The psychology of supermarket shoppers is under scrutiny as Coles and Woolworths are accused of deceptive pricing practices.
Food giants are heading to court after the consumer watchdog launched legal action against them for allegedly breaching consumer law with misleading discount price claims.
The Australian Competition and Consumer Commission said the duopoly would briefly raise product prices by about 15 percent, before cutting them back below the peak but above the initial price.
That discount illusion is a result of a human bias to process information as quickly and easily as possible, according to Deakin University consumer behaviour expert Paul Harrison.
“There’s very strong research showing that people skip over details when they see something being dismissed… it serves as a shortcut and a way for a person to say, ‘I don’t need to process detailed information about that,'” she told AAP.
“You could say it’s a form of manipulation… we trust these institutions to tell us the truth and if they say it’s a discount, we assume it really is.”
Dr Harrison said supermarkets and retailers would be aware of the psychological impact words like discount have in influencing people to overlook additional details.
Jana Bowden, a marketing professor at Macquarie University, agreed, saying supermarkets actively “exploit” that psychology.
Experts say shoppers are afraid of missing out when faced with supermarket discounts.
Dr Bowden said a shopper can go from being “rational and careful” to “emotionally charged” when faced with a discount.
“Consumers are facing a full-blown FOMO effect – they feel a lurking sense of unease and guilt if they don’t buy now and buy on sale,” she told AAP.
‘If we add to that the fact that many consumers only look to get in and out when they want to buy food, not much time is spent analyzing… supermarkets know this and take advantage of it.’
Coles defends the move while Woolworths defends its ‘Our Prices Downped’ programme for offering shoppers ‘great value every day’.
In a statement, the ACCC said the revenue from the allegedly misleading discounts was significant given that tens of millions of the affected products were sold.
The allegations relate to 266 products sold by Woolworths at different times over 20 months and 245 products sold by Coles at different times over 15 months.
RMIT finance professor My Nguyen said the two companies controlled about 65 per cent of Australia’s supermarket trade and the lack of competition could easily be exploited by the giants.
“The ACCC’s recent legal action… underlines how its market power can lead to practices that might not be possible in a more competitive environment,” Dr Nguyen said.
‘They can influence prices more easily, potentially translating into higher costs for consumers and higher profit margins for supermarkets.
‘High barriers to entry, including economies of scale and established supply chains, make it difficult for new competitors to challenge their dominance.’
