Algorithms feeding unsustainable price cuts online

Variable price rates are not an uncommon feature on Amazon. In fact, about a quarter of the items sold on Amazon shift in price, sometimes many times over the course of one day. Recently, however, there has been a significant shift in this dynamic. There has been an over 70% jump in the price-shifting occurring for products sold by third-party sellers on Amazon’s marketplace. For three consecutive months of 2018, Profitero tracked 100 best-selling items on Amazon. In doing so, Profitero found that marketplace sellers were changing their prices on average every two days. First-party sellers were found to be changing their pries on average about four times over a two month interim. This new data suggests that its more than the big sites that are creating price wars, its stemming from the sellers themselves. The shifting paradigm is not dampened by consumers, who buy into the practice literally, by constantly checking for better prices on their smartphones.

Key Takeaways:

  • Under normal conditions certain items sold on Amazon shift their price sometimes several times in a 24 hour period.
  • Data shows, however, that for third party sellers on Amazon, this number is far more dramatic and recently reached more than 70%.
  • Data revealed that whereas first-party sites tended to have about four price changes over two months, marketplace sellers were changing their price about every two days.

“Dynamic pricing algorithms have enabled retailers to detect every online price change, including temporary promotions, and that’s, “leading to race-to-the-bottom behavior and permanent drops in Average Selling Price,” Profitero said.”

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