MONEY

Why Angie’s List Keeps Getting Mixed Reviews

Angela "Angie" Hicks Bowman, co-founder of Angie's List Inc.
Angela "Angie" Hicks Bowman, co-founder of Angie's List Inc. Scott Eells—Bloomberg via Getty Images

Even as the paid-membership review service Angie's List has announced major plans for expansion and increased hiring, investors are bailing on the company.

On Wednesday, the stock price of Angie’s List dropped more than 5%, after a decline of as much as 20% a week ago. Overall, the price of Angie’s List stock is hovering near its 52-week low, and it has fallen nearly 60% over the past 12 months. Last week’s plunge stemmed largely from the release of disappointing third-quarter results. Even as the company decreased marketing expenses by 20% and increased membership revenue by 7%, a slowdown in paid memberships and the failure to meet profit revenue expectations have apparently spooked investors.

Angie’s List watchers have been on a particularly wild rollercoaster ride of late. Roughly one month ago, a report surfaced indicating that the company had hired investment bankers to explore the possibility of putting Angie’s List up for sale. Shares of the stock rose more than 20% on the news but were still down more than 50% compared to a year ago.

A couple weeks later, Angie’s List announced that it was adding 1,000 jobs and expanding its Indianapolis headquarters, leading some to believe there would be much brighter days ahead. One week after that, third-quarter results were released, leading many investors to bail—but also leading opportunistic value investors such as billionaire Ken Griffin, owner of the Citadel Investment Group, to go bullish on Angie’s List.

So what does the future have in hold for a paid membership review service such as Angie’s List? Well, to anyone under the age of 30, the idea of paying for reviews or online content of any sort is probably puzzling. But for nearly two decades, the online review service Angie’s List has built a loyal, paying membership of homeowners and renters who find real value in a network where real-life people can exchange honest, trustworthy recommendations about handymen, contractors, plumbers, electricians, clean-it crews, and other services they’ve used personally.

To these folks, the value proposition is simple: When you’re considering who to hire to do a $50,000 home renovation, forking over $20 or $40 for access to reviews on local contractors is a no-brainer. Indeed, according to the company’s second quarter 2014 results, paid memberships hit 2.8 million at the end of June, up from 2.2 million a year before and just 820,000 as recently as 2011.

So why does Angie’s List appear to be on the ropes?

An in-depth post by the Indianapolis Business Journal suggests why: Angie’s List, founded in 1995, has never turned a profit. A report released last October, for instance, showed the company had a net loss of $13.5 million for the third quarter of 2013, following a loss of $18.5 million for the same period a year prior.

Why hasn’t all its growth translated into profits? Much of it can be attributed to (presumably expensive) expansion into new markets; the service is now available in 253 areas of the country, compared with around 200 in 2012.

More to the point, Angie’s List has been forced to scale back the amount charged for each membership as Yelp, Google+ Local, TripAdvisor, and other user review sites have flourished with an open-to-everyone, completely free business model. The most recent Angie’s List report states that from 2010 onward, the average annual membership fee was just over $12, down from more than $36 a decade earlier.

And the amount members pay continues to drop. A Wall Street Journal post published a year ago detailed Angie’s List’s plans to cut membership fees in several key cities to around $10 annually. Today, it’s a cinch to head over to an online coupon site to find offers for 30% or 40% off, bringing the cost of a one-year subscription down as low as $5.39.

Meanwhile, the company recently agreed to pay a $2.8 million settlement to end a lawsuit alleging it had re-upped members without proper notice and at higher rates than subscribers were led to believe.

Perhaps an even bigger problem is that the trustworthiness of Angie’s List is increasingly being called into question. Critics point out that a growing portion of Angie’s List revenues come from service providers paying for advertising on the site—the same service providers that are supposed to be rated in non-biased fashion by members. “Almost 70 percent of the company’s revenues come from advertising purchased by the service providers being rated,” a 2013 Consumer Reports investigation explained.

CR called out in particular the practice of allowing advertisers with B or better ratings to be pushed to the top of search results as questionable at best. “We think the ability of A- and B-rated companies to buy their way to the top of the default search results skews the results… They get 12 times more profile views than companies that don’t buy ads.”

