Companies use algorithms to track prices in real time at multiple retailers – for everything from electronics to exercise equipment. Then advise their clients – other retailers – on whether they should drop or lower their prices. Ana Garcia reports for the NBC4 News at 5 p.m. on Dec. 19, 2012.
Third-party companies that track the behavior of retailers are contributing to a competitive holiday shopping environment online.
The companies use algorithms to track prices in real time at multiple retailers – for everything from electronics to exercise equipment. Then advise their clients – other retailers – on whether they should drop or lower their prices.
“That’s really the power of the Internet,” Dominique Hanssens, a marketing professor at UCLA.
It’s a phenomenon that helps explain why the cheapest price for an iPad Mini on Google Shopping shot up from $279 to $329 to $411 and then back down to $329 in a five-day period this month.
"They are saying if a competitor drops the price, and we don’t want to lose sales, then maybe we have to match it,” Hanssens said of retailers.
Conversely, if a competitor raises prices, other retailers may follow suit to maximize profits.
“The Internet’s created a very transparent marketplace where retailers compete vigorously for a buy button,” said Mike Fridgen, CEO of Decide.com, another new kind of company that tracks prices for consumers.
On Fridgen's site, shoppers can search for selected items and be rewarded with the lowest price, and they can also find out whether the price will go up or down within the next two weeks.
Decide.com offers a type of insurance that most other price comparison sites don’t. If its prediction is wrong and the prices goes down, it tracks that information and then mails the buyer a refund for the difference.
It's a subscription-based service that costs $5 a month or $30 a year.
Experts say this kind of online transparency is a win-win situation because consumers get lower prices and retailers still make a profit.
Other price comparison sites include:
Meanwhile, shoppers may want to figure out how to change their browser settings to avoid falling victim to "dynamic pricing," which lets companies use web cookies to potentially charge a higher price.