Tuesday, October 27, 2015

Only Schmucks shop at Best Buy stores

It looks as if Best Buy has been discriminating against its in-store customers, by showing them a fake intranet with prices higher than its real internet store.
Company spokesman Justin Barber, who in early February denied the existence of the internal website that could be accessed only by employees, says his company is “cooperating fully” with the state attorney general’s investigation. Barber insists that the company never intended to mislead customers. 
State Attorney General Richard Blumenthal ordered the investigation into Best Buy’s practices on Feb. 9 after my column disclosed the website and showed how employees at two Connecticut stores used it to deny customers a $150 discount on a computer advertised on BestBuy.com. 
Blumenthal said Wednesday that Best Buy has also confirmed to his office the existence of the intranet site, but has so far failed to give clear answers about its purpose and use. “Their responses seem to raise as many questions as they answer,” Blumenthal said in a telephone interview. “Their answers are less than crystal clear.”

This kind of indirect price discrimination (higher prices at the store, lower prices online) is typically legal, deceiving consumers about its existence likely runs afoul of the Consumer Protection Laws, at least in Conneticut, which has a very aggressive Attorney General.

Remember, consumers don't like learning that they are "schmucks."

HT:  Ben

8 comments:

  1. Barnes & Nobles has a similar practice. Physical stores claim their "online store" is a separate entity from their brick & mortar stores and therefore will not honor prices from their website. (This also applies to their higher education textbooks.)

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  2. Regarding the in-store sales practices of both Best Buy and Barnes & Nobel (and probably others) for claiming separation between store and online prices and selling schemes.
    Not quite the old fashion “bait & switch” routine of luring shoppers into the store with a few very low prices entities where there are minimal numbers of those particular items for sale, or they are already sold out (and no rain checks and no substitutions), or there were none to begin with (the absolute scam). Maddening for certain for the shoppers who rise early, stay up late or otherwise attempt to patronize the store for the advertised special sales item, only to find their time and efforts wasted.

    Occasionally, (rare, but lucky to happen) is the rare event when the particular salesperson actually goes above and beyond to help the customer get the wanted (or needed item) and even match the best sales price, whether an advertised special (and the item is indeed in stock somewhere in the store). Or to honor a policy to match a rival store’s price. Or the even rarer event where they honor the store’s own separate and special online “limited” price reduction.

    Two years ago, the last mentioned event actually occurred! I was in search of the recommended Texas Instrument financial calculator for one of my MBA courses. Rushing into the nearby Staples store minutes before closing, I asked for help getting the particular model. As luck was my copilot that evening, the assistant evening store manager (AESM) was the one to help. We searched online as well as the store shelves and someone was sent to the back storeroom, as well. One last calculator was found! In the meantime, the AESM found the model online in the Staples website. It had a “one day” special price reduction. With only a moment of negotiation, the manager graciously offered me the online sales price for purchasing the item in the store. They wanted to close, I wanted to buy, the forces moved the demand/supply curve into favorable territory for me, we closed the deal with my credit card swipe, and I left the store pleased with both purchase and service. Smart move on the manger’s part. I remain a Staples’ customer.

    Of course, getting the really good email coupons also keeps me the Staple’s customer, as well. Ever so useful (and enjoyable!) are those $100 coupons for a $200 (or more) purchase via their online/website store. I’m well stocked for a decade with Staple’s staples (love to say that), paperclips, and various writing implements.

    The moral of this blog is to find the store that has the right personnel and is willing to accommodate you.
    Lee Lichtenstein

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  3. It is very common for Retail Stores and in many cases Cable TV providers to advertise lower prices online. In the case of retail stores it is cheaper to have the customer go online, read up on the product descriptions and specs themselves and more efficient than 4 customers waiting in line for an hourly paid store representative to assist them with questions answered on each product’s webpage. Verizon traditionally advertises its triple play bundles for $10 cheaper online with 50% half off installation, this ensures that less customers have to wait on hold for the limited number of available reps. More online installations mean less callers on hold, less customers hanging up out of frustration to call the competition and less money spent winning the customer over from the previous provider. The installation process for cable and internet is actually quite expensive and it takes anything from 3- 5 months to recoup the cost of installing a new customer, having self-help options online are more beneficial to customers and more cost effective to the organization.