To be fair, many Angie’s List competitors also actively solicit the businesses reviewed on their sites as advertisers. Yelp is known to flood restaurants, doctors’ offices, and other small businesses with pleas to advertise on the site, to the point that one restaurant in the San Francisco area launched a bizarre “Hate Us on Yelp” campaign to undermine the user-review site. (Despite claims that it engages in what amounts to extortion, Yelp has repeatedly stated that advertising doesn’t affect a business’s ratings in any way.) Porch.com, an online network created to help homeowners find contractors and other home improvement services, launched a partnership referral system with Lowe’s this year. While businesses don’t pay to be listed, the website gives extra visibility to contractors that pay for a premium membership, such as making it easier to see their phone numbers in search results. (Full disclosure: Porch contributes articles on home improvement to Money.com.)

For the time being, Angie’s List seems to have figured out how low it must cut membership fees in order to keep subscriber numbers from falling. But the strategy hardly seems sustainable, especially if the perception that the service’s ratings aren’t trustworthy continues to spread. Convincing consumers it’s worthwhile to pay for a review-and-ratings service when there are free alternatives is tough enough. It’s borderline impossible to convince them that doing so is worth the money when there’s reason to question whether the ratings are entirely legitimate.

Correction: An earlier version of this story incorrectly described how Porch.com enhances the visibility of contractors who pay for a premium profile on their site.

MONEY Gas

$3 Gas, and Its Impact on What’s Under the Christmas Tree

This week, the national average for a gallon of regular should hit $3, a low that hasn't been reached since 2010. That means consumers will have more money to spend during the holidays, right?

Not so fast.

Yes, gas prices have been plummeting in the U.S., bringing much-welcome relief to household budgets. Average prices around the country reached a new low for 2014 recently, and then just kept on falling, hitting a low not seen since 2010. As of Monday, according to AAA, the national average stood at $3.04 per gallon after falling 32 days in a row, making prices at the pump 25¢ cheaper compared to the same time one year ago. With prices falling roughly 1¢ per day (the average was down to $3.03 on Tuesday), we’re on pace to reach the all-important psychological mark of $3 per gallon by the end of this week.

But let’s step back. Is the $3 mark—and cheaper gas prices in general—really all that important for the economy as a whole?

A GasBuddy post crunched some numbers, and found that Americans are collectively saving $110 million per day on gas compared to what we spent a year ago. The timing of decreasing gas prices would seem to bode well for retailers, which are hoping that some of that money that’s not being spent on gas will be spent instead on holiday purchases in the weeks ahead. Data from the research firm Deloitte indicates that retail holiday sales will rise 4% to 5% this year, or perhaps even higher considering that the average household could spend $260 less on gas for 2014 as a whole.

Retail analyst Mary Epner told CNBC recently that cheaper gas prices could wind up giving a boost to a few categories of retail in particular:

“A drop in gas prices should be great for Ross Stores, Walmart, and dollar stores (for consumers who must live paycheck to paycheck),” she said. “This also helps low-cost teen retailers, as most teens have a finite amount of money and they will usually opt to put gas in their cars before buying other things.”

Overall, however, cheaper gas prices shouldn’t necessarily be viewed as a holiday season savior for retail. As a recent Fortune post pointed out, gas prices had already begun their downward trajectory in September, but the month was basically a dud in terms of consumer spending. The effect of cheaper gas on holiday spending is expected to be minimal as well. At the higher end of the income spectrum, shoppers aren’t going to alter holiday spending based on gas prices shifting by 10% or even 20%. For middle- and low-income earners, stagnant wages, weak hiring, and higher costs for housing and health care are likely to far outweigh any “savings” that come via cheaper gas prices.

What’s more, as a Bloomberg News story noted, today’s shoppers have grown so accustomed to huge discounts that they’re programmed to ignore all but the most dramatic price slashings and promotions. Add in that over the past few years, drivers have seen gas prices retreat, rise, then retreat and rise again, so there’s an appropriate level of skepticism concerning the idea that we could be paying less for gas for the long haul.

Few people will head promptly to the mall and splurge because the price of a gallon of gas drops by a few pennies. Nor should they.

MONEY Tech

Why Amazon Is Not A Monopoly

141027_INV_Amazon
Kevork Djansezian—Getty Images

Many of the criticisms directed at Amazon of late are nothing more than hyperbole.

The no-holds-barred fight between Amazon.com AMAZON.COM INC. AMZN 1.683% and Hachette Book Group over e-book pricing took a turn for the worse recently (for Amazon, that is) after a number of prominent commentators suggested the U.S. Justice Department should sanction the e-commerce giant for alleged violations of antitrust laws.

