Online Retailers Use Dynamic Pricing to Offer New Customers Steep Discounts

A recent consumer case on AliExpress highlights how online platforms apply dynamic pricing strategies that result in significant price differences for the same product based on the buyer's profile. About three months ago, an Israeli customer paid 109.73 shekels for a drone on AliExpress. When a family friend accidentally broke the drone and tried to buy an identical replacement from the same seller using the same link, the price displayed was only 61.22 shekels, nearly 45% cheaper.

This pricing gap exemplifies a common tactic where companies offer lower prices to new or inactive users to attract them into their ecosystem, often selling products below cost as a "loss leader" to encourage future purchases. Returning customers, identified by the platform's algorithms as loyal buyers, are shown higher prices since the system assumes they are willing to pay more.

This practice is widespread among major digital economy players, including Amazon, which adjusts prices millions of times daily based on user behavior, purchase history, and loyalty status. Similar dynamic pricing is prevalent in travel, hospitality, ride-sharing, and streaming services, where algorithms analyze user data to maximize revenue by charging different prices to different customers.

Common consumer advice like using incognito browsing only helps during initial price research, as logging in or entering payment details reveals the user's identity and triggers higher prices. To counteract this, consumers are advised to create alternate accounts under different names or split purchases across multiple accounts to access new-user discounts. Additionally, downloading retailer apps for the first time can unlock special low prices.

Ultimately, the official price shown online is a flexible recommendation, with loyal customers effectively subsidizing the steep discounts offered to new users. This dynamic pricing strategy reflects a global trend of personalized pricing driven by advanced algorithms and big data analytics.