The best time to save on Amazon & Co

November 9, 2023, 8:47 a.m. |
Reading time: 9 minutes

The decisive advantage of online shopping? The offers are available anytime and anywhere. But what you quickly overlook is that the price can fluctuate at the same retailer. TECHBOOK has taken a closer look at the phenomenon of dynamic pricing.

This can be confusing for customers because no one wants to accept a disadvantage. But you are not helpless at the mercy of the dealers’ tricks. Anyone who buys at the right time can be happy. But if you strike at the wrong moment, you pay. TECHBOOK interviewed an expert and explained how you can catch the right moment.

Maximize your willingness to pay

Depending on the day of the week and the provider, shoppers may save a few euros – or spend too much. Dynamic prices have several advantages for sellers. Marketing expert Prof. Dr. Peter Kenning from the Heinrich Heine University in Düsseldorf says to TECHBOOK: “The companies pursue two goals with dynamic pricing. On the one hand, price is a powerful lever for increasing profits. The providers want to use price fluctuations to tap into customers’ willingness to pay and exploit the profit potential.” Willingness to pay describes the maximum amount that a customer is willing to pay for a product or service. A dealer is therefore very keen to set his prices as high as possible, but still within the willingness to pay.

“In addition, the providers are reacting to the competition,” explains Dr. Kenning, “The market is constantly being closely monitored so that customers do not order from another shop.” However, this can also be a disadvantage for customers. For example, if a competitor’s product is out of stock, the retailer usually increases its price very quickly. Customers now have less choice and have to accept the higher price.

This is how dynamic pricing works behind the scenes

Behind the price fluctuations are algorithms and bots that non-stop analyze the current market situation and the prices of the competition. Many also use data from comparison sites. But a retailer can just as easily decide that a particular competing company should be kept in mind. With AI now widely accessible, the algorithms are learning more and more and can adjust prices even more specifically. The dealer sets the framework within which the price should be increased or decreased.

The AI ​​is equipped in advance with relevant factors such as current demand, inventory levels, your own brand strength, seasonal effects and your own costs. For example, Christmas decorations are subject to different price dynamics in the run-up to Christmas than in summer. Depending on the product, the algorithm also takes weather developments, trade fairs or regional characteristics into account. This multitude of factors results in several forms of dynamic pricing.

Long and short term price fluctuations

As presented above, time-based pricing is based on times of day and weekdays. Another form of dynamic pricing responds to general market developments, such as when new competition enters the game, demand skyrockets (or falls), or even when raw material prices rise. These effects on prices are usually somewhat longer-term. For example, the global paper shortage combined with the death of the German paper industry is one reason for the increased book prices. In addition to these exogenous market conditions, peak prices can also cause dynamic pricing. A classic example of this is all prices in the tourism industry, which skyrocket during the peak season.

Finally, there is segmented pricing. Here the prices change depending on the segment and therefore depend on the respective customer. Presumably more affluent customers who own a Mac, for example, are shown a higher price online – at least in the USA. With every search query, a lot of personal data is transmitted to the respective website, which may be processed directly by the pricing algorithm. But segmented pricing can also bring advantages for specific customer groups. For example, there are occasionally discounts for students or seniors.

But when is the best time to go on an online shopping spree? And is there a shopping prime time? Yes, the time can be crucial in dynamic pricing. So said Dr. Kenning to TECHBOOK: “It’s similar to gas stations. When demand is low then is a good time to buy. For example in the morning when many people are at work. But the algorithm is not only determined by the time of day, other factors also play a role, so this rule does not always apply or for all products.”

Various studies have shown that the same product is often offered at a higher price during the lunch break because demand increases at this time – after all, people now have the time and leisure to browse. However, prices are comparatively stable later in the evening. During the study period, at the online retailer ATU, car batteries or tires were sometimes up to 30 percent more expensive in the morning than the afternoon before. At the mail-order pharmacies DocMorris and Sanicare, price reductions were accompanied by price increases for other items on individual days. Statistics have also shown that clothing, shoes and accessories on fashion platforms are cheapest on Thursdays, but are often most expensive on weekends. Clothing should usually be cheaper to buy before Christmas. But that doesn’t apply to shoes, which often go up in price before the holidays.

Anyone who has can: large companies use dynamic pricing

It is often the large international companies that practice dynamic pricing. In 2019, the Federal Statistical Office monitored consumer prices on the Internet for a year. A total of 42 million pieces of data from over 200 online retailers were collected. Electronics markets and online pharmacies particularly often relied on dynamism during the study period. It’s not always just about small adjustments, as the example of a large fashion retailer shows. The market watchdogs followed the price development of a pair of trousers. Within a few days, the offer fluctuated in several steps between just under 80 euros and almost 200 euros. At a large electronics retailer, customers who bought it on the wrong day paid 220 euros more for a smartphone than on other days.

The online giant Amazon practices dynamic pricing extremely. Here the prices even change several times a day. According to a study by the software company “Minderest”, the price can change up to 100 times within 24 hours. Prices are calculated using a programmed algorithm. “Thanks to digitalization, the price adjustment costs are very low,” says Dr. Kenning. “It all happens automatically. That’s why almost all online shops now use dynamic pricing. But dynamic pricing has not only arrived on the Internet, but also in real stores. Thanks to electronic price tags, many companies can also change their prices very flexibly.”

The dynamic pricing model is also very popular with airlines, holiday travel providers and hotel agents. Depending on the day of the week, time of day and time remaining until the service begins, different prices apply. The ultimate goal is to find the highest price that the consumer is still willing to pay and thus, if possible, fill the last empty spaces.