“The company has achieved a level of dominance that merits the application of a very old label: monopoly,” wrote Franklin Foer of the New Republic earlier this month. And just this past week, Nobel Prize-winning economist Paul Krugman claimed in The New York Times that the online retailer “has too much power, and uses that power in ways that hurt America.”

But to anyone familiar with antitrust legislation — more specifically, federal appeals courts’ interpretation of the Sherman Antitrust Act — it’s clear that claims like these are nothing more than hyperbole. While Amazon is certainly a large and growing online retailer, even a liberal interpretation of its share of the domestic e-commerce market puts the figure at less than 50%, which is well below the 70% threshold courts typically require as proof of monopoly power.

amazons-share-of-domestic-e-commerce-sales_large

The gap between hyperbole and reality widens when you consider the e-commerce market’s insignificance in the context of overall retail sales. In 2013, for instance, domestic e-commerce sales added up to $263 billion, which is a fraction of the $4.5 trillion in total retail sales processed in the United States over the same period.

And even if a court found Amazon to possess monopoly power — as one could somewhat realistically claim it does in the e-book market — that’s still only half the battle, as it must also be proved that said power is being exercised to the detriment of consumers. According to the Justice Department’s antitrust guidance, “Prohibiting the mere possession of monopoly power is inconsistent with harnessing the competitive process to achieve economic growth.”

To prove Amazon is illegally exercising this hypothetical power, in turn, one would have to demonstrate that it is raising prices or curtailing supply by, among other measures, keeping competitors out of the market through predatory pricing or other prohibited means. Implicit in this is the assumption that Amazon earns monopoly profits — that is, the economic profits that accompany inflated prices. But as many investors know, Amazon has never reported meaningful earnings. In 2013, it generated a mere $274 million in net income from $74.5 billion in sales. That equates to a profit margin of only 0.37%.

ecommerce-sales-as-a-percent-of-total-retail-sales_large

Its willingness to forgo earnings even led former Slate columnist Matthew Yglesias to characterize Amazon as a “charitable institution being run by elements of the investment community for the benefit of consumers.” Amazon founder and CEO Jeff Bezos took issue with that point by arguing that his company isn’t a charity, but instead a business whose strategy is to make customers as happy as possible. Suffice it to say, among monopolies, that is unbecoming behavior.

As a final point, it’s important to appreciate that Amazon isn’t just a retailer; it’s also a marketplace for third parties to sell their wares and, in many cases, to compete against Amazon itself. A recent survey of companies that sell products online found that 84% of them use Amazon’s platform to do so. While the company doesn’t release figures about the size of this channel, one estimate pegged its total third-party sales last year at $73.5 billion. If accurate, this would mean Amazon facilities more third-party business than it records on its own behalf.

Thus, as a matter of law and common sense, there’s little evidence to back the claim that Amazon has exercised or is exercising monopoly power in a way that, as Krugman and other commentators would lead you to believe, hurts America. Does this mean the online giant won’t ultimately accumulate enough market share to do so? No. But it does mean that we have years, if not decades, before that’s a legitimate concern for the Internet retailer.

MONEY online shopping

How to Beat Online Price Discrimination

different price stickers
Feng Yu—Alamy

A new study found that major e-commerce retailers show some users different prices or a different set of results.

Do you think you can find the lowest prices by shopping online? Think again.

A new study by researchers at Northeastern University confirmed the extent to which major e-commerce websites show some users different prices and a different set of results, even for identical searches.

For instance, the study found, users logged in to Cheaptickets and Orbitz saw lower hotel prices than shoppers who were not registered with the sites. Home Depot shoppers on mobile devices saw higher prices than users browsing on desktops. Some searchers on Expedia and Hotels.com consistently received higher-priced options, a result of randomized testing by the websites. Shoppers at Sears, Walmart, Priceline, and others received results in a different order than control groups, a tactic known as “steering.”

Overall, the study confirmed what we’ve known for a long time: Online prices are all over the map, even for the same products. Search results can be influenced by a whole bunch of factors, including your search history, what kind of device you’re using, and where you’re located. For example, two years ago Orbitz was found to be “steering” Mac users towards more expensive hotels. Staples charged different prices for staplers based on where the shopper lived.

A majority of Americans think this kind of price discrimination is illegal. Sorry, it’s not.

Rather, as the Northeastern researchers explain, it’s a bedrock economic principle: Merchants should always try to establish “perfect price discrimination,” whereby a customer is always charged the absolute most he is willing to pay for any given product. Some customers are “elastic,” meaning they have very high price ceilings; others are “inelastic,” and if the price of a product increases just a little bit, they won’t bite.

