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The double whammy of being poor – making less and getting charged more – The Paribus Blog

Mr. Robot has kicked off a huge discussion in the tech communityabout the wealth divide. The99-percent-versus-one-percent questionis back and in force.

Here at Paribus, we’ve found that the poorer are not only making less, but alsooften getting charged more because of tech-enabled price discrimination.We’ll start with a story, then show you the data.

Theripped-off doorman

Four months into our beta, we sawsomething odd. Paribusworked almost too well for one of our members (Joe). Hes a Manhattan doorman. Like clockwork, every two weeks Paribus saved him $20. It was too regular.

When Joe shopped online, hed add a pair or two of jeans and a shirt for work to his cart. And then hed check out.

He never used any discount codes when placing an order, even though he was always eligible for savings. That was odd. So every time after he placed an order, Paribus would send a follow-up note for him to customer service, and ask for the discount to be applied. Every two weeks, we saved him money this same way.

It didnt make sense — these promo codeswere obvious. HUGE banners at the top of every page.Why was he missing these?

When we met up it hit us. He worked on his feet all day, and he only shopped on his phone. That was his main computer. On phones, Banana Republicwas not displaying any discount codes. He had no way to see the codes. He had no idea he was being charged 40% more than everyone else.

Desktop shoppers see coupons. Mobile shoppers don’t.

Source: http://bananarepublic.gap.com/browse/product.do?pid=673290002

The poor are overcharged –they have less time to spend dealhunting(and they pay for it)

Wealthy people spend a lot more time shopping. This makes sense — they tend to work desk jobs, have more leisure time so they get to know prices and deals well. They also have more devices to check prices and shop, which researchers at Northeastern proved is extremely important.1

How much longer do rich people spend shopping? According to a 2014 study by the Federal Reserve Bank, onehour more every single week.2 That adds up. The wealthy build abetter sense of when prices are low and deals are good. They have the time and built-up expertise to pay less. And they have more resources on their side too (5% cashback cards, reward cards, personalized coupons, etc.), but well leave this last point for another day.

The poorer spend a lot less time shopping. So when stores like Amazon are changing 80 million prices per day,3 and other stores are actively changing deals based on users’ information,1 its not surprising that the poor are especially vulnerable to getting overcharged. They often pay more for the same purchases without realizing it.

The poor are overcharged –they have less money (and they pay for it)

Theres a baseline spend on essentials (food, clothes and housing) that everyone needs to pay. When youre poorer, this is a much higher percentage of your income. The bottom 20% of families spend more than 60% of the incomethey make on food, clothes, and housing.4

Source: The Atlantic and the US Bureau of Labor Statistics

Taken together, this means that poor are (1) spending a much greater share of their income on everydaygoods and are (2) charged more for the same purchases.

e-Commerce lookslike atax on the poor

As it stands, e-commerce today acts like a regressive tax. People who are poorer are spending more than the wealthy on the same purchases(as a percentage oftheir income, and dollar for dollar).

Tech-enabled discrimination. What can we do about it?

If you’re reading this, you’re probably a technologist (or tech enthusiast) of some sort.

Too many of us in Silicon Valley work to createtechnology that powers “dynamic pricing.” This is really justa fancy name for tech-enabled price discrimination. And it adversely affects those with less time and money.

We totally get that companies are trying to find ways to earn more. But it’s clear that a lot of the profitscreated are beingearned at the expense of those least equipped tocope.

Not nearly enough is done for consumers — especially thosewho don’t have thetime or resources to keep up.Consumersdeserve better.

We think people should be able to:

  1. Know when price changes happen (full transparency).
  2. Have the best tools to ACT when they’ve been overbilled or could have saved more(tech that empowers).
  3. Savewithout hassle— a fair deal should not only be reserved for people who have lots of time or resources on their hands (Simple opt-in).

How can we do more as a community to level the odds?

Here atParibus,we’re tackling part of the problemby building tools forconsumers (that instead of maximizing prices like stores do, get consumers money backwhen they overpay). But this is only partof the puzzle.

We’d love to start a conversation here (or on reddit) on what we can do to empower consumers.

Photo: Courtesy of USA

Sources and additional resources:

1 Why You Cant Trust Youre Getting the Best Deal Online Wall Street Journal, Oct. 23,2014.

2 Shopping Time Federal Reserve Bank of San Francisco, Sep. 2014.

3 Amazons Pricing Strategy Makes Life Miserable For The Competition Forbes, Nov. 20, 2014.

4 Where AmericansRich and PoorSpent Every Dollar in 2012 The Atlantic, Sep. 16, 2013.

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