An Amazon driver delivers packages in Washington, DC, on August 27, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
When Brandon Fishman discounted his coffee with vitamins for Targetat his weekly bidding event, he wasn’t worried about how it would affect his business Amazon. He certainly didn’t expect his sales there to “fall off a cliff.”
Fishman was in for a rude surprise. During Target’s sales event this week, Amazon’s automated systems spotted his bag VitaCup The coffee was available there for $13.43, about $1.50 cheaper than its listing on Amazon.com.
One of Amazon’s core tenets is that it offers “the lowest prices on Earth’s largest selection.” It’s up to Amazon merchants to deliver on that promise, and those who sell their products at a lower price on a competing site risk losing perhaps the most valuable virtual real estate in e-commerce: the buy box. This is the list that appears first when a visitor clicks on a particular product and the one that is purchased when a shopper clicks Add to Cart.
Although Fishman owns the VitaCup brand, he said he lost the purchase box from a reseller of the coffee products.
“I had to intentionally miss the buy box all week because of this Target issue, and my sales on Amazon dropped a lot,” said Fishman, who has been selling VitaCup coffee on Amazon since 2017, pulling in about $20 million a year. website sales.
Amazon has long relied on algorithms that constantly scan the Internet to match or beat the price of products listed elsewhere. Other markets, incl Walmartuse similar systems in an attempt to offer the cheapest prices.
Amazon’s algorithms have drawn scrutiny from lawmakers and regulators who claim the system is anti-competitive. The practice is at the center of a lawsuit filed in September by the Federal Trade Commission, which accuses Amazon of using an “anti-discount strategy” and a “massive web crawler that constantly monitors online prices” to stifle the competition.
The company rejected the FTC’s allegations and said the pricing tool is part of running a good business.
“Just like any store owner who wouldn’t want to push a bad deal to their customers, we don’t highlight or promote deals that aren’t competitively priced,” wrote David Zapolsky, Amazon’s general counsel. in a blog post after filing the lawsuit. Amazon has also said third party sellers set their own prices.
An Amazon spokesman declined to comment on the concerns raised by sellers.
The Importance of the Market Box
Amazon launched Prime Day in 2015 as a way to attract new members to its $139-a-year subscription plan while also showcasing its own products, notably its electronics and other services. The promotional event has become a big revenue driver for other retailers, who often hold competitive sales on Prime Day.
JPMorgan analysts predicted total revenue for Prime Day, ie which starts on Tuesday, will reach $7.9 billion this year, up 11% from 2023, according to a note to clients on Friday.
Target began rolling out sales across its entire site on July 7 as part of its Circle Week promotion. Circle Week usually takes place in anticipation of Amazon’s bargain offer.
The problem for Fishman and other retailers stemmed from a change in the way Target was promoting its Cycle Week deals. In the past, the company would show the percentage off the regular price to avoid upsetting Amazon’s pricing algorithms, Fishman said.
But this year, instead of listing its item as 25% off, Target showed the item’s actual sale price. That meant it was indexed by Amazon’s pricing algorithms, Fishman said, causing it to lose the buy box.
An Amazon Rivian electric delivery truck on Interstate 87 near Harriman, New York, US, on Thursday, April 11, 2024.
Angus Mordant | Bloomberg | Getty Images
Winning the buy box is paramount to the success of an Amazon seller. Without it, buyers can still find a seller’s product, but they have to go the extra step of clicking through to a separate window listing all available offers. Nearly 98% of sales made on Amazon go through the buy box button, the FTC alleged in its suit.
Mason Arnold’s experience last week was similar to Fishman’s.
Arnold said that after Target started Circle Week, its sales Sunwink Herbal tonics and powders started plummeting on Amazon because it lost the buy box from resellers.
“The only way to get the Amazon shopping box back is to lower our price on Amazon,” Arnold said.
Sunwink did just that, dropping the price of one of its products to $19 from $23. Sales have since started to pick up, but Arnold is doubtful that he will be able to turn a profit at this level. Amazon retail is already a low-margin business because of price competition and all the fees for fulfillment, advertising and other services.
“We’ve lowered our prices, so we’re losing money until it’s fixed,” Arnold said. “We don’t know what the total will be, but for us it’s at least hundreds of thousands of dollars” in losses, he said.
Arnold said some resellers buy his products from offline discount retailers and sell them at a markup on Amazon, forcing him to compete by selling his own brand.
Fishman said he and other retailers in his network took their concerns to Target. The company then adjusted its Circle Week sales on some listings to say, “See price in cart,” meaning shoppers would have to add the item to their cart to see the price, Fishman said. The change bypassed Amazon’s pricing algorithms, he added.
Target disputed the claim and declined to comment further.
Third-party sellers like Arnold and Fishman are the heartbeat of Amazon’s dominant e-commerce business. As of around 2017, they account for at least half of all products sold on the site. In the first quarter of this year, that number rose to 61%.
But Fishman says the company is quick to punish sellers, who are just trying to make a living. In doing so, the company is stifling the competition, he says.
“Their whole point is we always want to have the lowest price,” Fishman said. “So, me as a brand, if I want to have a sale at Target for a week, I should be allowed to. I shouldn’t be on sale everywhere.”