In brick-and-mortar days, retail assistants might have profiled well-dressed customers as price-elastic and subtly directed them toward more expensive merchandise. Coupon-clippers might have received different treatment. Now, thanks to the Internet, retailers can make much more accurate guesses about how much different customers might be willing to pay, by using cookies to track buying patterns across the web.

Of course, retailers say this isn’t discrimination so much as using the tools and technologies at their disposal. “Presenting different booking paths and options to different customers allows us to determine which features customers appreciate most,” Expedia spokesman Dave McNamee told the Wall Street Journal.

Fortunately, you can play this game too. Here’s how to make sure you see the cheapest prices when you shop online.

Delete your cookies. Retailers use cookies to track you and collect information about your preferences. If you want to see unaltered prices, delete cookies by clearing your browsing history.

Browse privately. The problem with deleting your cookies is that information they contain might also work in your favor—remember that users logged into Orbitz or Cheaptickets sometimes saw lower prices than shoppers who were not logged into the site. So look at products using a “private” window, which will not send the website any information about you. See if the price is higher or lower in that mode. (On Google Chrome, go to “File,” then “Open Incognito Window.”)

Wait. Be inelastic. Put an item in your shopping cart, but don’t buy it. Some online retailers will cut the price to close the deal.

Use tools to price-watch. Try CamelCamelCamel.com, which sends you an alert when the price drops on an Amazon product. When MONEY tried it, the price of a vacuum fluctuated between $212 and $268 over the course of a month.

To bargain-shop like a pro, read MONEY’s feature about how to snag the best deals online.

MONEY Airlines

What You Really Need to Know About When to Buy Flights

shape of airplane over calendar
Amanda Rohde—Getty Images

Wait a second, now Sunday is the cheapest day to book airline tickets? Forgive us for being skeptical of this (and every previous) study naming one or another day of the week as the best for buying flights.

This week, the Airline Reporting Corporation (ARC) released a study analyzing roughly 130 million airline tickets booked in the U.S. from January 2013 to July 2014, with the hope of shedding some light on when prices are highest and lowest. Over the years, plenty of these kinds of studies have made the rounds, but the current report differs from the pack in a couple of key ways. It shows:

1) Flight prices are cheaper when booked further in advance. In the past, ARC data has indicated that the lowest domestic flight prices were for tickets purchased 42 days before departure, while other studies have advised travelers to book 49 days in advance for the cheapest fares. The new ARC study shows that, on average, booking 57 days out yields the best prices. What’s more, researchers found that average ticket prices were fairly flat during the window of time 50 to 100 days before departure. In other words, the best bet is to book 50 to 100 days beforehand: Tickets purchased during that period were $85 cheaper than the overall average for all domestic flight prices ($495.55).

2) Weekends are cheaper booking days than weekdays. This is the truly surprising takeaway from the study. According to ARC data, the average price of a domestic flight purchased on a Sunday was $432, and it was slightly higher on Saturday, at $437. For a long time, the consensus advice was that the lowest prices were to be found on flights booked on Tuesdays or Wednesdays (when airlines tend to roll out new flight sales), yet the new study shows the average paid on Tuesday was $497.

The smartest travelers seem to be those who booked flights on a Sunday 50 to 100 days before departure: They paid $110 less for their tickets compared to the average.

High Fares, Record Profits

Why is it that Saturday and Sunday seemingly have replaced Tuesday and Wednesday as the cheapest days for booking? The current mentality of the airline industry—which is less competitive and more profitable than it’s been in years—offers some explanation. As Scott McCartney of the Wall Street Journal noted regarding the shift to weekends: “Airline executives come into work Monday looking to raise fares, not discount them with sales to fill seats.”

Earlier this week, for instance, the country’s largest domestic carriers hiked airfares, a move that would seem to be not only unnecessary but downright greedy considering that fuel prices are plummeting. Given strong demand for air travel and American travelers’ apparent willingness to pay increasingly high prices for flights, airline executives are no longer worried about filling planes with passengers. They’ve moved on to worrying about surpassing their (already record high) profits, and they’re raising fares at every opportunity, for the same reason they’ve relentlessly been adding fees: Because they can.

In any event, the fact that airfares are rising would seem to give travelers even more reason to take notice of studies by the likes of ARC and adopt new booking routines, right? Well, maybe, maybe not. The problem with all of these studies is that they’re generalized and are based on averages from the past. The takeaways they offer may, in fact, not help you save on money your specific flight needs in the future.

