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Consumers today love a good deal, and the internet is often the best place to find one.
Because of that, the internet can be a cut-throat environment for retailers. With just a few clicks, it's possible for consumers to find the best price for just about any given product and if your company isn't the one offering it, there's a good chance you'll miss out on the sale.
If seven district attorneys in California are right, that sort of pressure may have led a well-known online retailer to mislead consumers about its prices.
According to the district attorneys, since at least 2006 Overstock.com "routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products." One example cited by the Oakland Tribune: Overstock.com led consumers to believe it was selling for $550 less than the next cheapest competitor, when in fact it was apparently available at Walmart for significantly less than Overstock.com's price.
All told, the district attorneys claim that Overstock.com's behavior was designed to lead consumers into believing that they wouldn't find a better price from Overstock.com's competitors, and they're seeking at least $15m in fines and restitution.
As one might expect, Overstock.com denies the allegations being made against it. It claims that the district attorneys don't understand the nature of the price comparisons it offers potential customers on its site, and argues that it discloses to them how those price comparisons are generated.
Who is telling the truth? The parties will have to battle it out in court, but the dispute does highlight the risks involved in trying to convince consumers that you have the deal they're looking for. More than a few online retailers publicly compare their prices to their competitors. In theory, that's likely to be a good thing. After all, price is often an important part of a purchasing decision, and it makes sense for retailers to highlight how competitive they are on pricing.
But such price comparisons are typically generated automatically, and that means there's room for inaccuracies. Furthermore, it's not too far-fetched to imagine a retailer 'massaging' the inputs to display more favorable comparisons. For instance, a retailer might exclude from comparisons competitors that it knows regularly beat it on price in certain categories. And price comparisons might exclude available discounts, including free shipping offers, and taxes, which in some cases can change the price comparison dramatically.
At the end of the day, retails should use whatever tools they have available to convert potential customers into customers. And on-site price comparisons can be a valuable tool. But transparency and trust are key. While we'll have to wait to see the outcome of the lawsuit against Overstock.com, the allegations, whether accurate or not, should serve as a wake-up call to other online retailers.