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Sunday, May 26, 2024

Online retailers sneaky selling tactics under competition body scrutiny

The Competition and Markets Authority (CMA) of the UK recently unveiled its plans to crack down on what it calls ‘online rip-offs’ or misleading claims. The CMA has written a letter in this regard to many online retailers.

The CMA is looking to eliminate both misleading claims when it comes to price reductions and also unfair pressure-based selling tactics. There are five practices that online retailers generally use that may invite CMA attention regarding misleading claims.

One is rollercoaster pricing also referred to as a fake deal in which retailers gradually hike the price and then suddenly drop offering discounts based on the highest previous price. For instance, they may offer a 60 percent discount on the previous day’s price but when compared with the price they offered a month back the discount could be 20 percent or even less. In some cases, it could be more expensive than the lowest price offered before the discount.

Rollercoaster pricing is especially prominent around big shopping periods like Black Friday, Cyber Weekend, and Christmas. This tactic falls under CMA review.

Another selling tactic is yo-yo pricing in which the prices go up and down many times in a year and sometimes for a few days or weeks. These might offers are branded as ‘flash sales’ or ‘one day only offers. The CMA terms this ‘flip-flopping’ and it would be wise for retailers to review their tactics.

Then comes gender-based marketing in which retailers offer very different prices for the same apparel versions for males and females. For instance, in beauty and clothing, the ladies are charged more for beauty items and men are charged more for clothing.

Bundle Pricing is another tactic where an item is offered for free when purchasing a certain product. In most cases, the price of the main product is hiked to account for the additional ‘freebie’ – meaning the additional item is not free at all. It is not currently under CMA consideration.

The fifth tactic used to boost sales is by advertising that only one item is left but the online retailer may book numerous orders of the same product because it has sufficient stocks. This is called common pressure pricing. Sources reveal that CMA is likely to crack down on pressure pricing.

The consumer protection laws of the UK which the CMA has the authority to enforce are very comprehensive, but in some areas, EU laws are more stringent. The CMA thus can go for more regulation in this regard.

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