Amazon Pricing Policy Update: Pricing Changes For Sellers & Vendors
Amazon is currently in hot water with the Federal Trade Commission and it will probably directly affect how you sell your products on Amazon. Come mid-October, the Amazon Pricing Policy will be revamped, or as they put it, “simplified.”
Amazon’s Questionable Sales Tactics
Recently, a probe was issued into the sales practices of Amazon based on a complaint by the advocacy group Consumer Watchdog. In analyzing over 1,000 items sold on Amazon, the advocacy sector found examples of inflating prices based on the current market so as to appear that the lowered price tag was a “deal” or a “sale.”
According to Consumer Watchdog, “Amazon displayed reference prices on 46 percent of the products surveyed—a sharp increase from a similar sample taken just months before,” Consumer Watchdog said in its report. “They now employ several different kinds of reference price, including “was” prices, “sale” prices, or simply prices with a line through them (“strikethrough prices”).”
And these price hikes weren’t just a few dollars off the actual value of the product. Consumer Watchdog suggested that Amazon was jacking reference prices up about 70 percent of their historical price value on multiple items on the site.
Now, the FTC is looking into faulty practices of “dynamic pricing” or “surge pricing”, particularly with their most recent business deal with Whole Foods.
This will directly have an impact on how you sell your items on Amazon starting as soon as mid-October, as the Amazon Pricing Policy is changing.
What is Surge Pricing?
Surge pricing, also interchangeably called dynamic pricing, has been a trick-of-the-trade for airfare and hotels for a long time now. It’s also a common practice for events like Black Friday . Companies jack up the prices of items right before a big event or holiday just so they can sell the same items for a “lowered” cost that actually hasn’t been changed at all.
It’s genius and it’s completely unethical and it’s what the free market is all about. Gotta love America!
Dynamic pricing can work in both directions, too. Per the example given above, retailers –particularly huge conglomerates like Best Buy, Walmart, Target, and Bed, Bath, and Beyond –will take their most coveted items and hike the prices of these products a few weeks prior to a big sales event.
So, say you are looking for a flat screen TV (one of the most popular items sold on Black Friday). If you were to buy a LG 60” Smart flat screen TV in April, maybe you could get it for $700. More than likely, if you were to compare that price at other retailers it would be roughly the same because nothing happens in April that incentivizes a large amount of the population to get a TV.
Now, say you wanted to get that exact same thing a few weeks prior to Black Friday –like you had a birthday coming up or you didn’t want to sell your soul to the devil by waiting in line for a Black Friday event.
You probably would be paying an extra $200 for that television, not because its suddenly more valuable or because the retailers expect anyone to buy flat screen TVs a few weeks before Black Friday.
In fact, it’s the exact opposite.
Stores assume that not many people will be purchasing this item right before the largest sales event of the year, so they have nothing to lose by exploiting the price tag. In a few weeks, they’ll be gauging the price back to $700 and the consumer will think they are saving $200 dollars when there was never a change in the first place.
This works in the other direction, too.
That exact same TV that oscillated between $600 to $800 then back to $600 will probably skyrocket to $999 come Christmas time.
They’ll pretend like their inventory is limited and that you must spend the extra money because it’s coveted, limited, and, hey, it’s Christmas and you need to get in the spirit of giving, darnit!
What Does This Have To Do With Amazon?
Amazon is the master at the Price Surging game, from their slashed pricing format like this:
… to their “deal of the days” that actually have a watch that counts down the minutes you have to get in on the deal, like this:
For Awhile, This Was A Great Marketing Tool For Sellers & Vendors
Up until recently, if you were a seller, you could get in on this marketing technique. While it may be questionably ethical, it is also totally legal. It’s a selling tool that utilizes the ebbs and flows of the demand-and-supply of the free market, on the (somewhat) misleading theorem that consumers dictate the value of a product or service.
However, if a company is falsely representing a product, you can get into trouble with the FTC, which is precisely what happened with Amazon and while it lead to an Amazon Pricing Policy Update.
But If The Sellers Are Dictating Their Own Prices and Amazon Is Just The Platform, Why Is Amazon In Trouble?
Essentially, Amazon was caught varying the suggested market value of certain products that were selling in high volume, as was the case for Jason Jacobs.
Jacob, who owns a shoe deodorizer company, found that every time his brand was written in a major market publication, the retail price would soar on Amazon. He attributed this to Amazon’s pricing algorithms which would spike prices based on consumer demand. In turn, this would cause costumers to think it was Jacobs himself that was causing the influx and thus gouging the prices to mislead potential buyers. This, in turn, created lower sales volume.
And this continual fluctuation in pricing happens so often that camelcamelcamel.com is an entire website dedicated to continually checking the price changes on Amazon’s popular items throughout the day.
The Amazon Pricing Policy Update and How It Will Effect You
You know how there’s always that one kid that ruins something for everyone else? That’s sort of what is happening here.
If you are a seller on Amazon, you had the leverage to change the pricing options on your product three ways: The Suggested Market Value, The Actual Listing, and a Sales Option. This meant that your brand could change value based on what the market was dictating, thus allowing you to tether around a fixed rate while still meeting your sales quota.
Now, before we go making Amazon seem like this terrible, unethical conglomerate, it should be noted that practically everyone has used the surge pricing tactic. From small mom-and-pop businesses to huge restaurant chains. Walmart’s is seen doing this very thing here:
You can get the full rundown on what is now allowed on your sellercentral account but the gist is that you can allow your page to show a lower offer price and a list price, but they will no longer be described as “sales.” If you use the sale price, there will no longer be a separate field for pre-discounted prices.
How the Amazon Pricing Policy Update will affect your brand if you are a seller is yet to be determined. In some ways, the new Amazon Pricing Policy update will help even-out the playing field. Price manipulation will be much more difficult.
In other ways, it may be problematic for companies that use dynamic pricing sales tactics to entice customers and drive sales. Sellers will have to now rely and focus their efforts utilizing keyword optimization, content development, and EBC to drive sales, which Markethustl is here to help you do jut that.
For consumers, this is a win-win, as there will be less questionably misleading promotional tactics.
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