Feb. 12, 2009 at 8:00 AM ET
Companies often advertise one price to lure customers into their stores, then charge a higher price. In days gone by, this was called "bait and switch." Now, it's called fees and surcharges.
On the Internet, this tactic has another fancy name: "landing price." Advertisements include a low price to persuade customers to land on their e-commerce site. But by the time shipping and handling is piled on, the “out-the-door” price is substantially higher.
This tactic is most clear in the world of online florists, and most prevalent during Valentine’s Day. A quick survey of the top online florists shows that consumers using the two top sites typically pay at least 50 percent -- and often as much as 100 percent -- higher than the advertised price.
Take ProFlowers.com, which this week was running nearly ubiquitous ads with offers like this: $29.99 for a dozen roses and a free vase. But any consumer wanting the arrangement delivered on Valentine's Day will pay at least $55, after shipping, taxes, handling and a Saturday delivery fee are added. Shoppers who agree to early delivery on Feb. 12 will save $10, but will still pay around $45 (when $10 shipping, $1.99 handling and about $3 in taxes are added in). That's still 50 percent above the advertised price.
Making matters worse for shoppers: The total price isn't revealed until the last possible moment -- after the recipient's name and address, credit card number, billing address and even the "Love, Bob," note are entered. This reporter counted seven screens before the real price was unmasked. After all that typing, consumers are less likely to abandon the transaction.
ProFlowers says all its advertisements indicate customers will face additional fees
"ProFlowers advertising...clearly states that shipping and handling are additional costs," spokesman Mike Rosen said in an e-mail. He said the company has not received any complaints that its advertisements are deceptive.
Rosen also pointed out that consumers can add the total cost on their own within the first click or two. But to do that, consumers must notice and click on a link named “details” while picking the delivery date.
“I don't think you give consumers enough credit,” Rosen countered. “In this day and age customers understand this process better … and expect to pay shipping charges.”
At FTD, $19.99 flowers cost $42.77
ProFlowers’ strategy is relatively standard in the flower business. Shoppers at FTD.com may arrive at the site lured by the promise of Valentine's arrangements that cost $19.99. But that price doesn't include an additional $19.99 "service charge.” By the time customers click “order,” they are told the $19.99 flowers really cost $42.77.
But at least customers at FTD.com see the full price before they are asked to enter their credit card numbers.
Robert Apatoff, president of FTD, said his company was “transparent” about its pricing.
“People get that they pay for shipping and handling. You can't just ship for free,” he said. “There’s nothing new about price point advertising…it’s consistent with the practices of the vast majority of online and offline retailers.”
He also said that $19.99 was a reasonable service charge when the additional costs of special handling and Saturday delivery are factored in.
After these two disappointing experiences, consumers might be too disheartened to try the third major online florist, 1800Flowers.com. That's too bad, because on Tuesday the site advertised a $39 arrangement with free shipping. The actual price: $39, plus tax of a few dollars. A $34 arrangement without the free shipping offer would cost $50 for delivery on Valentine's Day, but that additional charge was made clear the moment a delivery date was picked.
Our wilting economy
Shopping for Valentines flowers is a study in why the U.S. economy is so broken today.
In the end, the prices at all three sites are quite similar. Yet consumers shopping for flowers must jump through near-impossible hoops to actually comparison shop. (Only a reporter with too much time on his hands is likely to do it.) That means many consumers won't make rational economic decisions based on quality or price, but rather will choose based on which company’s advertisements are most compelling -- or, some might say, deceptive. In the end, it's almost certain that the most up-front company, 1800Flowers, will lose sales because consumers think they are getting a better price from a competitor when they really aren't.
Some might argue this is simply capitalism at work. In fact, the opposite is true. If this were a free market, all information about the transaction would be transparent, and the best product with the best price would win. Instead, the most convincing advertiser wins. Ultimately, this economic system -- which is not capitalism -- will put honest companies out of business and reward deceivers. The current list of troubled banks, home builders, mortgage brokers and retailers is a “Who's Who” of well-marketed companies that had unsustainable profits built on false advertising. Their business models were a house of cards destined to eventually fail.
When the new administration in Washington wants to renew the promise of America and create change all consumers can believe in, it will focus considerable attention on creating a true free market, which will be made obvious by its transparency and lack of unfair trade practices.
RED TAPE WRESTLING TIP
All three of the big flower sites have dynamic front pages, which change depending on how a customer arrives at the site. Make sure to click through an advertisement or enter a discount code before ordering, or you may not be presented with the cheapest price.
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