a retail analyst at Gartner. “I may be comfortable ordering my laundry detergent from my mobile phone, but I also may let my internet-enabled washing machine order me replenishment detergent because I trust it to do that for me.”

Between its various business ventures, Amazon already owns many of these channels. It controls 70 percent of the voice-controlled speaker market. It’s working with some of the country’s biggest household brands to integrate Alexa into every aspect of the home. And it’s the most-downloaded shopping app on the iPhone, according to Sensor Tower.

These pushes are weaving the orange arrow into more and more aspects of people’s everyday lives, while making blind habit-shopping easier than ever. You’re much less likely to compare prices in a hypothetical future where you set your smart refrigerator to auto-buy milk or refill household supplies through a Prime subscription basket delivery.

These sales won’t last

As it works now, Amazon’s automated pricing system pulls in real-time data from competitors across the web, then strategically creates the illusion of widespread savings by marking down certain popular items, according to Amazon veteran Guru Hariharan, who now runs a consulting firm called Boomerang Commerce.

In one case, Amazon marked down a popular TV during the holiday season, while simultaneously raising the price of an HDMI cord often purchased at the same time by a third, a Boomerang study found.

Amazon is famous for aggressively discounting items and selling at a loss when it’s edging out competitors and grabbing up market share. But there’s little incentive to keep prices low once the battle is won for a particular product category.

Once Amazon had decisively vanquished booksellers, for instance, authors and publishers told the New York Times in 2013 that they’d seen it start to hike prices.

Many more retail categories are nearing a similar brick-and-mortar tipping point. Harirharan said Boomerang’s data shows that traditional retailers in a particular market start to file bankruptcy or face significant investor pressure once online sales takes over a share of between 20 and 25 percent.

“Let’s face it, we’re basically getting things for free right now. That won’t go on forever,” Yarrow said. “They’re basically making an investment in that addiction so that people will become so used to it, so dependent on it that eventually, they’re not going to be able to live without it and they’re going to be willing to pay more for it.”

“None of this is happening by accident, I’ll just put it that way,” she added.

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