Difference between in-store, online prices probably not what you think

MIT Sloan study reveals information of use to consumers and economists

Difference between in-store, online prices probably not what you think

MIT Billion Prices Project map

Credit: MIT

Sure, online shopping is generally more convenient than going to the store for your purchases, but prices are pretty much the same three quarters of the time, according to a new MIT study.

MIT Sloan Professor Alberto Cavallo cleverly went the crowdsourcing route to gather some of his data by having 370 recruits use a scanning app to check barcodes for prices on a random set of 10 to 50 products in physical stores in 10 countries. That information, along with online price data at multi-channel retailers (so no Amazon or eBay), was fed into the MIT Billion Prices Project database for analysis. 

Cavallo’s findings are valuable both for consumers and economists, the latter of which have been reluctant to use online pricing info in their research out of concern that such data might not be representative of overall pricing. Less than 10% of all retail transactions in the United States are conducted online, according to MIT.

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Online and offline prices align most closely for items such as apparel and electronics, but less so for items in drug and office supply stores, where it might not be as easy to comparison shop between online and offline. (We're guessing some of this might go out the window during unique stretches such as the Black Friday shopping season.)

For the conspiracy theorists in the crowd, Cavallo saw no evidence that retailers monkey around with pricing based on shoppers’ IP addresses or based on people revisiting an item on a website multiple times.

It's clear that consumers have wondered about whether they get better deals online or in stores, as even FAQs on retailer websites such as Walmart's address such questions. Walmart indeed acknowledges that store prices might sometimes be better when store managers are clearing out inventory.

“For those interested in the effects of the Internet on retail prices, my study suggests that while the web may not have reduced price dispersion across different retailers, it may have created incentives for firms to price identically across their own stores,” Cavallo said in a statement.

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