How Marketplaces Use Hidden Online Fees: The Sinister Logic (WSJ)

Until now, Airbnb has used a pricing strategy that is informally known as “drip pricing,” in which a company lures in customers by showing a low price and then tacks on fees as they go along, in the hope that customers will focus their attention on the low initial price rather than the total. An Airbnb customer who tries to book a $300 room for a night can easily end up spending $600 after fees and taxes are tacked on. Hidden fees are good for Airbnb but bad for customers.

Airbnb isn’t alone in using hidden fees. UberEats, eBay, Lyft, Instacart, Etsy, Ticketmaster, Postmates and StubHub, among others, all engage in drip pricing, shrouding their fees to varying extents. This might not be a big deal if customers fully anticipated and accounted for the fees. After all, shouldn’t customers quickly learn that fees are going to be tacked on at some point and bake that into their expectations for the cost? As it turns out, they don’t.

Not seeing where eBay is adding drip fees, at least for the buyer (yes for the seller, ditto Amazon)

For the buyer it is sale price, a postage charge (varies by distance the item needs to travel, with a more complex fee breakdown if the goods ship internationally using global program, but these costs would be there but hidden if global program is not offered for the specific international route), and maybe a card provider fee for a foreign currency charge.

Maybe I’m in the minority, but I find these systems annoying enough that I generally refuse to use them altogether. I believe there are some subset of consumers that determine these pricing actions to be frustrating and avoid their platform altogether. That’s even worse than cart abandonment because they never appear in the first place and have written off using the platform entirely because of frustration over pricing expectations/authenticity. Sure it’s there at the end, but that’s the same situation that high shipping costs have caused in cart abandonment metrics at many online retailers over the years. Buyers are always frustrated and annoyed by a “surprise” charge later in the process, even if they expect it from a platform but didn’t know exactly how much it might be until later in the process.