Smoke and Mirrors at Amazon.com?
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.
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...
This article was posted by Bob Rankin on 28 Aug 2015
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Article information: AskBobRankin -- Smoke and Mirrors at Amazon.com? (Posted: 28 Aug 2015)
Copyright © 2005 - Bob Rankin - All Rights Reserved