Amazon Screws Prime Customers?

Eszter Hargittai has caught Amazon charging one price for ordinary customers and another, higher, price for Amazon Prime members like herself (and me).

So the thanks I get for paying for the Prime membership and shopping at Amazon a lot is higher prices. No thank you.

[…]

When I initially sat down to use Amazon, I was going to spend well over $1,000. I walked away spending nothing. Additionally, I have no intention of continuing my Prime membership (I disabled the auto-renewal for it immediately), unless I get some explanation and the chance to buy items at prices others are being offered them.

Eszter’s commenters aren’t sympathetic, with many arguing that, of course, Amazon is going to charge more to “make up” for the “free” shipping they offer Prime customers (there’s also a bizarre sub-thread about prime numbers which is only tangentially amusing). Others offer interesting economic rationales:

  • “[S]ome shops use artificially low prices that are compensated by high shipping cost, and they of course do not offer free shipping.”
  • “Amazon would be leaving money on the table if it didn’t charge you extra. Because you pre-pay the shipping costs, those are a sunk cost to you. If you go to another vendor, you will have to pay for shipping. Hence Amazon can now charge you a higher price and still beat another vendor’s price.”
  • “Once you buy Amazon’s free shipping option, you are a captive consumer, just like the spectators at a baseball game. The hot dogs inside the baseball stadium don’t cost more even though the fans have already paid to get inside. They cost more because the fans have paid to get inside. You paid to get inside Amazon. That’s why Amazon can now charge you more.”

While compelling, these explanations make sense only in the case of one-time transactions.  It’s true that Amazon already has Ezster’s $79 and that she’s now psychologically predisposed to buy from Amazon.   But upon learning that she’s been had, she’s presumably going to not only cease buying from Amazon but tell her friends about it, thus costing Amazon not only multiple iterations of $79 Prime membership renewals but also future business.

UPDATE: Mark Jaquith and Chris Lawrence both note in the comments that Amazon’s practices may not be as nefarious as suggested:  They’re quoting the best total price to all customers.  In the case of Prime members, they may be better off paying a slightly higher base price on a product that’s eligible for free shipping, thus yielding a lower or equal aggregate price.   I haven’t had time to investigate but that sounds plausible.

FILED UNDER: General
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. inhumans99 says:

    Huh…I think the folks in that amazon thread are confused. I have had a prime membership, and I was not charged a different price for my stuff than non-prime folks. This post reminds me of the story about Chinese restaurants having two different menus, one for folks who speak the language, and one for the tourists, with the prices on the native speaker menu being lower (not sure if this story turned out to be apocryphal).

    Amazon’s prices change all the time, I got lucky just this morning, some blu-rays I ordered this past Friday had not entered the shipping stage yet, so I checked their price, and noticed one item was cheaper by $3, and another $1 from when I placed the order, so I canceled those two items from my original order, and simply re-ordered at lower price. If they had shipped already, then oh well, I could have save $4 if I could see into the future and know the price would go down.

    Another example, I was excited to order a Brother all-in-one printer on Amazon when it hit a certain price (I think I pulled trigger when it was $223), and literally, a few hours later in the day, the printer was now priced at $199.99, so I quickly canceled my original order and got in at the lower-price point. The price for this item seemed to change on an hourly basis.

    Amazon tends to tell you that X item sitting in your cart (maybe you have had an item in your saved to buy later section of the shopping cart there for weeks) has gone up or down in price since you added it to the cart.

    I honestly think the person who feels that amazon is charging more for prime members encountered a situation similar to the ones described above.

    Regards,

    Christopher H.

  2. James Joyner says:

    Christopher: Did you actually read the linked post? It’s pretty clear that it wasn’t some fluke.

  3. odograph says:

    It’s the dark side of web 2.0

    It is very technically feasible to present different prices to different viewers. I think I’ve seen it elsewhere, and I actually have some vague memory of Amazon admitting it.

    Flush your caches, and use lowest price search engines. If this is an e-war, you can fight it.

    The shopper might even have the advantage here, if he uses the price searches.

  4. odograph says:

    BTW, it is will not just be “prime shoppers” … with a good ID they can price for your income and your shopping history. The data is there nowadays, and databases are fast enough.

  5. inhumans99 says:

    Hello James,

    Yes, I did.

    I am also aware that amazon has, in the past, to put it mildly, ‘annoyed’ their customers when word got around that they were testing out regional pricing, and yes, that meant that someone in NY might find widget y was $1 more than widget y in a CA shopper’s cart. This is not a conspiracy to screw prime members, as I have not noticed prime/non-prime quotes (and I lighten my wallet on a regular basis shopping on amazon).