Take holiday travel, for instance, when passengers are truly most in need of money-saving advice because prices tend to be so high. In the quest for cheap Thanksgiving airfare, the guidelines mentioned above don’t really apply. Several booking sites point to data indicating that the lowest prices for flights over Thanksgiving weekend are likely to be found two to four weeks before departure—that is, unless you absolutely need to fly on the peak-peak days of the Wednesday before or the Sunday after Thanksgiving. Flights on those days should be purchased far in advance, ideally several months beforehand. In other words, booking a Thanksgiving weekend flight 50 to 100 days ahead of time is probably a bad strategy, no matter what day of the week you’re searching for flights.

What’s more, all “when to buy” advice is based on past performance, as a recent Quartz post on Thanksgiving travel advice painstakingly made clear.

The Trouble With Simple Advice

The WSJ‘s McCartney pointed out that airlines are more inclined lately to discount flights booked on weekends because that’s when leisure travelers are likely to be casually noodling around online and may be enticed to make an impulsive flight purchase if the price is right. The vast majority of business travel, meanwhile, is booked on weekdays, and business travelers are less sensitive to pricing because the flights are deemed more essential. At the same time, however, airlines still do regularly introduce fresh flight sales on Tuesdays and Wednesdays to boost seat purchases on routes that aren’t filling up.

What all of these strategies have in common is that the airlines are reacting to traveler behavior and are lowering or raising prices to maximize revenues. If and when travelers change their behavior again—say, if a critical mass of business travelers suddenly starts booking flights on Sunday rather than Monday—the airlines will tweak their pricing tactics accordingly. All of which is a roundabout way of pointing out that there are far too many complications for simple advice like “book on Sunday” or “book on Tuesday” to be valid across the board. (We’re only talking domestic flights, mind you; booking advice for international flight is more complicated still.)

Probably the only solid time-tested guideline for finding inexpensive flights is this: Booking too early is generally bad, but booking too late is likely worse. The average domestic flight purchased 225 to 300 days before departure cost $500 to $550, per the ARC study, while the average for a ticket on the day of departure was around $650.

How do you find the sweet spot in the middle, when prices are lowest? It’s complicated, dependent on a range of factors including the destination, season, and day of the week you’re traveling; whether there’s a convention or major event where you’re going; and even larger forces like the state of the economy and yep, gas prices. Kayak and Hopper are among the flight search tools that use historical pricing data to try to predict whether fares on a given route will rise or fall, but again, past performance is no guarantee of future results—especially not in recent years, when airline executives have regularly rejiggered their pricing tactics, generally sending fares up, up, and up.

Despite the dizzying amount of tech at traveler’s fingertips, the question of when to book remains largely unanswerable. Yes, it’s wise to hunt during that window 50 to 100 days in advance, and sure, try to remember to poke around for flights especially over the weekends. But be on the lookout on Tuesdays and Wednesday too, because that’s when sales pop up. Consult historical pricing data and airfare price predicting tools, just don’t expect to pay the same bargain-basement fare you got a decade or even one year ago. Pay attention to airfare sale-tracking services like airfarewatchdog, but bear in mind the best deals are often for fluky routes and days and may not work for your travel needs. Perhaps wisest of all, use an airfare tracking service like that of Yapta, which will alert you if and when a flight on your route and dates has reached your desired price threshold. Just try to be realistic with the kind of fare you can expect nowadays.

MONEY Shopping

How Opening on Thanksgiving Day Can Actually Hurt Store Sales

Eager shoppers crowd the entrance as they pour into the Macy's Herald Square flagship store, Thursday, Nov. 28, 2013, in New York
Eager shoppers crowd the entrance as they pour into the Macy's Herald Square flagship store, Thursday, Nov. 28, 2013, in New York. John Minchillo—AP

The decision announced this week by Macy's and some malls to open doors to shoppers during the dinner hours on Thanksgiving seemed inevitable. But it doesn't necessarily make sense.

Macy’s was blamed for the death of Thanksgiving when the retailer announced last year that it was opening up for shopping on the holiday—at 8 p.m. If Thanksgiving’s obituary was written in 2013 because Macy’s opened at 8 p.m., what does the retailer’s decision to open at 6 p.m. on Thanksgiving 2014 mean about how we as a culture value the holiday? Perhaps it’s the equivalent of spitting on Thanksgiving’s gravestone.

