Sellers are gaming prices on Amazon, according to academic research published in October. The University of Florida explained in a post
today what researchers observed by studying 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.
"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% more, on average, for their new vacuum than they would have just a day earlier," according to the University of Florida post.
The full research was published in the journal Marketing Science. The research abstract published on INFORMS PubsOnLine
explains in part:
"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."
The three professors who published the research paper are Jinhong Xie (University of Florida), Sungsik Park (University of South Carolina) and Man Xie (Arizona State University).
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.
Professor Xie said the pricing practice allowed sellers to "achieve the impossible: increasing margins and increasing sales simultaneously."
Xie wants consumers to be aware of the practice to protect themselves (the University of Florida post includes some suggestions) and advised consumer organizations and regulators to evaluate the new marketing practice.
We've written about crackdowns on price-fixing, such as Three More Amazon Sellers Plead Guilty to Price Fixing (January 2022
) and Amazon Seller Pleads Guilty to Price Fixing (August 2016
Those cases show that US and UK regulators take seriously price manipulation even by relatively small marketplace sellers and have serious consequences for those who find themselves in regulators' crosshairs.