Every year or so we see another article documenting how women’s prices are mostly higher than men’s. Here’s the latest one from the Washington Post that prompted this blog post. One meaningful pull quote from the article:
“The New York City Department of Consumer Affairs compared nearly 800 products with female and male versions — meaning they were practically identical except for the gender-specific packaging — and uncovered a persistent surcharge for one of the sexes. Controlling for quality, items marketed to girls and women cost an average 7 percent more than similar products aimed at boys and men.”
Let’s accept that this is simply true. Now the question is why?
First, I can assure you that nobody is sitting at Target’s corporate headquarters saying we should charge women more. There is nothing nefarious going on. In fact, if they could charge more for men’s products and get away with it, they would.
That last sentence provided the key, they can get away with it. In the end it’s because women are willing to pay more than men are. This sounds ridiculous but it is the most plausible explanation.
Retailers nowadays use sophisticated pricing software where they can adjust the price of an item and see what happens to sales. When they adjust prices up or down and the number of units sold doesn’t change much, they realize the buyers aren’t price sensitive so retailers move the prices a little higher. When a lot more units are sold at lower prices, they tend to charge lower prices because the buyers seem to be price sensitive. This is just logic.
Notice this has NOTHING to do with gender. By looking at the sales response to price changes for individual products they can get close to optimal pricing for each product.
Putting these two together we can infer that when they price test women’s products, demand doesn’t change much so they hold women’s prices high. When they price test men’s products, demand changes more so they price more aggressively. There is no judgment being made. It’s simply profit maximizing behavior.
I’m certain women see this as unfair. People tend to find pricing unfair whenever it isn’t in our favor. However, the prices are a result of the buyers’ behaviors. If all women acted like they were more price sensitive, the prices of women’s products would decrease. Unfortunately, the only thing any individual woman can do is purchase the less expensive men’s version.
As I look into my crystal ball, here are my 2 predictions for the future: 1. there will be more articles written on how women pay more and 2. the effect won’t go away. It’s about human behavior, not bad behavior.