An interesting article discusses that retailers armed with data are becoming better at extracting consumer surplus through price discrimination.

The author sounds alarm saying that retailers will suck every dollar out of the consumers!

Hmmm…is it so?

His dire situation would only be possible if the retailers colluded and became a oligopoly, which will probably never happen in retail.

In fact, retail is the one of the most competitive industries! 

The retailers cannot fully extract consumer surplus because the competitors will charge a bit less and steal the customer! As retailers compete fiercely with each other, the consumer will benefit, which is what has happened.

People are afraid that Amazon will dominate everything. But Walmart, Costco, Best Buy, and even Google are stepping up the game online. So Amazon cannot gauge the customers because of competition!

Ahhh~ the beauty of competition- the elegance of economics!

So the author is right in the sense that retailers are better at extracting consumer surplus with more data but it is extremely unlikely that they can suck everything out of the consumer.

Just look at the profit margins of retailers, they are RAZOR THIN!


Yup, competition baby!