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Amazon Error May End 'Dynamic Pricing'

ByABC News
September 29, 2000, 9:44 AM

S E A T T L E, Sept. 29 -- In the space of two weeks, online retailerAmazon.com has been forced to apologize, issue refunds and appeaseangry customers after it was found to have charged some people morethan others in random price testing on its Web site.

With the virulent reaction of Internet-savvy customers, andAmazon.coms rapid decision to drop the tests, those tempted tooffer different prices to different customers online had betterthink twice.

Amazon.com has faced allegations which it denies that thedifferent prices were based on customer data, such as where aperson lives and how much he or she might have previously bought atAmazon.com.

Weve never tested and we never will test prices based oncustomer demographics, founder Jeff Bezos said in a news releaseThursday.

Consumer-Friendly Net

Online retailers in general may never get the chance to do so,since customers have proven to be sharp-eyed when it comes toprice. The Internet itself encourages comparison shopping, andswapping of information by consumers.

With popular sites like Amazon, you really cant get much pastthe consumers anymore, said Tom Wyman, electronic commerceanalyst for J.P. Morgan. Theyre out there trading notes all thetime, looking for the best deals.

The problem started a few weeks ago, when Amazon.com customerswho bought digital video disc (DVD) movies began comparing notesonline. The media picked up on the disparity, forcing Amazon.com toadmit it had been conducting random price tests.

Amazon.com spokesman Bill Curry said the tests were useful indetermining a price point the right balance between how muchAmazon.com could charge and still maintain a good sales volume.Nevertheless, because of the consumer outcry, Amazon.com ended uprefunding 6,896 customers an average of $3.10 each, or a total of$21,377.60.

Amazon.com has no immediate plans for more random testing, butCurry wouldnt rule it out in the future. He said customersinvolved in any test would get a refund if they paid more than thelowest price used in the test.