Of course, it’s not just Macy’s that’s opening on Thanksgiving, and doing so earlier and earlier each year. Entire malls in Maryland, Pennsylvania, and elsewhere have announced 6 p.m. Thanksgiving openings, and it seems like the majority of stores that aren’t opening at 6 p.m. plan on opening a mere two hours later. Surely more retailers will match Macy’s 6 p.m. start; last year Toys R Us and Walmart launched “Black Friday” sales in stores at 5 p.m. and 6 p.m., respectively. (Best Buy went with 6 p.m. too.)

Macy’s confirmed its 6 p.m. opening begrudgingly, almost apologetically, this week after a letter from company executives to employees was leaked to the media. A Macy’s spokesperson explained via statement to the (Minneapolis) Star-Tribune that the move was based on “significant, sustained customer interest,” and that last year’s Thanksgiving hours were supposedly a big hit with Macy’s workers. “We also heard last year from many associates who appreciated the opportunity to work on Thanksgiving so they could have time off on Black Friday.”

Retailers essentially gave the same explanation last year for why they were opening on Thanksgiving Day. Macy’s 2013 press release stated that its 8 p.m. Thanksgiving opening came as a “response to interest from customers who prefer to start their shopping early.” It also noted that stores would only open “after families across the country have finished their holiday meals and celebrations.” Presumably, those meals and celebrations will have to end earlier this Thanksgiving for anyone wanting to start their shopping when the doors open. Likewise, a J.C. Penney spokesperson told the Dallas Morning News last year that it was only opening on Thanksgiving (at 8 p.m.) because “our stores saw a lot of frustrated customers tap our doors wanting to shop,” the year before, when locations opened a few hours after many competitors.

Everyone Else Is Doing It

The overall message retailers are trying to send is: We’re not opening on Thanksgiving to be greedy or anything. We’re doing it simply to make our customers happy. Another way to translate the message: Don’t blame the stores for ruining Thanksgiving, blame the shoppers who want to go to the stores on a national holiday.

The reality is that these retailers are opening on Thanksgiving mainly for the same reason that kids often cite as the excuse for why they did something stupid: Everyone else is doing it. Macy’s and the rest of the mall stalwarts feel forced to open earlier and earlier on Thanksgiving because that’s what the competition is doing—and by not opening on Thanksgiving, a store is essentially conceding some chunk of sales to the competition. The battle for holiday sales and when stores should open is even more muddled by the fact that consumers can shop to their heart’s content no matter what the day, 24/7/365, because e-retail never closes.

What’s interesting is that there’s a good argument to be made that Thanksgiving store hours don’t actually boost a retailer’s overall holiday sales. Rather, sales on the holiday simply displace sales that would otherwise have been rung up on Black Friday or later in the season. After an underwhelming back-to-school period for retailers, Craig Johnson, president of the retail consulting firm Custom Growth Partners, predicted to the Wall Street Journal in late September, “With the soft sales outlook, we do anticipate a few earlier openings” on Thanksgiving. “However, there is a law of diminishing returns,” he warned, and stores that open on Thanksgiving “risk cannibalizing” sales that they would have made at another time.

The End of Black Friday?

In light of that, it shouldn’t come as a surprise that Black Friday sales flopped last year when more stores expanded or introduced Thanksgiving hours, and that some say the Black Friday phenomenon is facing extinction. After all, when stores are open at 6 p.m. or even earlier on Thanksgiving Day, the idea of getting excited by the prospect of shopping at the ungodly hour of 4 a.m. on Friday seems more absurd than ever.

Let’s also not forget that Thanksgiving store hours turn off many would-be customers. Last year, countless petitions were launched pleading with retailers to pull back on Thanksgiving hours, which critics say ruin the holiday for more than just the retail employees being forced to work.

For what’s is worth, Lehigh Valley Live recently asked readers to vote on how early stores should open on Thanksgiving. At last check, around 4% responded “as early as they can.” On the other hand, 82% voted “They shouldn’t. It’s a holiday.”

MONEY online shopping

Believe it or Not, Amazon Is Not the King of Cheap Online Prices

Amazon logo
Lionel Bonaventure—AFP/Getty Images

A new report suggests that Amazon’s edge is not as strong as people think.

As far as conventional wisdom goes, Amazon.com AMAZON.COM INC. AMZN 1.683% is the king of low-cost goods bought online; the Wal-Mart WAL-MART STORES INC. WMT 0.0785% of the Internet, so to speak.

And that’s largely true.

