Amazon subscribers jolted by dynamic pricing

What do subscriptions to a newspaper, magazine or Netflix account have in common? Once you sign up, you expect to pay the same rate every month.

Yet that’s not the case at Amazon when you subscribe to its Subscribe & Save program, which automatically refills orders for household staples like instant coffee, napkins or trash bags.

Amazon’s subscription program, which was introduced in 2007, lets consumers register to have their favourite consumables delivered regularly — monthly, for example — in exchange for a discount of at least 5 percent off each order.

Buried in the e-commerce company’s terms and conditions is that the Subscribe & Save discount is applied to the price of the item at the time that the order is placed. And on Amazon, prices change frequently — including sometimes rising.

I learned this the hard way while reviewing an email summary of my Amazon subscriptions. A pack of lint rollers that I had subscribed to for more than two years recently jumped to $18.04 (Rs 1,207) a pack, up from $12.44 (Rs 804) since the last delivery a few months ago, or almost a 50 percent increase.

A quick web search revealed other consumers were also surprised by price jumps for Subscribe & Save items. One Amazon customer said he signed up for a $10 (Rs) box of chewing gum and was charged $100 (Rs 6,706) for the same product a month later. In Amazon’s online forums, dozens of people posted about prices of Subscribe & Save items fluctuating, with some calling the program a “bait and switch” subscription scheme.

Amazon declined to comment. The company emails people 10 days before a recurring subscription delivery, when it informs customers of a new price of their item so they can change or skip the order.

Any sticker shock, analysts said, may be the result of Amazon’s complex pricing system coming into conflict with consumer expectations of a traditional subscription.

Jared Wiesel, a partner at Revenue Analytics, a pricing and sales consulting firm, said of Amazon, “I think they’ve violated the psychological concept of a subscription with their customers in changing prices like this. When people think of a subscription, they think of locking in a set cadence of receiving a good.”

Amazon’s dynamic pricing system, in which it frequently adjusts item prices based on a sophisticated set of variables like supply and demand, time of day and prices offered by competitors, is the company’s way of making it look as if you are always getting the best deal, Wiesel said.

Prices of goods can also fall, of course. But even when prices decline, people need to beware because Amazon’s pricing tends to fluctuate more widely and more frequently than at your local grocery store or Wal-Mart, Wiesel added. In traditional retail, the major price changes typically happen during promotions, he said.

To get a preliminary view into whether people can save — or not — with Amazon’s program, I plugged prices of 50 featured Subscribe & Save items into a spreadsheet and looked at their price histories during the previous six months. I compiled the results with the web tool Camel Camel Camel, an Amazon price tracker.

Prices of items, including dishwasher soap and toilet bowl cleaner, changed frequently. As often as weekly, prices rose, dipped and rose again like a roller coaster. In extreme cases, prices for items like instant coffee and napkins jumped between 90 and 170 percent.

In the end, whether you save money depends on when your subscription order is placed and what items you buy. The downside of buying through Amazon’s subscription program is the lack of predictability. Wiesel noted that it would be tough for Amazon to revise its subscription program to offer items at fixed rates. A majority of sales on Amazon are one-time purchases, and dynamic pricing is fundamental to how the company operates.

If, for example, Subscribe & Save prices remained static, those customers could miss out when prices go down for one-time purchases of the same products.

If you truly want to save money on Amazon, one approach is to sign up for price alerts on Camel Camel Camel to get an email when a price drops to a desired amount. When that happens, manually reorder your instant coffee or toilet cleaners.

Sucharita Mulpuru-Kodali, an analyst for Forrester Research, said the retailer was probably pushing prices up to test how loyal customers are to products and how much more they are willing to pay for them. Yet the sharp price changes on Subscribe & Save items caught her by surprise.

“It doesn’t seem as customer-friendly as Amazon typically is,” she said. “That’s what’s unusual.”