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How 'Standard' Pricing Became A Thing Of The Past

Shopping in a supermarket in Rome
Shopping in a supermarket in Rome
Andrej Mrevlje

NEW YORK CITY — The 19th-century French sociologist Gabriel Tarde defined the marketplace as a war between buyers and sellers. He called price "a truce" obtained by haggling. It was because of that "war" mentality, he explained in his Selected Papers, that authorities in Europe began fixing prices on goods and services. The goal was to ease antagonisms between buyers and sellers.

If Tarde is right, I spent most of my life like a 19th-century man. I took set prices very much for granted, in other words. But then something happened to challenge my 200-year-old mindset.

A few years ago, I walked into Sephora, a drugstore on Broadway in Manhattan, and noticed that the product I had been using for many years no longer had a price tag on it. When the cashier scanned my cream, I had to bargain, fighting to reduce the extremely high and exaggerated price I was asked to pay. I won the battle, without understanding the reasoning behind this arbitrary pricing because, as I said, I come from a time when even an artichoke in a street market in Rome has to have a price tag.

Ascribing the whole event to the ignorance and menefreghismo of the personnel in the shop, I did not know that, in fact, I was the ignorant party. I'd been using a dusty, 19th-century logic, while the shopkeepers were following a modern, 21st-century playbook.

To this day I don't know how I managed to win that little dispute. Persuasion? Was it the old habits of a man who remembers the general strike in Italy, organized by national unions, when the government decided to increase the price of milk to 10 liras ($ 0.0005529) per liter?

That was in the late 80s, and within walking distance from my apartment in Rome, I remember there were nine butcher shops, several bars, a least a couple of delis, a greengrocer, two wine shops, three barbershops, and no supermarkets or shopping malls. Back then we bought papers at newsstands (no home delivery) and watched the TV news once a day. I remember I had a passion for going to Via Veneto at 1 a.m. to buy the first edition of La Repubblica and Corriere della Sera. Looking back, it does feel like the 19th century, even if it was just 30 years ago.

Now, just a few years after my Sephora episode, I see this in TheAtlantic:"In the 1990s, the internet began to erode the terms of the long peace," the article reads. "Savvy consumers could visit a Best Buy to eyeball merchandise they intended to buy elsewhere for a cheaper price, an exercise that became known as "showrooming." In 1999, a Seattle-based digital bookseller called Amazon.com started expanding into a Grand Depot of its own. The era of internet retailing had arrived, and with it, the resumption of hostilities."

This at least is what was happening in America. In Italy, my Rome neighborhood started to cut down the number of butcher shops and some supermarkets finally appeared. Here, in the meantime, a new generation of sellers began to acquire original data on customers with checkout scanners. By the early 2000s, the amount of data collected on the internet servers of retailers had become so massive that it started exerting a gravitational pull.

Humanity is transforming into jobless consumers.

That's what triggered the second development: "The arrival, en masse, of the practitioners of the dismal science," TheAtlantic article, written by Jerry Useem, explains. Then, according to the magazine, something decisive happened. "In 2001 the Berkeley economist Hal Varian — highly regarded for the 1999 book Information Rules — ran into Eric Schmidt. Varian agreed to spend a sabbatical year at Google, figuring he'd write a book about the start-up experience. Varian, however, was immediately invited to look at a Google project that (he recalls Schmidt telling him) "might make us a little money": the auction system that became Google AdWords. Varian never left."

Price tags on vegetables in a market in Rome — Photo: Simon Doggett

Other similar companies joined Google in mining data: eBay Inc., for instance, used a log of buyer clicks to estimate how much money one hour of bargain-hunting saved shoppers —roughly $15 was the answer. Economists soon realized that they could go a step further and design experiments that produced data, determining whether Big Data could discern every individual's demand curve and calibrate the price precisely to the maximum that one would pay for a product.

This created some skepticism about online shopping in particular after some cases created suspicion; customers feared rip off. "In 2007, a California man named Marc Ecenbarger thought he had scored when he found a patio set — list price $999 — selling on Overstock.com for $449.99. He bought two, unpacked them, then discovered — courtesy of a price tag left on the packaging — that Walmart's standard price for the set was $247. His fury was profound. He complained to Overstock, which offered to refund him the cost of the furniture," Useemreports.

That marked the end of the golden era of online shopping. "This could be seen as the final stage of decay of the old one-price system. What's replacing it is something that most closely resembles high-frequency trading on Wall Street," the article reads. "Prices are never "set" to begin with in this new world. They can fluctuate hour to hour and even minute to minute — a phenomenon familiar to anyone who has put something in his Amazon cart and been alerted to price changes while it sat there. A website called camelcamelcamel.com even tracks Amazon prices for specific products and alerts consumers when a price drops below a preset threshold."

The rest is present day history. Shopping malls are closing. Bookshops are disappearing. We are spending hours online in search of the best price or the most convenient delivery. We are regularly targeted by micro advertising. And since many jobs are lost every day, humanity is transforming into jobless consumers.

We can't process every piece of price information thrown our way. So we judge a store's prices based on a handful of products we know well. Or we stop shopping like Bonnie Patten of TruthinAdvertising.org did in The Atlantic article.

"It's already so complicated," she told Useem. "Everything is 50% off, but they have all these exclusions where it doesn't count, and then everyone is trying to calculate 20% of 50% in their heads." Patten already has a full-time job, she explained. And three kids! "As a general matter," she added, "I find it so difficult to determine the actual price of the product that when I'm shopping for my kids, my new technique is to make all my decisions at the cashier. I pick up lots of clothes. I completely ignore all pricing until I get to the register. And then if something is too much, I say, "I don't want it.""

You can opt for Patten's choice if you have shops available in the area you live or work. My argument is different. I am focused on the social impact in the time of predominant online shopping. To me, it matters less how long one spends researching the best price before clicking to purchase. I am convinced that shopping, or bettering the act of consuming, should help to build a community in one's immediate area. In every place I have lived I was able to create a minimum of community that allowed me to feel the pulse of the place. But, as I said, I am a man of the 19th century, and just beginning to contemplate how this madness may end. Some people have already started to resist.

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FOCUS: Russia-Ukraine War

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Germany and the U.S. overcame months of reluctance in the past 24 hours to commit to sending heavy combat tanks to Ukraine. Russia responded with official bluster, but others in Moscow fear that the tanks delivery could be a gamechanger on the battlefield.

Picture of recently mobilized Russian troops

Recently mobilized Russian troops getting ready to depart for service

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A week of growing expectations of a coming Russian offensive was turned on its head Wednesday as Germany and the U.S. announced their intention to send heavy combat tanks to Ukraine.

The sudden show of resolve on supplying tanks — after months of reluctance, particularly from Germany — has prompted some Russians to fear that Ukraine will now be equipped for a major counterattack. That would be significant reversal after speculation had been growing this month about a Russian spring offensive.

Stay up-to-date with the latest on the Russia-Ukraine war, with our exclusive international coverage.

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Chancellor Olaf Scholz’s government confirmed Wednesday morning that Berlin plans to send at least 14 German-built Leopard 2 tanks to the frontline. U.S. media also reported that Joe Biden’s administration is expected to officially announce Washington's commitment, with at least 30 M1 Abrams tanks expected to be sent.

The timeline remains unclear as to when the vehicles would make it into combat. Still, both sides on the war acknowledged that it is a significant development with the potential to change the math on the battlefield.

Official Russian response was loaded with typical incendiary rhetoric. Dmitry Peskov, press secretary to Russian president Vladimir Putin, said the new tanks would "burn like all the rest, only these ones are expensive.”

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