Online price wars are forcing retailers to change prices every minute

Online price wars are forcing retailers to change prices every minute »Play Video
FILE - In this Monday, Dec., 1, 2008, file photo, an Amazon.com employee grabs boxes off the conveyor belt to load in a truck at their Fernley, Nev., warehouse.(AP Photo/Scott Sady)
SEATTLE -- Price wars are nothing new. Typically an airline will launch a price war on Tuesday, and that's usually followed by competitors matching or beating a market-specific airfare within hours.

Big box electronic stores do the same tactic with a competitor down the street who usually then meets or beats the competitor's price.

The price war has now extended deep into the Internet. It's known as dynamic pricing.

Retailers are hiring companies to change the price of products at a moment's notice depending upon market conditions and competitor's sales prices.

"In the age of the internet, a fixed price is a thing of the past and that's just the reality," said Mike Fridge, CEO of Decide.com, a Seattle-based price comparison website.

It's not just stock prices that change every second, it's also the online price of a pair of shoes, jackets, TVs, computers and even toothpaste.

For example, Decide.com tracked the price adjustments for a new iPad in one 24 hour period on Amazon. At midnight it was listed at $511. It dropped to $503 at 6:05 a.m., dropping further at 11:51 a.m. to $475. It then shot back up to $529 by 10:00 p.m. There were 22 price changes with a difference of $54 between the highest and lowest price in 24 hours.

One of those companies behind the dynamic price changes is Mercent. The Seattle based online analytics company provides instantaneous pricing intelligence for a variety of retailers who are competing to be the lowest price in the search engines or be in the coveted "click buy now" button on Amazon.

"We can re-price as often as every 15 minutes" says Eric Best, CEO of Mercent. His company's client list includes Home Depot, Office Depot, Home Shopping Network and Zappos. They analyze the price of nearly 2 million online products an hour.

"We are taking real time action to change our clients prices on the fly," Best said. "We'll either bump it up if a competitor's pressure eases or we'll drop it if a new competitor enters the market."

Clients give Mercent specific parameters on how low it can sell the product. It's then up to Mercent to suggest a price and the client to enact the price change. Mercent than feeds those price changes directly to the most popular shopping search engines in the world include Google, Bing and Amazon.

For the consumer, Decide.com digests all these numbers and weaves it into a website that can provide many bits of information to its users. It collates product reviews from well-established reviewers like Consumer Reports and formats a product score with a recommendation to buy now or wait until the price goes down.

For a fee, users can find out more detailed information on a product's predicted future price and when a newer model may be released.

"77-percent of the time our predictions come true, said Fridgen, who claims his company has built algorithms that generate the predictions.

"We find in a given day, 20-percent of the prices change," he said. His company has seen the dynamic price fights first hand.

"Intraday they are competing for more sales on all the shopping engines," said Fridgen. "That's why we are trying to give consumers insight into on where a price is going and level the playing field for the consumer."

Decide.com is going one step further than other price comparison websites.

"If the price drops we'll actually pay you the difference even if the price drops from any retailer," said Fridgen. "So if you bought from Amazon, Walmart of Best Buy and they drop the price, we'll pay you the difference".

It's a bold move by Decide.com because we haven't found a price comparison website that has made the same claim. To qualify, the search of the purchased product had to originate on Decide.com and the price had to drop within two weeks after purchase in order for Decide.com to pay up.

"We actually track the product for the consumer, notify them of the price drops and send them the money," said Fridgen.

Dynamic pricing is quickly becoming the norm but don't expect the prices on the store shelves of traditional brick-and-mortar stores to change right before your eyes. But the technology is on its way.