If the dollars and sense of Amazon’s approach to pricing seem confusing, that’s because, well, they are.
The e-commerce behemoth is known to change the price of a single item multiple times a day, and recently, it has removed the “List Price” of some items, meaning the product manufacturer’s suggested retail price, as stated by the merchant.
The List Price was used to compare to a product’s “Offer Price,” meaning the cost to the consumer of the product. It also was a tool to help brands navigate the pricing landscape on Amazon.
In a new report, research firm L2 studied the pricing of various fashion items for sale on Amazon in an effort to understand its algorithms, discounting volumes and the impact of third-party sellers.
Among the findings are that for products that are less than $50, Amazon and third-party sellers tend to offer comparable prices, but when it comes to more expensive products, Amazon’s pricing is “more aggressive.”
According to L2, slightly less than half of the products sold on Amazon are from third-party sellers, who traditionally have been associated with deep discounting. However, researchers found that for fashion brands, Amazon’s wholesale inventory is discounted more steeply than the same products sold by third-party sellers.
L2 also determined that Amazon adjusts the prices for most fashion products less than one time each day, and that the price of expensive products changed most frequently.
The report used as an example a pair of Cole Haan men’s loafers, the price of which from Amazon fluctuated between $158 and $39.50. After Amazon sold through its stock, the Buy Box (meaning the merchant featured on the product listing) switched to third-party merchants, which returned the price back up to $117.99. In other words, the downward trajectory of the List Price was not due to third-party discounting.
Ultimately, researchers wrote, “Just as Amazon’s aggressive discounting can depress third-party prices, the reverse can also occur.” They anticipated that this would become more common with the advent of Amazon’s forthcoming “Automate Price” tool, which will standardize third-party sellers with an algorithm that is more comparable to Amazon’s own automatic price-setting.
“Accordingly,” the report stated, “it is critical for manufacturers’ brands to actively monitor and, when necessary, take action to clean up third-party sellers aggressively discounting their products.”