    Another scenario, sometimes I look up an electronic item / accessory, and notice that the price looks good, but then I do a double-take because the quote is if you purchase from one of their 3rd-party vendors, and off to the right side of the screen I notice the price amazon charges for the item, along with other quotes from different vendors selling the same item. Usually, the quote I pull up is from a 3rd party that is offering for less than amazon, and amazon’s price is higher, but often worth the extra $, due to savings from free super-saver shipping.

  6. I’m not sure if “screws” is the right term here; here’s one of the comments from the thread:

    BUT – looking at your screenshots, you’re comparing the price from two different vendors — the $17.13 price is if you buy from a seller whose sales are “fulfilled by” Amazon (and $17.13 is the price for non-Prime members also), and the second is if you buy from “Eek Technology” (as a third party seller, they don’t participate in the Prime program).

    I suspect what is going on here is that all of the options are available for all buyers, but that Amazon figures that Prime members would rather place an order that’s eligible for Prime shipping.

    It appears Amazon’s algorithm is selecting the best price which includes expedited shipping for Prime customers, but some other price (either based on marketing or “lowest shipped,” no matter what speed) for non-Prime customers.

  7. anjin-san says:

    Consumers have to be on constant lookout for crap like this. Verizon Wireless consistantly quotes higher prices when I use our B2B account, I just gave up on it.

  8. Anderson says:

    The linked thread is one example of “economic analysis” where, as commonly, it’s assumed that being a jerk has no economic downside in and of itself.

    As JJ’s post concludes, that’s not very plausible.

  9. Mark Jaquith says:

    Eszter didn’t look closely enough.

    First, this item was being offered by a third party, so shipping isn’t free. Amazon Prime only gets you free two-day shipping for select items sold by Amazon.

    When I’m logged in to my prime account, it shows as $17.13 with free two-day shipping.

    When I’m not logged in to my prime account, it shows as $10.45 + $6.68 shipping (regular shipping, not two-day).

    $10.45 + $6.68 = $17.13

    I pay the same price as everyone else, but I get a free upgrade to two-day shipping.

    In Eszter’s own screen shot, it says “$14.14 + $2.99 shipping”

    Hey, what do you know… that ALSO comes out to $17.13!

    There doesn’t appear to be anything nefarious going on here.

    Since writing this, the vendors offering this product have shifted around (nothing unusual). Now both Prime and non-Prime are offering it for $17.13 with free Super Save Shipping, sold by a third party.

  10. Mark Jaquith says:

    I’ve looked, and I haven’t been able to find a single item that costs more for me as a Prime member. Certain items sold by third parties have their shipping cost baked in to the price, but with a two-day upgrade. So as a Prime member, I pay the same total cost, but get it faster (bonus!). I only paid for free two-day shipping (as opposed to a free upgrade to two-day shipping) for select items sold by Amazon. When I compares the price of an item sold by Amazon, and available for Amazon Prime two-day shipping, the quoted price is the same, but non-Prime people have to pay shipping, whereas Prime members do not.

    So Amazon isn’t screwing you.

  11. RW Rogers says:

    Christopher, Chris and Mark are right. I’ve seen allegations like this before. None have held up to scrutiny. As of this moment, Eszter continues to refuse to admit she didn’t bother to check her facts before posting. She remains confused about the salient points as well, although she adamantly denies she is. Perhaps it is too much to expect a professor of communications to actually put theory into practice before making such sensationalistic and serious (and ill-informed) allegations. LOL!

  12. DC Loser says:

    I’m a cheapskate, so I’d never fork over extra for free shipping. I’ve always opted for their free super-saver shipping when I can. They always default to their paid shipping on checkout and I switch to the free shipping. 9 times out of 10, I get my shipment in a couple of days, much faster then their estimate of the week or 2 weeks it takes to ship.

  13. SJ Reidhead says:

    The 3rd party vendors do not use Amazon Prime. I always check their shipping v. “used” prices. There are times when the used book and shipping is cheaper than a new one. Sometimes it isn’t.

    Amazon loses money on me, so I have no problems with the 3rd party fees – I always check before going that way.

    BUT – the way Amazon makes up for it is FREE Prime shipping APO! My brother, who is stationed in Baghdad gets the Amazon Prime shipped items, usually in a week – and I don’t even worry about shipping costs. The way Amazon handles APO makes up for it all. I usually ship something to him this way at least once every week or so.

    For Christmas I sent him 3 books, the X-Files DVD, and the complete DVD collection of the Three Stooges – no shipping fees. I ordered them last wee, he’s already opened the packages!

    SJR
    The Pink Flamingo