Shopping Wisely in the Web 2.0 Era

The tougher the economy, the more wisely we must shop. Fortunately, today's Internet makes it easy to do so.

Step 1. Ask yourself, "Is buying this thing my wisest use of those dollars?" Sure, that new car, furniture, big-screen TV, "real" jewelry, yet another pair of shoes, or first-class vacation would be nice, but what's the opportunity cost? Would the money more wisely be saved? Spent on something else?

Think three times before buying a non-essential on credit.

Assuming you decide you should buy it, this sort of approach to shopping wisely on the Net will work well for many items:

Step 2: Resist advertisements. Disproportionately, a company advertises when its product fares poorly in online reviews and word-of-mouth.

So, for example, Toyota spent little on advertising the Prius because it knew that reviews and word-of-mouth would do the trick. In contrast, carmakers that provide poor value advertise heavily: GM, Chrysler, Mercedes, BMW, Infiniti, etc. For example, Consumer Reports finds that Mercedes in addition to its gulp-inducing price, breaks down more often and requires more expensive and frequent maintenance than most cars.

Other examples: Pfizer advertises Lipitor heavily because much cheaper generic statins are available. Safeway advertises more than Wal-Mart because it often charges much more for the same items. For example, I just bought an eight-ounce bottle of Gulden's Spicy Brown Mustard at Wal-Mart for $1.18. At Safeway, it's $3.65--more than 300 percent as expensive!

President Obama urged us to spend more to goose the economy--He even offered "Cash for Clunkers," to make predominantly modest-income people dump their running cars into landfills so those poor folks can go deeply in debt to buy a new car. I don't believe we--individually or as a society--live the life well-led when we buy what we don't need, especially on credit.

Step 3. Pick your model by googling the product and the word "reviews," for example, "big-screen TV" reviews. (Note I put big-screen TV in quotes so Google recognizes it as a phrase.) Also see if your product is reviewed on www.consumersearch.com, which summarizes reviews from a number of sources, usually including Consumer Reports and Amazon.com.

If my product is not reviewed on consumersearch.com, I visit Amazon.com--it has user reviews of an enormous range of products. I generally value user reviews over expert ones--experts' evaluations are too weighted by bells, whistles, and technical specifications that are trivial in benefit.

Another reason I prefer user reviews is that many more are available, notably on amazon.com. I believe in the wisdom of crowds.

If I need a service, for example, a plumber, I consult sites such as yelp.com, angieslist.com, servicemagic.com, and/or a local gem, Berkeley Parents Network. I don't necessarily nix a service provider because of one bad review--sometimes, it's written by a rare unhappy customer or even by a firm trying to make its competitor look bad.

Step 4. Google the item's model number. That search usually yields Google's product search engine, which reports the price--including shipping and tax--from multiple vendors, including user ratings of the vendor's reliability.

Before deciding where to buy the item, I usually price-check it on Amazon and eBay. Amazon is great because, for each millions of products, it aggregates many vendors' prices (for the item new and used,) has the most reviews both of product and vendor, and offers one-click buying. Amazon even makes returning items easy. eBay is worth checking because its prices, which sometimes are the lowest, don't show up on a Google or Amazon search. (By the way, I predict a merger of Amazon and eBay.)

Today's Internet makes it so easy to buy the best-choice products at the lowest price, delivered effortlessly to your door. There's no schlepping in traffic to stores with no parking--and even if you can park, compared with the Internet, in a store, you're much less likely to find the most appropriate product, let alone at the best price. And returning an item requires another schlep.

Alas, the ease of Internet shopping can tempt us into overspending. Remember, the life well-led is much more about good work, a rewarding avocation, and someone to love.

The Art of Bargaining

You see an item in a department store. The price tag says $100. That's what you'll have to pay. Right?

Not necessarily. What if it has a scratch on it or is shop-worn, or last-year's model? "Speak with the manager, and pointing to the defect say, "I'd be willing to take this if I could get 15% off. Is that fair?"

But what if the product is the current model and is in perfect shape. Are you stuck with having to pay the $100? Ask the cashier, "Is a coupon being offered that could be applied to this purchase?" Often there is. Even if you don't have it, she may have some of those coupons available.

No product defect? No coupon? I might ask, "Do you know if this just came off sale or is going on sale?' Often, they'll give you the sale price now. Or worst case, you can have them hold it for you until it goes on sale whereupon they'll ship it to you.

All those bargaining possibilities are at a supposedly fixed-price department store. Your bargaining opportunities multiply elsewhere.

For example, let's say want to buy something from an independently owned store. If you don't like its price, ask to speak with the manager and say something like, "I really like this but I can only pay (offer 50 to 75% of the sticker price). Can you do that?" If no, say thank you and start to walk out. The manager may call you back and say yes or counteroffer. If you've made it back out onto the street without being called back, you can come back in and say, "Well I suppose I could pay (insert 85% or 90% of the sticker price.)" Of course, this strategy won't always work but it often will. And you have nothing to lose by trying. At minimum, you'll know that if you ended up paying full price, you could not have gotten that store to sell it to you for less. Of course, so many products are available less expensively if bought on the Internet, both because it's easy to price shop and because there's often no sales tax.

How about a really big purchase like a car? Get the TRUE current dealer cost (NOT the widely available invoice price) from Consumer Reports. The term for the true dealer cost is "dead cost." Call five dealerships (especially those in low-rent districts) and ask to speak with the new car sales manager. Do not agree to speak with anyone else. Tell that manager the precise car including color and options you want and ask if they have it in stock or are willing to get it for 3% over dead cost. If one dealer says no, politely thank them and call the next dealer. If all five say no, call them again offering 5% over dead cost. If they all say no, offer 8%. You'll end up buying your car for less money than do 99% of customers. Once you and the manager agree on how much you'll pay for the car, don't get hit up for other costs. You should pay only the agreed-on price plus tax and license; that's it. (No dealer prep, advertising, no nothing.) Also, say no to the dealer getting you the financing or insurance--that's a huge profit center for dealers. Get your financing from the best-rate lender you can find on bankrate.com. Better yet, don't buy more car than you can afford to pay for in cash. That's key to keeping your costs down without significantly degrading your lifestyle. Comparison-shop for car insurance on esurance.com.

Of course, in all bargaining, you shouldn't be a pig. Remember that the seller is entitled to make a reasonable profit--sellers have to live too. But there's no reason you shouldn't try to get a good deal. That's standard practice in business and there's no reason it shouldn't be for you.