Study uncovers Amazon price gaming
A study in America has discovered that some Amazon Sellers are gaming prices - claiming discounts while charging extra for goods.
The University of Florida outlined their findings in a post last month in October, after researchers observed and studied the prices of consumer goods. They found that over a quarter of vacuum cleaners sold on Amazon during the study had at some point pretended to offer a discount when they had actually just increased the price.
The University of Florida post read: “By pairing a price increase with the introduction of a previously unadvertised ‘list price’ for a product, Amazon signals to shoppers that they are receiving a discount when they actually pay 23 percent more, on average, for their new vacuum than they would have just a day earlier.”
The researchers studied the pricing of household products on Amazon from 2016 to 2017 and followed more than 1,700 vacuums and gathered nearly half a million individual observations of prices.
Jinhong Xie, a professor in the Warrington College of Business at UF, added: “When you see this list-price comparison, you naturally assume you are getting a discount. It’s not just that you didn’t get a discount. You actually paid a higher price than before the seller displayed the discount claim.”
The full research was published in the journal Marketing Science. The research abstract published on INFORMS PubsOnLine explained: “This research investigates a newly observed pricing practice by which a seller frames a price increase as a discount by simultaneously increasing the price and introducing a list price, a scheme we call ‘price-increase and list-price synchronization’ (PILPS). To investigate this potentially deceptive practice, we tracked multiple product categories on Amazon over a 13-month period.
“We find that PILPS (1) is a prevalent practice adopted by a broad range of categories and sellers, (2) allows sellers to simultaneously achieve higher profit margins and a larger sales volume at consumers' expense, and (3) is most effective for and more likely to be deployed by products with advantages in consumer reviews.”
Thompson and Holt managing partner Stuart White believes that the report will lead to similar practises being exposed elsewhere on Amazon - and that will have further repercussions down the line. White explained: “If Amazon weren’t aware of this practise before then they certainly are now, and they aren’t likely to look favourably on it.
“As outlined above, the likelihood is that this practise extends well beyond just vacuum cleaners and we expect to hear of further reports of it taking place in other sections of Amazon.
“But as a customer-focused business, Amazon will not be happy with this news, and are likely already taking steps to stamp it out as quick as possible.
“Currently, regulations prohibiting deceptive pricing require that sellers use truthful price comparisons. In the past consumers have won class-action lawsuits against leading retailers for making discount claims using illegitimate values in price comparisons.
“In the pricing practice exposed in this latest report, the list price can be truthful yet still misleading. That’s because retailers advertise a price discount by displaying the list price when they actually raise prices and give the impression of a deal. But most of the time, the product is sold at a cheaper price without any comparison to a list price. It is the timing of the price comparison that misleads shoppers - and that will upset Amazon.
“As such, at Thompson and Holt we would strongly advise against trying to replicate it, as it is likely to lead to sanctions at some point.”
If you have found yourself suspended while selling on Amazon, contact Thompson and Holt for a free LiveChat to get your Seller business back online as quickly as possible.