Amazon customers are paying more for popular products due to algorithms that give more prominence to items that benefit the company, according to new research.
An investigation by ProPublica found 94% of sellers who were selected for the first suggested purchase in the “buy box” were not the cheapest listing and were either sold by Amazon or companies paying to its services.
After looking at 250 frequently purchased products over several weeks, the research found the algorithms in place pose as a major disadvantage for sellers who don’t pay Amazon fees.
Three quarters of the time, Amazon places its own products in the box, or those of companies that pay for its services. Companies that don’t pay the fees of 10% and 20% of sales are sidelined, according to ProPublica.
Although it’s unclear how the algorithms work in regards to the buy box, Jeffery P. Bezos, Amazon founder and CEO, said in the 2007 shareholder meeting that the company had “very objective customer-centered algorithms‘’ that automatically award the “buy box” to the lowest price seller, provided “they actually have it in stock and can deliver it.”
Erik Fairleigh, a spokesman for Amazon, said the algorithm that selects which product goes into the “buy box” accounts for a range of factors beyond price, including seller rating, the closest item to the customer and free delivery.
He said in a statement: “Customers trust Amazon to have great prices, but that’s not all— vast selection, world-class customer service and fast, free delivery are critically important. These components, and more, determine our product listings.”
However, the research found that customers would have paid 20% less than if they had bought the same products for the lowest price on the platform.
The investigation found that customers without Amazon Prime accounts, which offers free shipping for $99 a year, and those purchasing less than $49 worth of goods are being misled by rankings when using the comparison shop tool “price + shipping”, whilst those with accounts or buying more products are able to see accurate rankings.
In a statement sent to ProPublica, Amazon said: “With Prime and Super Saver Shipping (which requires no membership and ships orders above $49 for free), the vast majority of our items ordered – 9 out of 10 – can ship for free. The sorting algorithms the article refers to are designed for that 90% of items ordered, where shipping costs do not apply.”