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  4. It is very common for Retail Stores and in many cases Cable TV providers to advertise lower prices online. In the case of retail stores it is cheaper to have the customer go online, read up on the product descriptions and specs themselves and more efficient than 4 customers waiting in line for an hourly paid store representative to assist them with questions answered on each product’s webpage. Verizon traditionally advertises its triple play bundles for $10 cheaper online with 50% half off installation, this ensures that less customers have to wait on hold for the limited number of available reps. More online installations mean less callers on hold, less customers hanging up out of frustration to call the competition and less money spent winning the customer over from the previous provider. The installation process for cable and internet is actually quite expensive and it takes anything from 3- 5 months to recoup the cost of installing a new customer, having self-help options online are more beneficial to customers and more cost effective to the organization.

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  5. Best Buys practices of "indirect price discrimination" is deceitful. Legal or not, customers looking to support local "brick and mortar" establishments and the employment of people in the community should not be taken advantage of. Though the post states that Best Buy's practices are indirect discrimination, this would appear to be more discriminate. Showing customers an intranet site verses the actual internet site is most likely targeting customers without home internet services. This may include any host of demographic members of the community. There are multiple ways to realize price maximizing profits including coupon's and select discounts, without being deceitful. Ultimately the consumer will decide if they were treated poorly.

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  6. A valuable lesson from our Managerial Economics text (Froeb, McCann, Shor, & Ward) is that if you are going to price discriminate, you better keep it secret or pay the consequences. In the case of Best Buy in Connecticut, I am not surprised by the practices that they were employing. This story reminds me of Syms Corporation, which was an off-price retail clothing store chain. They always advertised that “an educated consumer is our best customer”, when in reality, it seems as though Best Buy may have felt a bit differently. By using an internal intranet site to show faux prices, consumers were taken advantage of. With the usage of smartphones, many consumers can show real-time prices while in the store and should challenge them when they feel as though something appears foul. This practice seems like a license to steal by retailers, as the holidays approach and inexperienced people find themselves making purchases for items they know little to nothing about.
    I have had a related experience recently with an online pricing issue at a local major office retail store. I had a situation where their online price was much lower than in the store. I asked them to match it and they refused, saying it is now out of stock online, and they didn’t have to honor the pricing, also that they were separate from the in-store division. So I did the only thing I could do, went down the road to another location of the same chain which was more than willing to help me.

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  7. I think Best Buy’s indirect price discrimination has crossed the line between ethical and unethical pricing. However, if they had been honest about the price difference or offered to match the online price when it was brought to their attention, I see no problem with them offering different prices in these two channels. The fact of the matter is that it is likely more convenient for the customer (same day purchase) and more expensive for Best Buy to complete the sale at the store (overhead, sales associates, etc.), justifying a higher price here.

    A year and a half ago, Clorox faced a lawsuit that alleged price discrimination between warehouse clubs and smaller chain stores. Woodman’s grocery chain stores sued the company for only selling large packs of product to the larger stores such as Costco and Sam’s Club. Woodman’s claimed the practice will hurt their ability to compete with these nearby stores and violated the Robinson-Patman Act.

    This goes to show that price discrimination can take place at a multitude of levels and it is imperative that retailers handle this separation of customers appropriately. Having different prices from production to sale of a product is part of what makes the world go around and the economy keep moving. If companies were unable to sell in bulk at a low price that retailers could then mark-up, they would be unable to take advantage of consumer surplus. However, it is clearly important how they decide who can and cannot purchase in bulk or they risk breaking the law. I think consumers are blind to how often price discrimination takes place but that does not make it any less important for businesses to do this in an ethical manner.

    Associated Press. (2014 October 29). Grocery chain sues Clorox for price discrimination. Retrieved from http://www.washingtontimes.com/news/2014/oct/29/grocery-chain-sues-clorox-for-price-discrimination/

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  8. Price discrimination is certainly a terrible way of deceiving consumers and in a way very unethical. However, at the same time the consumers have the right to argue their case and confront the stores who do such things. I have once before experienced price discrimination in a lamp store. My husband and I were shopping for a ceiling fan, and the price of the fan was approximately $400.00. At first we did not think much about the price however, once we got home we were curious to see if the fan we picked out was indeed worth $400.00 online as well? Well, we learned that the fan was actually offered for only $290.00 online, with free shipping.

    We were a bit upset, however, we decided to confront the lamp store. To our surprise, we were happy to learn that the store was very professional and once we provided them with proof of the price we saw on a different website, they decided to honor it, and they were able to match the price offered online ($290). The bottom line is that price discrimination is a very negative act used by stores to deceive customers. However, at the same time, if the customers do their research they will be able to avoid falling into such traps. Additionally, it would be nice if all the stores were ethical and professional however, this may not always be the case unfortunately.

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