Spotlight: Internet cookies bite back

By Lucy Soto

For the AJC

Watch out for those cookie crumbs. They might be costing money.

Cookies aren’t just treats tasty with milk. They are little bits of text served to computers by Web sites that leave a sort of footprint, a crumb trail, which can tell retailers a consumer’s IP [Internet Protocol] address, ZIP code and browsing and shopping habits.

And many use them to offer dynamic or flexible pricing, which means consumers might be paying more for those books, that cool jacket or a concert ticket than the same item sold to a neighbor on a different computer.

Most customers are accustomed to finding different prices in the bricks-and-mortar world, based on where a store is and how popular an item is. Sometimes, prices are different for the same product in a rural or urban setting or in a rich or poor ZIP code. Sometimes seniors and kids pay less for movie tickets.

But many consumers don’t realize tailored pricing has hit a new level in cyberspace. Retailers are finding stealthier ways — through cookies that track ZIP codes, shopping habits and even how long we take to buy — to profile who can pay more, or less, for their products.

“We know there’s price variability,” said Joseph C. Nunes, associate professor of marketing at the University of Southern California’s Marshall School of Business. “But I don’t think the average consumer has any clue to the extent to which they are subject to price discrimination.”

ShopSmart Magazine, a publication of Consumer Reports, has tracked the practice since 2006. “Most consumers are totally unaware of the practice,” said Deputy Director Sue Perry.

The magazine published its own evaluation a few years ago and found price changes on books, shoes and airline tickets.

“The changes can be as little as $2, $3 and $4, but it all adds up,” Perry said.

Spotlight tried it, too, and found changes based on when we ordered. A basketful of books placed in the Barnes & Noble Web site basket cost $2.30 more four days later, though all the books were still offered under same “limited time discount.” At Macys.com, a swank black jacket on sale for $131.24 one week was still on “sale” a week later for $174.99.

Dynamic pricing. Price customization. Flexible pricing. It’s legal no matter what it’s called. Yet, a study from the University of Pennsylvania’s Annenberg Public Policy Center showed 64 percent of adults were unaware that it is legal for an online store to charge different people different prices.

“It’s something that can be troubling,” Nunes said. “If I get into a negotiation at a bazaar or flea market, and they try to see what I can pay, that’s one thing, because I’m participating in the negotiation.”

But the changes in price based on invisible cookies can seem unfair, Nunes said. And enough variability can cause consumer resentment.

How consumers find out about and deal with dynamic pricing will be even more important for retailers as the Internet marketplace grows.

Although online sales dipped in 2009, the sector is growing. Research and trend analysis firm eMarketer predicts online sales will grow 7.5 percent to $141.3 billion this year and to more than $189 billion by 2013.

Of all Internet users, 86 percent shop online, using the Web to research and compare prices and products, eMarketer says. More than 80 percent of those online shoppers actually buy online.

“More and more of us do rely on the Internet,” Perry said. “It’s a great shopping bazaar. You can get great deals. It’s revolutionized how many of us shop and save money. But do we take the time to read the fine print? No.”

Dynamic pricing is not just about shopping for jeans, books and airline tickets.

Last year, a pricing software company called Digonex hooked up with The Orchard, a wholesaler of music tracks to online retailers like iTunes and Amazon, to use dynamic pricing for its song list. Another company, Qcue, uses its dynamic pricing engine to help sports teams and concert promoters set ticket prices on the fly — depending on how popular the team or artist is, the weather, how strong sales have been leading up to the event and other variables. Qcue’s customers include the San Francisco Giants and the Dallas Stars ice hockey team.

Perry suggests just a few things could help consumers get the best price. Be aware, she says. Experiment by clearing cookies or using different computers. Compare prices at rival sites or shopping comparison sites. Don’t leave items in the online cart. Track past purchases to compare prices.

“You have to take control and feel empowered as a shopper,” Perry said. “We forget about it until it rears its head. ... They remember us. We cannot hide.”

That’s the way the cookie crumbles.

Clearing Your Cookies

Understand that deleting a computer's cookies also will remove your saved settings, meaning when you return to a site you often use, it won't recognize you as a customer.

Here are video instructions and tips for popular browsers.

For Microsoft Internet Explorer 6

• Open browser and click on the "Tools" menu.

• Select "Internet Options."

• Click on the "General" tab.

• Under the heading "Temporary Internet files," click on "Delete Cookies."

• Click "OK" for "Delete all cookies in the Temporary Internet Files folder?"

• Click "OK" to exit.

But wait — there's more!

There's a more persistent kind of cookie called a Local Shared Object [LSO] or "flash" cookie – small files stored on your computer by Web sites with Adobe Flash media, such as video clips. Flash cookies can back up data stored in regular cookies. So, using the browser controls to delete cookies won't affect this "flash" variety. Adobe's Web site offers ways to control or delete Flash cookies. Firefox browser users can get an add-on to detect them.

Source: aboutcookies.org

The fine print

Ever read the "privacy notice" on shopping sites? Peruse a few, and you'll find most leave a door open to the practice of creative information gathering. Here's a tiny snippet, for example, from Amazon.com's long privacy notice, under "automatic information":

"Examples of the information we collect and analyze include the Internet protocol (IP) address used to connect your computer to the Internet; login; e-mail address; password; computer and connection information such as browser type, version, and time zone setting, browser plug-in types and versions, operating system, and platform; purchase history, … products you viewed or searched for; and the phone number you used to call our 800 number."

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Meet the Reporter

Lucy Soto has been a reporter for nearly 20 years, covering politics, government and Atlanta's sprawling growth. She was born in Medellin, Colombia, and graduated from the University of South Carolina. She moved to Atlanta to join the AJC during the blizzard of 1993. She now freelances and lives in the city with her family.