Your Pricing May Vary

J.D. Lasica wondered in regards to some pricing at Amazon.com where they say that they can't show it on an individual page: "...why [Amazon.com] can display the price in my shopping cart but not on the product page. Does it have to do with shopping comparison bots, where Amazon's price would compare unfavorably? Or does it have to do with Amazon's arrangement with its big retail partners like Target?"

It's a funny world, ain't it? Amazon.com gets co-op dollars from manufacturers to promote their goods. Co-op dollars are a huge point of contention between chain/large stores and independent stores (bookstores, electronics sellers, etc., etc.). Co-op dollars are ostensibly a way for manufacturers to push sales by encouraging retailers to advertise goods that they might otherwise not promote. Retailers get their advertising subsidized.

It's a dirty secret, and Amazon.com has been surprisingly forthright about aspects of it. The term in the book industry is merchandizing. Back a couple years ago, Doreen Carjaval of the New York Times wrote what I thought was a very unfair article with a chip on its shoulder on the front page of the paper about how Amazon.com was accepting co-op and other merchandizing dollars to promote items in their What We're Reading section and other places on the site. The article was unfair because it made it sounds as if Amazon.com were doing something that didn't conform to industry practice.

Amazon.com's response was quite good: they said, you know, we shouldn't be toeing the line, we should be more upfront than other folks in the industry, so they added a link on pages that had support dollars attached that explained this. They became (and still are, I believe) the most transparent retailer in this regard.

This is one reason why I was annoyed last summer when they started messing around with pricing, shipping, and surcharges: I felt they weren't keeping in mind that they were confusing the consumer enough that it bordered on misleading the consumer. After a discussion with some folks at the top of the company (after my appearance in the WSJ, the LA Times, and on CNBC commenting on this problem), I accepted their explanation that it wasn't an attempt to mislead, but rather the top brass didn't quite understand how much they were tweaking.

Since that point, prices have been essentially fixed: discounts have remained, and the special order (4-6 week on order books) surcharge was further made transparent through a special note on pages on which the surcharge applied. They did learn this lesson, and they did once again become the most transparent retailer.

Back to the issue of why they can't show these prices. If you accept co-op dollars, you also agree to not advertise products below a minimum price. It's a shady area in that manufacturers are not per se allowed to set prices for goods; retailers may charge what they will. But manufacturers can choose to sell to some merchants and not others as long as the reason they choose not to sell is based on fair principles: that is, they can't choose to not sell in a black neighborhood or because another merchant told them not to sell. But they can restrict sales based on conditions, or not sell at all.

They also place these conditions on co-op and merchandizing money. If you take the money, you don't advertise below MSRP (manufacturer's suggested retail price). For the purposes of the Web, manufacturers have apparently agreed that the price covers the Web page on which the product appears, but once it's added into a shopping cart, that's a private transaction. This does, as you suggest, also limit the ability of comparison engines (such as my own isbn.nu) to provide the actual lowest price.

The reason for preserving MSRP is to prevent price-cutting retailers from using co-op dollars as a tool to undercut other retailers in the same or similar channels. Manufacturers must protect the channel fairly or face problems from the government and the retailers.

Hope that suffices as my understanding of the issue!