In its rise from a humble online peddler of books into the most feared, and dominant, name in online commerce, Amazon has used its willingness to undercut the competition to send more companies than I can fit in this space the way of the dodo (RIP Borders, et al). However, a recently released report suggests that Amazon’s supposed edge when it comes to low prices might not be as strong as some believe.

Inside the battle for e-commerce

Earlier this month, Wells Fargo and online sales tracking firm 360pi unveiled their findings from a full-year analysis of the various online pricing habits of the world’s largest e-commerce companies across over 100 commonly offered stock-keeping units. And as you’ve hopefully gleaned by now, the findings came with their fair share of surprises.

Perhaps the biggest single bombshell was that Amazon.com has lost a sales edge in four important categories to the likes of Wal-Mart and Target TARGET CORP. TGT 1.4617% . According to the report, both big-box retailers generally offered lower prices online than Amazon in the clothing and shoes, electronics, housewares, and health and cosmetics categories. However, the report also notes that Amazon typically offered the lowest prices when it came to “like-to-like” specifics goods.

This comes as a surprise for longtime followers of Amazon and implies that online pricing software used by Wal-Mart and Target, which scans competitors’ prices and adjusts accordingly, has grown sophisticated enough to compete against Amazon’s own pricing bots. Specifically, the reports says Wal-Mart’s pricing in the four categories sat an astounding 10% lower than Amazon’s as of August and that Target enjoyed a 5% pricing advantage as well. The report acknowledges that the pricing survey didn’t account for the cost of shipping and taxes, areas where Amazon enjoys advantages with its Prime shipping service and its notorious state tax policies.

Either way, this new report certainly calls into question the conventional wisdom that it’s simply Amazon and then everyone else in the online retail space these days.

The bigger e-commerce picture

Still, I think this report misses the point to a large extent by painting Amazon in a negative light on pricing without discussing the overall profit opportunity online.

As Amazon.com and its online peers have been around for a generation now, it’s easy to fall into the trap of categorizing e-commerce as a whole as a somewhat mature business. In fact, the opposite is true. When viewed in the broader context of the entire U.S. economy, online retail sales represent a veritable drop in the bucket. See for yourself.

Source: U.S. Census Bureau.

With online sales in the U.S. consistently setting fresh all-time highs, it’s also important to understand just how paltry a percentage of total retail transactions they really represent: just 6.2% in the first quarter of the year. And this only reflects the new record figure in a technologically advanced market. Viewed globally, this figure is almost assuredly smaller and it represents a large opportunity for all e-commerce retailers.

There’s no question that the stakes are extremely high in online retail. As I’ve mentioned before, the only free lunch you get in broad-based retail sales are economies of scale. As the global e-commerce boom progresses over the next generation, the companies that control the greatest share of the proverbial pie will have the strongest hand. And both Amazon and Wal-Mart excel in online retail.

Foolish thoughts

Historically, Amazon has always outflanked other online retail outlets. However, owing to the stakes and its well-documented tenacity, it was probably never realistic for the media or investing community to expect a company like Wal-Mart to go quietly into that good night. So while this storyline gives Amazon’s dominance in the growing battle for online sales supremacy, it’s by no means the end of the story, and that is certainly worth noting.

Andrew Tonner has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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MONEY online shopping

Why Amazon Is Hiring 80,000 New Workers

To prepare for the holiday shopping surge, the online retailer is adding a record number of seasonal employees. Other big names are gearing up for the crush too.

MONEY online shopping

3 Reasons Google’s Same-Day Shipping Looks Like a Game Changer

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Nick and Laura Allen—AP

Google already dominates search. If the big expansion of a same-day shipping service proves successful, it could be on its way to dominating online shopping too.

On Monday, Google announced that the express online shopping-and-shipping service it has been testing for months in northern California and parts of Los Angeles and New York City is expanding to three more cities: Boston, Chicago, and Washington, D.C. The service, originally dubbed Google Shopping Express and now shortened to just Google Express, allows shoppers to place orders online or via mobile device with partner retailers such as Walgreens, Costco, Staples, Barnes & Noble, and Sports Authority. Google promises same-day shipping on all such orders, at a cost of $4.99 per delivery or flat subscription plans of $10 monthly or $95 a year.

