Price Gouging Issues Grow As Digital Shopping Takes Over

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The following is a Q&A session with Omri Traub, Co-founder & CEO of Popcart. Price gouging is the latest problem stemming from the pandemic. Popcart, a price comparison service, is out with brand new data that shows pre-covid and post-covid numbers.

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Can you tell us about your background and how your experience led to the development of Popcart and Supply Finder?

I have been working in the Boston tech scene for over 20 years.  Popcart is my third startup.  Most recently, I worked at a Boston software company named Endeca.  Endeca was a pioneer in the first wave of e-commerce infrastructure.  By the time it was acquired by Oracle in 2011 for $1.1B, Endeca was powering more than half of the top 100 retailers on the web, including Walmart, Target, and Home Depot, with search, navigation, and product spotlighting.  After the acquisition, I ran a team of almost 200 at Oracle building software for analytics on Big Data.

I think I must have had big data and e-commerce on my mind as I was leaving Oracle 3 years ago.  At that time I fell in love with Amazon all over again when I discovered that I could shop for everyday essentials (CPG = consumer packaged goods = > $1T a year industry) online and have them arrive at my door in 1-2 days.  My bubble was burst, however, when I happened on the outrageous price volatility on Amazon when looking through my purchase data as well as purchase data from friends and family.  A friend of mine paid $50 three times for a mega-pack of Kleenex on ‘subscribe and save’ but then was charged $80 three times and $104 one time by Amazon!  He didn’t even know about it, assuming that prices were locked under ‘subscribe and save’.  I started Popcart right then with the conviction that we can arm the consumer with technology that rivals the sophistication of what Amazon and other retailers have.  The solution is the simple promise – to find you the best price every time you shop. 

Tell us about Popcart and Supply Finder and the benefits of using these platforms.

If there is one thing I learned in doing Popcart, it’s how easy it is for us as consumers to believe any price that’s shown to us when a brand does some good marketing.  A fancy Lego set for $60?  Sounds right.  A mid-century modern chair for $300 – why not?  It’s not until you systematically compare prices that you see you can get the former for $20 off and the latter for $140 off at another retailer.  Comparison shopping is absolutely essential to get the best price and yet who has the time to do that for every item you buy?

Popcart is a browser extension that is with you as you shop.  You can shop as you normally would on Amazon, Walmart, or Target.  When we find you a better price on another site we will tell you about it!  Doing this systematically is saving our users hundreds of dollars a year.  Sometimes even hundreds of dollars on a single purchase!

How do you differ from competitors? How do you have an advantage in the industry?

Other browser extensions like Honey have paved the path for us in terms of educating millions of users on what a browser extension is and how it can be useful.  But while Honey, Wikibuy, and Rakuten are focused on finding you the promo code or coupon at checkout, we focus on doing price comparison as you are deciding what to buy and where.  A 20% off promo code may make you feel like you are getting an amazing deal.  But what happens when the original price being discounted is $50 or 40% more than the best price at another retailer?   

How has price gouging and surge pricing changed as a result of the pandemic?

Yes!  Amazon is a marketplace.  Only half the items sold on Amazon are sold by Amazon as a first party.  The rest are sold by 3rd party sellers which can range from large companies or brands to individuals trying to make some money through speculation.  The early stages of the pandemic saw some egregious cases of price gouging on items like Purell or Toilet Paper which were suddenly in very short supply. Enterprising 3rd party sellers saw this coming, hoarding those items, and trying to list them for sky-high prices.  After much public criticism, Amazon has done a reasonable job putting an end to this for brands like Purell.

But the reality is that marketplaces like Amazon or Walmart are very difficult to police.  Amazon itself, as a first-party seller, is often the biggest offender when its own dynamic pricing algorithms spin out of control.  It’s micro-economics at work: the supply and demand curves intersecting.  When they do, the consumer is frequently the loser.  We call this surge pricing.

Price Gouging

Please define the “3rd party swoop phenomenon”

The ‘3rd party swoop’ is one of the worst pitfalls of shopping at an online marketplace like Amazon.  Let’s say you have an item like a 55” TV selling on Amazon for $280.  The seller is Amazon as a first party.  One day Amazon runs out of inventory on that item.  At that point the Amazon “Buy Box” is won by a 3rd party, waiting for just this moment with an offer to sell that same TV for $350.  With each TV the 3rd party sells, it gets bolder, raising the price until it’s charging $500.  It’s testing out the demand curve!  How high can it raise the price and still make sales?

Without careful comparison shopping, a consumer could easily believe that the TV is really worth $500. This plays out daily on hundreds of thousands of items on a busy marketplace like Amazon.  Popcart protects you in two ways.  (1) Popcart gives you an alert whenever it notices a 3rd party seller that has low ratings or a poor track record.  (2) Popcart compares prices to other reputable retailers so a bad price is much harder to get away with!

What’s the forecast for your services in the second half of 2020?

Business is booming as we are seeing more Americans turn to online shopping than ever before.  Some experts have forecast that the pandemic has accelerated e-commerce adoption in the US by 5-10 years.

What are the trends you expect to see in 2021?

I think we will continue to see an acceleration in e-commerce.  Most interesting, perhaps, is the adoption of a feature industry insiders call ‘click and collect’ – also known as curbside pickup or in-store pickup.  It a hybrid model that allows shoppers to enjoy the comfort and safety of shopping online (as opposed to browsing store shelves) coupled with the convenience of picking up the item the same day at a store located only a few miles away.  We see this with Walmart, Target, Home Depot, Kohl’s and Best Buy to name just a few.  I expect this trend to grow in 2021.

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