Smoke and Mirrors at Amazon.com?

Category: Finance

Like millions of other consumers, I buy stuff on Amazon.com. The free two-day Prime shipping is convenient, and the prices seem to be competitive. But some eye-opening reports, a class-action lawsuit, and a new competitor are causing me to question my assumptions about Amazon. If you shop online, you'll want to read on for the details...

Has Amazon Lost Its Price Edge?

When Amazon.com debuted in 1994 (yes, 21 years ago!) it was all about low prices. The e-commerce juggernaut has relentlessly built a reputation as the first and only place consumers need to go in order to get the lowest prices. But Amazon’s prices have crept upwards, creating an opportunity for new and old competitors to exploit.

Amazon Prime, with its “free shipping” and other perks, has been key to building customer loyalty and trust. But two pending lawsuits allege that Amazon betrays that trust by invisibly folding shipping charges into prices displayed only to Prime members.

An example given in one of the lawsuits says that a non-Prime shopper may see an item price of $10, plus $4 shipping, but a Prime member will see a price of $14 for the same item, with “free” shipping. Even worse, if the non-Prime shopper’s order totals $35 or more, he will actually get free shipping while the Prime member pays a higher total for the same order! I've seen something similar to this myself on many occasions, where the “free shipping” is an illusion created by raising the price.
Amazon pricing: Smoke and Mirrors?

Walmart.com prices were 7% lower than Amazon.com’s on a basket of 59 items compared by Kantar Retail analysts in 2014. Walmart in-store Supercenter prices were 16% cheaper than Amazon’s and 8% cheaper than Walmart.com’s according to the study.

Third-party sellers in the Amazon Marketplace accounted for most of the differences between Amazon and Walmart in the Kantar study. When Kantar compared “Amazon direct” grocery prices to Walmart Supercenters, it found the two were on equal footing. But household supplies were another matter, i. e., Windex Antibacterial Multi-Surface Cleaner — $2.47 at Walmart Supercenter, $7.07 at Walmart.com and $9.49 in the Amazon Marketplace.

Amazon obscures its overall pricing even more by offering frequent promotional discounts and “bundles” of related products. The lack of transparency lets Amazon get away with charging higher prices overall.

I Thought The Major Was a Lady

A new challenger to Amazon’s hegemony promises to eliminate the smoke-and-mirrors game. Jet.com is a membership club, like Costco. It costs $50 per year to shop at Jet, which opened in July, 2015, with over 10 million items.

A Wells Fargo analysis found that Jet.com’s prices average 9% less than Amazon’s on the same items. Jet.com even lists Amazon’s prices side-by-side with its own on items that both e-tailers carry. Jet.com even offers to refund the $50 membership fee if a customer doesn’t save at least $150 over the course of a year.

And unlike Costco, Jet.com doesn’t make you buy 48 rolls of toilet paper at a time to save money. Instead, your savings increase as your total order increases. You can actually watch the prices of items in your shopping cart fall as you add more items. Orders over $35 ship for free, and they also offer free returns. The icing on the cake is an extra $10 off your first order of $35 or more.

If you're hesitant to pay $50 just to join, you can try Jet.com free for 3 months. There's no gotcha here. If you like it, join Jet and pay the membership fee. If not, you just walk away. (As of 08/28/2015, if you use the promo code CURISMA when signing up, you'll get 12 months free, instead of 3 months. I don't know if or when this code will expire.)

Jet.com is well stocked with household items such as cleaning supplies, kitchenware, home décor, etc. It’s still a bit thin on electronics, sporting goods, and apparel. Perishable foods are non-existent, as is booze. (Side note: Amazon just launched two-hour liquor and wine delivery in Seattle.) But 10 million items is a good start, and with $225 million in seed money Jet.com can expand quickly.

Just as it pays to shop for car insurance once a year, it’s a good idea to review your online shopping loyalties periodically. There are other options besides Amazon, and they could save you hundreds of dollars per year.

Your thoughts on this topic are welcome. Post your comment or question below...

 
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Most recent comments on "Smoke and Mirrors at Amazon.com?"

(See all 50 comments for this article.)

Posted by:

finyin
28 Aug 2015

Am shopping for a replacement food processor so checked Jet.com. I use Consumer Reports to reference test results. The KitchenAid processor that Jet.com offers is low rated and they don't have either Breville's top ranked one or Cuisinart's second and third place finishers.

eBay had best price so far. Amazon had it priced with $30+ difference in a few listings... go figure. Buyer beware of where you spend!