Former Google CEO Eric Schmidt mentioned this week at a conference that Google’s biggest rival isn’t Yahoo or Bing but is in fact Amazon.com, and the expansion of Google Express into Amazon’s online shopping turf is a clear indication that Google takes this rivalry very seriously. While Amazon is still the most dominant player in e-retail, Google’s newly expanded service is arguably superior and a better value compared to anything Amazon currently offers. Here are three reasons why Google’s service is particularly compelling:

1. Same-day delivery that’s “free.” Consumers increasingly demand free shipping with online purchases. Things have gotten to the point that free shipping is so readily available—via a coupon code here or reaching a minimum purchase threshold there—that the idea of paying for delivery can now be a deal breaker.

Thus far, the phenomenal success of Amazon Prime has most clearly demonstrated the power of shipping when it’s not only reliably free but speedy as well. Prime subscribers receive free two-day shipping on most orders placed via Amazon.com, and the service has proven so popular and indispensable that enrollment numbers have continued to climb even after prices rose recently from $79 to $99 annually.

Overnight and same-day shipping are more costly services than two-day delivery, however, and Amazon Prime members must pay extra for these expedited options—typically $5.99 for same-day shipping, where and when it’s available. That’s on top of an annual subscription fee.

Like Amazon Prime, Google Express is available via subscription, priced at $95 per year (just a smidge under the cost of Prime) or $10 per month. Members then get free same-day delivery of all orders with a minimum purchase of $15. (As an alternative, nonsubscribers can pay a flat $4.99 delivery fee per order.) One of the big differences between Amazon Prime and Google’s subscription service is that the former includes two-day shipping at no additional charge, whereas the latter covers same-day delivery. Prime has many other benefits—free video streaming, for instance, not to mention a much broader selection of products than Google’s service—but in terms of speedy shipping, Google Express has the edge.

Bear in mind that you’re paying for whichever service you choose. These services are presented as featuring “free” shipping, but that’s silly. Subscribers pay a membership fee to cover the costs of shipping, and there’s nothing free about it. “Prepaid” may be a better way to describe the shipping offered by these services. A subscription is a potentially good value in the same way that an all-you-can-eat buffet is a smart buy for someone who eats (or orders online) a lot, but it can be a waste of money for others.

2. Same-day delivery of stuff you actually need that day. Based on the success of Amazon Prime, plenty of consumers are more than OK with two-day shipping on the vast majority of online purchases. After all, when you’re buying a new TV, or a winter coat, or batteries or coffee pods or a Christmas gift for your aunt, or any other thing you might purchase at Amazon, there are generally no pressing needs that might require you to be in possession of them on the very day you place the order.

Likewise, same-day shipping would seem to be less of a necessity for the products typically purchased from Google Express partners such as Sports Authority, Guitar Center, and Toys R Us. It’s often a different story, though, for the goods one needs from drugstores and supermarkets, because when you need cold medicine or diapers or food on the dinner table, you tend to need them right away—not two days after placing an order. The normal approach in these situations is to handle the errand the old-fashioned way, by making a physical run to the store. But because Google Express’s early partners include Walgreens and grocery chains such as Giant, Stop ‘n Shop, and Whole Foods, these kinds of everyday errands can be crossed off your list quickly online, without even the need to pay extra for same-day delivery. (Same-day delivery from another Google partner, 1-800FLOWERS.com, is probably even more of a necessity among certain shoppers on certain anniversaries and birthdays.) For the sake of comparison, Amazon has already introduced an online grocery service in select markets with same-day and overnight delivery, but its subscription runs $299 per year.

3. Same-day delivery on stuff that’s a hassle to buy in person. Another intriguing partner of Google Shopping Express is Costco. The warehouse membership club giant is beloved by bulk-size-loving patrons, yet much about the shopping experience is less than ideal—starting with the huge size of much of its merchandise and ending with the absence of shopping bags for carrying one’s purchases. What’s more, Costco has had some trouble attracting younger customers because fewer millennials have cars, which are all but necessities for any Costco shopping trip, and they tend to want to live in urban areas rather than the suburbs where most Costcos are located.

Many of these issues disappear when Google and its same-day delivery service enter the equation. If Google is handling the pickup and delivery, customers no longer have to worry about being strong enough to maneuver gigantic tubs of laundry detergent into shopping carts, then into one’s car. Heck, there’s no need for a car at all because, again, Google is taking care of the shipping.

While Google’s service is still in its infancy, it’s probably being helped greatly by the fact that that a popular retail brand like Costco is a partner. But who knows: Down the line, it could be that Costco membership numbers rise because same-day delivery is available via its partner, Google Shopping Express.

Read next: Google Express Expands its Same-Day Delivery Reach

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