Why shoppers are paying more for a fake Amazon discount

By Halle Burton

According to new research by Jinhong Xie, a Warrington College of Business professor at the University of Florida, more than a quarter of Amazon vacuum cleaners sold have increased their prices while pretending to offer discounts.

Xie’s pricing phenomenon research is joined with Sungsik Park at the University of South Carolina and Man Xie at Arizona State University, publishing their analysis in the Marketing Science journal.

A product’s price increase is paired with a previously unadvertised listing price, which encourages Amazon shoppers to receive a deceitful false discount.

This faux discount drove higher sales despite the price increase, and shoppers end up paying 23% more on average.

“When you see this list-price comparison, you naturally assume you are getting a discount. It’s not just that you didn’t get a discount. You actually paid a higher price than before the seller displayed the discount claim,” said Xie.

Regulations currently prohibit deceptive pricing by requiring truthful price comparisons from the sellers, but a list price can still be misleading under these circumstances.

Shoppers are misled by the timing of price comparisons where retailers advertise a price discount that actually only gives the impression of a deal.

“Current regulations are all about the value of the list price, and they don’t say anything about misleading consumers by manipulating the timing of the list price’s introduction,” Xie said.

Xie and her colleagues followed more than 1,700 vacuums on Amazon from 2016 to 2017 gathering observational data on their prices.

“We found that by increasing the price by 23% on average, the seller achieves a 15% advantage in their sales rank among all products in the home and kitchen category,” Xie said.

Xie encourages consumers to be aware, not make assumptions about discount claims and utilize multiple websites to compare prices.

“We think that consumer organizations and regulators should evaluate this new marketing practice to determine whether and how to manage it.”