Amazon.com, Morocco and the Fluidity of Price

You probably wouldn't be surprised if a vendor in a centuries-old Moroccan souk (market) began bargaining with you over an item. But when you go on Amazon to buy pumpkin-pie spice for Thanksgiving, you expect to be paying a fixed amount. You don't consider the web to be a North African bazaar. It may, however, becoming one.

In 2015, the price of pumpkin-pie spice varied from $4.49 to $8.99 on Amazon depending upon when you looked (according to a recent article in The Atlantic -- "How Online Shopping Makes Suckers of Us All").

It turns out that set prices didn't take hold in America until the 1860s, when retailers such as John Wanamaker and Rowland H. Macy instituted them in their stores. The status quo continued until the web was invented by Al Gore. What followed next was a battle for control between consumers and sellers.

Initially, consumers had the advantage, but sellers are now responding in-kind. As The Atlantic puts it, "our ability to know the price of anything, anytime, anywhere, has given us, the consumers, so much power that retailers -- in a desperate effort to regain the upper hand, or at least avoid extinction -- are now staring back through the screen. They are comparison shopping us."

In other words, our online comparison shopping put pressure on retailers to lower their prices. Retailers are fighting back -- "the immense data trail you leave behind whenever you place something in your online shopping cart or swipe your rewards card at a store register" allow economists and data scientists to turn this information into useful pricing strategies.

The Atlantic article warns that we may be seeing "the final stage of decay of the old one-price system." Prices will not be set, but will fluctuate over time like high-frequency trading on Wall Street. For example, one study showed that "the price of headphones Google recommends may depend on how budget-conscious your web history shows you to be." Big spenders are shown higher-priced headphones as compared to their more frugal neighbors.

My wife and I were fortunate to have wandered the old world bazaars of Fez and Marrakech in Morocco. Besides being a visual and cultural treat, it can be a bit frustrating. If I saw an item that caught my eye, I was hesitant to ask its price. The mere question started an extended discussion that I did not care to engage in, but was difficult to avoid without offending the shopkeeper. We went into one store that was a restored house with exquisite Arabic artwork (as you can see in the picture below). The proprietor asked "how many camels for your lovely wife?" (This was a question I heard a number of times -- apparently it's an ice-breaker with Americans.) Although I had a number in my head, I demurred.

"Do you see anything you like?" the owner inquired. We did.

"How much is the item?" we wondered.

"Please. We are friends. We'll talk." Eventually the shopkeeper shared a price with us.

Our facial expressions -- and the fact that we acted impatient to leave -- clearly indicated that we thought the price was quite high.

"Don't insult me," the owner protested, "it is our custom to negotiate. Please give me a price. We are friends," he reiterated.

Since I dislike bargaining, I said "I don't mean to insult you, but I want to be realistic as to what we're willing to pay." I thought I suggested a really low-ball price that would end the whole thing. The owner countered with a price that was not much higher. We accepted it.

Did we get a good deal? I thought so. But the owner's willingness to go down so quickly made me think we may have overpaid. I'll never know. As my friend Avi told me, you can never win in such situations; you can only hope not to lose. The proprietor knows the bottom-line price that still gives him an acceptable profit. You don't. You only can try to come as close to it as possible. The online shopping world may be heading in this direction.

Words of Wisdom

I tried to walk into Target, but I missed. -- Mitch Hedberg