Posted by:

DKW
28 Aug 2015

Thanks for the jet info and the codes. All worked.

we also have Prime. I've noticed there are often better prices for items [delivered] then using [prime and free delivery].

Walmart.com is often cheaper than store price, BUT also sometimes higher. I found one item on dot-com that was switched at store from the advertised one.
It was a Nikon that "lost" the VR [vibration reduction] on the included telephoto lens kit. I had a work-around for that, though. I think the online ad was incorrect, "typo" maybe? because both Walmart and Sam's had no such kits.


Posted by:

SnakeDancer
28 Aug 2015

The necessity of a low income caused me to diversify my on-line shopping experience long ago.

At one time Amazon had most all of my business, due to me living in a depressed area for shopping choice, combined with them offering good value and a wide selection.
I would always get the "Free" shipping, because it was obvious shipping had already been included in the price. But eventually they succumbed under the weight their own greed and I was left looking elsewhere.

The 'Depressed' area I live in is a product of "Wally-World" opening a Super Center, then undercutting all the local markets and smaller chains in order to eliminate the competition. Once that was done the prices went up and the shelves were cleared, to then only stock the shoddy Chinese goods they had the most profit in selling..

I just placed a $47. order with Walmart for some teas and other dry goods I could get for a good price, but not in my local store. (I checked) They were available close by in three directions, where Walmart still has some competition, but not here.

Amazon had the same for over $100 and 'Free' shipping..

I bought my chicory coffee from Amazon until they went from $5. per one pound can to $9.80 for 12 ounces. I now buy it in NOLA for $4.20 at Riley Foods.

Spices, herbals and such now come from Monterrey Bay Spice in Frisco and beans, milled grains and such come from Adobe Milling in Colorado. Sprout seeds and sprouting products come via the Sprout House ans the Sprout People on both coast.

BTW: Besides considering it a waste of money, I have a strong aversion to the supposed 'exclusivity' of buyer-clubs, groups or 'Special people'. It irks me when Food City thinks I'm gullible enough to present my card for fantastic savings over and above all those 'Common Class' customers not 'in-the-know'.

Then the register receipt is ten foot long trying yo tell me how much I "SAVED" on most every item on it. It wishes me to believe I saved $16. on a bar of soap by only paying $4. for what cost $1.39 anywhere else.

Ha! HA!! it is to laugh...


Posted by:

Sheri
28 Aug 2015

Yes, I tried Amazon Prime on their UK site once, when they offered a free trial of it. But I didn't find it saved me any money at all because the Prime prices with the free delivery included were so often matched or beaten by other sellers with good feedback scores!

I joined Prime hoping I would be able to use Prime Video as well - but I could not work out how to do it and there were no real instructions that I could find either. So I cancelled it and will never bother gain.


Posted by:

Jemima
28 Aug 2015

I agree with Dianne, above: this website is so junked up with moving objects that it's difficult to look at, let alone use. I would get a raging headache trying to place an order in spite of all the cutsie stuff.


Posted by:

Charles Feinstein
29 Aug 2015

Jet.com is only for US based shoppers. As an American living in Canada, I will say that Amazon.ca is not the "good deal" that Amazon.com is. Shipping prices are outrageous. Perhaps Canada Post is more expensive, but I think people hear are being taken advantage of. Unless someone gives me a gift card, I/we do not shop Amazon.ca except for free e-books for my Kindle app.


Posted by:

Rhonda Lea Kirk Fries
29 Aug 2015

And here's the unhappy almost-ending to the tale of my order from Jet.

After I failed to put two of the Tide Pods into my cart, I added other items to meet the shipping threshold. I just now received an email advising me that the Tide Pods order could not be fulfilled, but my other items would be coming. I wrote to Jet, and I advised them to cancel the entire order, so that I would not have to contact my credit card company to put through a charge-back.

I'm not happy. I'll be even less happy if I have issues getting the remainder of my order cancelled and my money returned.

I'll follow-up on this as soon as I have a reply.


Posted by:

Monica
29 Aug 2015

Most the time Amazon is higher than other sellers that sell on Amazon however they always promptly refund my money and they pay return shipping if I am not happy with a product.If you are not a Prime member they ship orders free over $35.00. but they use the slowest way possible to get you to join
Prime.I used to be a member till they raised the price.Most auto parts or 1/3 to 1/2 of the price at local chain auto parts stores.


