Wednesday, January 16, 2008

Finding Bargains in Your Amazon.com Shopping Cart

I buy a ton of stuff off of Amazon.com. I've been using the site for about 10 years now and bought everything from books (my first purchase was "The Intelligent Investor" by Ben Graham) to socks, to toys and many things in between. I have an amazon.com credit card and it gives me extra reward points when I shop on the site.

Anyway, I started noticing something about a year ago. When I added items to my shopping cart but didn't check out, I would come back a few days later and and click on my shopping cart to find a few alerts reading something like:

The price of the book "The Intelligent Investor" has decreased from $13.95 to $9.99 since you added it to your cart.

Basically Amazon keeps a record of the prices of things in your shopping cart and lets you know when they go up and down.

I've found this pretty fascinating from a few different standpoints, the primary one being finding bargains on items that I would like to have, but don't need right away at the prices they're currently listed for. To take advantage of this feature, I add basically anything I might want to my shopping cart, and sign in every now and then to see if anything has been updated. Sometimes the price reductions are so good that they'll convince me to buy the item right away before they get raised again.

It's also interesting to see how much prices actually fluctuate. Over the course of a month, my purely unscientific survey has shown the average item's selling price changes at least twice.

I started noticing this about a year ago, but it might have been happening for a lot longer... not sure if this is something everybody knows about.

One thing I also wonder about is whether or not Amazon lowers prices specifically to get a customer to buy something. For example, maybe they have some software program that checks what items someone has had in their cart for a while, and this triggers them to lower the price a certain amount on certain items as an inducement to make the purchase. I'm sure if they tracked customer responsiveness to price changes like this over time, they could figure out some pretty effective incentives that would drive sales increases.

I'm also curious if Amazon offers different prices to different customers at certain times, though I doubt they can practice much, if any, price discrimination.

Anyway, I guess the takeaway is to play around with this yourself, especially if you use Amazon and haven't already discovered this on your own. Add some items that you might want to buy at lower prices and then just wait for Amazon to make you an offer you would accept. For example, I have a 42 inch LCD tv in my cart right now. If Amazon tells me the price has decreased a few hundred dollars below where it is now, I might consider buying it.

This is basically the same approach I take to investing in individual stocks. I have a list of the companies I want to own, but I wait for the market to offer them to me for the right price before I'm willing to buy. Please note that I stole this approach from Warren Buffett, but he stole it from Ben Graham anyway, so I don't think he will be too angry. (For more reading on this, you might want to learn about who Mr. Market is).

1 comment:

TFB said...

As long as the price reduction is not targeted, you can also add the item to your Wish List and monitor the price there. That way you won't order the item by accident or have to take the item out of the cart when you order something else and then put it back into the cart. Better yet, if you want to automate price checking, you can list the item with a service like refundplease.com. They will check the price for you and notify you when the price hits your target.