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Consumers Hate “Price Discrimination,” But They Love Discounts

Consumers Hate “Price Discrimination,” But They Love Discounts

Zohar Gilad runs Fast Simon, a company that helps retailers optimize their websites. Instead of offering different prices, they can display premium items for customers with free purchase history, and clearance items for bargain hunters. Targeted coupons for hesitant browsers also create a personalized price under a different name, creating a sale that might not have happened.

“Let’s say if you’re looking for something and you didn’t buy it, you might get an email saying, ‘Hey, you have good taste. » We saw you looking for black boots. Here’s a 20 percent coupon,” Mr. Gilad said. “I believe that personalization, done correctly, can be beneficial and serve both buyers and merchants.”

However, some retailers prefer the loyalty that price stability can bring, even if it means giving up short-term profits. Walmart, with its everyday low prices approach, avoids coupons and rarely discounts anything. This practice “helps us earn the trust of our customers because they don’t have to chase sales and can count on us to consistently offer low prices every day,” said Molly Blakeman, a Walmart spokeswoman.

Retailers must also be careful to avoid any appearance of discrimination. The Princeton Review came under scrutiny when ProPublica revealed that because it charged higher rates for test prep in certain ZIP codes, Asian American students tended to pay more than other groups. Researchers found that in Chicago, Uber and Lyft’s pricing algorithms resulted in higher fares in neighborhoods with more non-white residents. The companies said their prices were based on demand patterns and without any intention of discrimination.

The most important factor, said Erin Witte, director of consumer protection at the Consumer Federation of America, is that shoppers understand the rules created by merchants. Problems arise when there is an “information imbalance,” especially when it comes to something as existential as food, which may have fueled Wendy’s backlash.

“When they feel like they can meaningfully participate in a negotiation on price, everyone understands, on some level, that a company is going to make money on a transaction,” Ms. Witte said. “But when you feel like you’re the subject of price manipulation that you, as a consumer, have no access to and certainly can’t predict with any certainty, it just feels very unfair.”

Audio produced by Sarah Diamond.

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Mattie B. Jiménez

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