Posted by:

Linda
29 Aug 2015

Amazon is gouging Canadian consumers as well. Here's my experience.

Last fall Amazon.ca offered a special on Canadian Litter - a new, Canadian-based company cat litter producer. The special was a 26.5 lb. bag for $9.95, including delivery. It turned out to be fabulous litter - the best I have ever bought - so I went back a couple of months later to order more. Well, suddenly the litter was $39.99 for the same size bag! (For any non-cat-owners out there, that is an outrageous price for litter!) So I began to suspect as well that Amazon's so-called "free delivery" was not so free after all.

I emailed the manufacturer, who was unaware that Amazon.ca was charging such an inflated price. He told me that the bag of litter I wanted should retail for $17.95...still not cheap but worth it at that price. The result - I now order another type of litter from Walmart instead, and the producer of Canada Litter is looking for a new distributor.

So Bob, you are absolutely right about Amazon's smoke and mirrors act. I have seen ridiculous prices for other things on Amazon.ca as well, and lately all kinds of prices that don't even make any sense! For example, the exact same item will be listed twice with HUGELY different prices.

Methinks Amazon NEEDS some stiff competition! Maybe that will make them smarten up before they lose a lot of customers. I doubt that Jet.com is available in Canada, but I will keep my eye open for it.

As always, thanks so much for your invaluable tips and insights and all the research you do!


Posted by:

Jim Cauthen
29 Aug 2015

Thank you Bob for all your hard work. I look forward to your letters, while deleting 95% of the junk in my IN box.
Anyway, I joined Amazon Prime for the video selections included. My three year old grandson watches several shows included with the Prime membership. That alone was worth the money. As for the saving of money, this is America, shop where you like. I would rather pay more at my local hardware store where they want my business and employ some old guys who have a wealth on knowledge to help me get the wife off my back. Compared to the rest of the world, we live like kings. Enjoy it while you can.


Posted by:

Herb
29 Aug 2015

Bob - you perfectly composed the words to go with the gut feelings I've had for quite a while. As in all things, it is up to the consumer to exercise his/her due diligence to ensure they are getting the best deal possible and not rely on the hype of major websites. There's gold in them thar hills if one is willing to dig for it.


Posted by:

Buffet
29 Aug 2015

WHOA! Talk about an eye-opener!


Posted by:

nicky49
30 Aug 2015

I just signed up. You put your email address in and they send you an email with a three month trial. There's no place to put in CURISMA anywhere.


Posted by:

Carrie
30 Aug 2015

Thanks for the heads up first on Amazon's "pricing" and then for mentioning JET. It's always nice to have a choice.


Posted by:

Ken Maltby
31 Aug 2015

At last - an opportunity to enlighten a (hopefully) sympathetic audience of the price gouging of Canadians that has long been happening (even when the dollar was par). Just look at book prices and Netflix for examples of how Canadians have been, and still are being, ripped off! I actually don't expect much sympathy from US ciizens but at least the message is getting to all your Canadian readers


Posted by:

Tom
31 Aug 2015

I am a Amazon customer and a Amazon seller. I've already signed up to Jet's free trial and have done some test shopping and can say that everything I would buy off Amazon that's offered by Jet is priced the same on Jet. But also, about 20% of what I buy off Amazon is not available on Jet.


Posted by:

Gracia
01 Sep 2015

Just input my name, email address and password and in "Membership Code", I input, "CURISMA" and it didn't accept it. I even tried it in lower cased letters.

EDITOR'S NOTE: Codes come and go. Try GOOGLE, MICROSOFT, or FACEBOOK.


Posted by:

Fabio Cardens
01 Sep 2015

My wife is taking a college class and was able to sign up as a student for Amazon Prime for $50/year for the next four years. This may work for many of you. All you need is an email address ending in .edu, you can see the requirements at amazon's membership page. I also have a separate non-Prime Amazon account and have found price differences for the same items when logged in with mine or my wife's account. I also noticed prices vary according to day and time of the day.


Posted by:

RLM
02 Sep 2015

Amazon has to cover costs just like any other business. Shipping rates have gone up substantially for them. Also, Amazon historically rarely reports a profit (talk about smoke and mirrors!). As a consumer, you want the lowest price. I get it. And the jacked up prices for the Prime members does seem weasely to say the least. But quityer cryin and move on!


Posted by:

rosshi
29 Sep 2015

#PRIME Doesn't Pay Eh Bob LOL


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