When you go to a product’s page on Amazon, you might expect to be shown the best price. But new research suggests Amazon is more likely to put merchants who use algorithmic pricing front and centre, and they tend to charge you a little more than other sellers.
Algorithmic pricing is a service independent sellers can use to automate their pricing strategy. Basically, sellers decide if they want to undercut, go above, or sit somewhere in the middle of typical prices for the same product and the service does the rest for them. It’s convenient for sellers, but Christo Wilson, research lead and assistant professor at Northeastern University, found that these so-called “algo sellers” who are being featured have higher prices 60 per cent of the time.
Most of the time the price is only raised by $US1, but there are many cases where the price jump is anywhere from $US20 ($26) to $US60 ($78). Prices are also a lot more volatile with algo sellers; about 10 times more so, according to Wilson. His team found one third of the 1000 products they tracked changed prices once a day, and some of them changed more than eight times every day.
Wilson says that Amazon has a relatively low number of algo sellers (somewhere between two and 10 per cent), but those sellers cover almost a third of the best-selling products offered by outside merchants. If you want to make sure you’re getting the best price on a product, Wilson recommends you always take the extra step and click through the list of all the sellers. Chances are you’re not seeing the best price upfront.
Northeastern researchers find that Amazon might not always be pitching you the best prices [Northeastern University via Mental Floss]