Rafi Mohammed

Want the Lowest Prices…Check Out the Internet!

Posted on May 10th, 2007 (0 Comments)

Remember the good old Internet mania days when the mantra for reaping discounts was “buy it on the web?” I saved a lot of money back then, but in recent years this mantra has slowly faded in my mind. A few recent buying experiences vividly reminded me of the key role that the Value Decoder step of setting prices based on those of the next best alternative plays – and why prices are so low on the Internet.

Surprise Pricing Discovery #1: I recently decided to buy a drinking fountain for my pet. Visiting Petco.com, I was pleased to find the fountain on sale for $34.99 (regular price: $39.99) plus discounts on the required water filters. Since I live down the street from a Petco, I dropped by to pick one up. I was shocked to find the exact same product priced at $54.99 plus higher filter prices. Leaving empty handed, I ordered online (free shipping) and presto, 2 days later my package arrived and I was $20 richer.

Surprise Pricing Discovery #2: Best Buy has a neat service where you can order items from their web site and pick them up at your local store 45 minutes later. The service is designed to offer convenience…as the items are waiting for you and there is a special cashier for expedited check out. Trying out this service, I discovered a little unadvertised added benefit: prices are often lower when you order online. After picking up my purchases, out of curiosity I checked the store prices of the products I ordered. Much to my surprise, the Internet prices I paid were about 20% lower than those in the store!

Surprise Pricing Discovery #3 (I screwed up). Outlet equals discount, right? As I recently found out…not really. With summer right around the corner, it’s time to hit the jogging path around the Charles River in Boston. Many years ago, a thrifty friend recommended buying running shoes at a nearby Saucony Outlet. This store fits the modus operandi of a typical outlet: a non-descript exterior, bare bones interior, and price tags trumpeting 30% or so below “retail.” Believing I was getting great deals, I’ve been a loyal customer since 1998. On Tuesday, I happily purchased a pair of running shoes for $99.99 (“retail” is $130). Doing a quick Google check, much to my dismay I found a retailer selling the same shoes for as low as $69.99 ($79.99 on Overstock.com)…that really, really hurts.

When you think about it, it makes sense for brick & mortar companies to offer their lowest prices on the web. Why? It all goes back to the Value Decoder and basing your prices off those of the next best alternative. It could not be easier to compare prices on the Internet (visit petco.com and petsmart.com). Just type in “Saucony Mens Hurricane 8 running shoes” into Google and whoa la…a bevy of prices instantly appear. Since it’s more difficult to compare prices between brick & mortar stores, it’s understandable why the same products (often sold by the same retailers) are more expensive in stores compared to the Internet.

C’mon, aren’t you surprised by the differences between the Internet and store prices in my above listed shopping experiences? I certainly am! I can assure you that now, my first step in making a purchase will always be to check Internet prices…

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