Does Online Shopping Mean the End of Fixed Prices? | Fortune.com

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In a week with the usual litany of bad news for brick-and-mortar retailers, The Atlantic offers an in-depth look at one of online sellers’ biggest advantages—data-driven dynamic pricing. It’s a tactic familiar to anyone who has watched items in their Amazon basket change price over the course of a day (or an hour)—but traditional retailers are starting to get in the game, too.

As writer Jerry Useem recounts, fixed pricing is itself a fairly new, and particularly American, innovation. Before retailers including Macy’s started advertising fixed prices in the 1860s, haggling was the default. It was the best way for sellers to find out the slightly different price each buyer was willing to pay for a product. Fixed pricing—leavened with price hierarchies and a dizzying array of discounts—came to be seen as both more ethical, and easier to manage as retailers expanded.

But the growth of big data, especially from tracking buyer behavior online, has in a sense made haggling scaleable. Useem describes the evolution of dynamic pricing since the mid-1990s—“eBay was Disneyland,” says one economist who studied consumer habits there. Online, possible tactics include tracking buyers’ spending habits, then suggesting more expensive products to more free-spending customers—or even, as did the instinctive hagglers of old, just offering them a higher price and seeing if they bite.

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Does Online Shopping Mean the End of Fixed Prices? | Fortune.com.