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The Fairytales of Cheap Online Prices

Author: Kurt Schauer

Are prices when buying goods of any kind online actually always cheaper? Not necessarily, according to a study conducted worldwide and funded by MIT in Cambridge. When shopping through multichannel retailers, there are only minor differences between offline and online prices, especially in Germany — which is good news for the end customer. Nevertheless, comparing prices is still worthwhile, because one important component was not taken into account in the study.

Collecting data …

To make a study meaningful, large amounts of data are necessary. Undoubtedly, this has also been the case here:

The study was conducted over a period of 16 months and includes ten countries spread across the globe. In Europe, for example, Great Britain and Germany were part of it.
38,000 prices of 24,000 different products were compared for this purpose. Collecting this amount of data was not possible alone, which is why 370 freelancers had to help.
Only multichannel retailers were compared. This refers to companies that sell both online and offline (such as Saturn or Tchibo, for example). The installation of a special app was also necessary for the comparison.

Those employees were instructed to go into a store with their smartphone and scan up to 50 products using their barcodes. For the later comparison, noting the advertised price was necessary. Not every retailer was enthusiastic about this, and so, for example, in China, it was difficult to even take photos of products. Nevertheless, the study is considered meaningful due to the enormous amount of data – and reveals some surprises.

… and their evaluation

The results showed that prices are identical down to the last cent in 72% of cases. In the remaining 28%, the differences amount to a few percent, meaning that for prices in the two- to three-digit range, customers often save only a few cents up to a few euros with the cheaper method. Therefore, the effort of price comparison is not necessary if it is already determined which retailer a specific product will be purchased from. The right place is simply the one that can be reached faster and with less effort.

Germany even fares slightly better than average in this comparison, as prices here are identical in 74% of cases. If differences occur in the remaining 26% of comparisons, online purchases are almost always cheaper. Up to 8% of costs can then be saved, which can be worthwhile for individual items worth several hundred euros. The case of cheaper offline shopping also occurred in the study – but only as a rare exception that proves the rule.

The product group decides

Buyers who purchase products from globally active corporations have a particularly high chance of success – meaning identical prices. Prices from large IT companies like Microsoft and Apple, or even companies like Ikea, are almost always identical within a currency area (although significant differences can still occur across countries). Especially for residents of countries in the Eurozone, the place of purchase therefore plays almost no role.

More important, therefore, is the exact type of goods: High-priced items such as electronic devices or clothing are at an identical price level both in brick-and-mortar stores and online shops. The differences are much more comprehensive for foodstuffs, for example: The numerous local offers (due to an approaching expiry date for fruit and vegetables, for instance) mean that only about 50% of prices are the same. Furthermore, this sector is subject to permanent strong price fluctuations, which is why a comparison between online and offline prices rarely yields a reliable result for the customer.

A rather popular tactic of multichannel retailers also seems to be far less widespread now than a few years ago: the price adjustment based on the customer’s location, search behavior, and economic status. In the past, for example, slightly higher prices were charged depending on the postcode if the search query for a specific product came from a device in an affluent district. However, this practice could no longer be proven in the study, at least in the USA. The increased transparency through price comparison engines and the associated fear of customer complaints are blamed for this.

The Great Unknown: Pure Online Retailers

However, the prices of typical online shops like Amazon or eBay were not included in this study. Therefore, the study should not convey to the customer that price comparisons are generally a waste of time. Due to many saved expenses (maintaining a branch network, personnel costs, building costs), online retailers often offer their goods at lower prices than the aforementioned multichannel chains. Since, as already mentioned, online prices are almost always lower than offline prices (provided there is any price difference at all), price comparisons will continue to be a proven method to save money in the future – if more than just multichannel retailers are included in the comparison.

If you are looking for ways to make your online shop more attractive – beyond simple price reductions – the kaos advertising agency will, of course, be happy to assist you. Our expertise also lies in customer acquisition through the optimization of your online shop – simply contact us without obligation!

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Do you have questions?

Eliana Gramer

Head of Web/Digital