• by George Simpson , Featured Contributor, April 20, 2012

Who among us hasn't been shocked by the price the guy sitting next to us on the plane paid for his ticket compared to ours? And that is no accident of bad luck (for one of you).

If you knew that online retailers -- especially travel sites -- keep track of your IP address and record your past activities in order to charge you higher prices, raise your hand. I'll bet you thought that when they see you return to them, they might charge you less because you are a "loyal" customer -- but no, because of some Faustian version of online yield management, they charge you more.

Some defend this as a law of supply and demand, since as seats of a flight you want begin to fill up, the airlines start to charge more for the remaining seats.  After all, they are nearly bankrupt as it is. Other see it as retailers ripping you off by using the browsing and shopping data they collect about you -- including every time you get to their site via Google search results. From this data, they can decide that you can afford higher prices -- or are simply willing to pay the price they show you at that moment.

For those of us who thought that online presented the best, easiest way to find the lowest possible price on well, everything, welcome to the world of data-driven pricing. Think of it as global zone pricing, the way that oil companies charge stations in affluent towns more for the exact same gas they sell three miles away for less in a "poorer" town. Except in this case, as long as you use the same browser to research and shop, you can't "drive" to another town for cheaper pricing. There are tactics to try and beat this system (such as using one browser to "shop" and another to "buy"), but they are arduous and the average person probably won't bother. Moreover, as data collection gets more pervasive and sophisticated, retailers will probably figure out how to counter your counter-measures.

Meanwhile, I see a full-page ad in a national magazine warning that you can't be sure if what you are buying online isn't counterfeit (and prone to burn your house down). I figure if you are stupid enough to buy prescription drugs online for a tenth of what you'd have to pay your local pharmacy, then you can't complain when you don't get off on the "vicodin" that is almost certainly more dried milk (or Chinese dust bunny) than opioid. But now you have to worry that your bargain surge protector or extension cord will spontaneously combust? Geez, what a buzz kill.

Most e-commerce  startup models I have seen want to collect data from millions of buyers so that you know what a fair price is when you see it online (or eventually have the retailers "bid" with lower prices to get your business). I think Truecar (which I used to buy cars twice in the past year) pretty much works this way.

When you have lots of retailers to choose from (especially someone like Amazon who can subsidize its pricing model with ad revenue to cut the heart out of any competition) you can hold out for the lowest combination of price, shipping and taxes. But with tickets, you are up against a stacked deck.  Ever try to buy a ticket to a hot upcoming concert only to find out they are "sold out" before you can even boot up? Then moments later, see them turn up on the secondary market for 10x their face value? What is that about? I thought the Eastern European hackers were after military secrets (or at least free downloads), not One Direction tickets.

I used to think that shopping online was the best way to wring the lowest price out of the system. But now that the system has gotten so much smarter (not to mention the fraudsters), I am much less inclined to make that quick purchase. Question is: Who does this hurt more in the end, me or the suddenly smarter retailers?