Does Amazon change prices automatically?
Does Amazon change prices automatically?
Yes, Amazon does change prices automatically. Prices for a single product may change many times in a day.
There are many factors which affect price. The biggest reason is demand: popularity for a product.
How do you know Amazon changes price automatically?
There are three reasons we know this:
- Anecdotal evidence - Members of Latest Deals often observe the prices change very quickly at all hours (more than humanly possible)
- Statistical research - a price intelligence firm published a report finding Amazon.com changes prices 2.5 million times a day.
- Amazon says it does - in 2016, Amazon introduced its own Automated Repricing tool for Amazon sellers.
What does this mean for me, as a customer?
When you go on to Amazon, the price you see has not necessarily been set by a human.
The seller has given some parameters, for example:
- Sell this mug for a maximum of £10, and a minimum of £1.
Then, Amazon does the rest.
Amazon tests multiple prices, compares it to other sellers, and works out what price generates the most revenue.
Therefore, although the seller has said the minimum can be £1, Amazon might choose £9, £8, £7...
Example of Amazon changing prices automatically
A member of Latest Deals, natz265, published a great deal for some star-shaped buttons:
You could get a pack of 25 buttons for just 13p with free delivery (great deal!)
The deal was popular and many Latest Dealers bought it. However, as more people bought it the price started to climb.
Within one hour the price had almost tripled to 32p:
I refreshed the Amazon page and watched the price increase to 32p as more members of Latest Deals bought it. That's a price increase of 246%.
Amazon changed the price with demand to maximise revenue.
Now, for most people 32p and 12p are both just as cheap as each other. 32p for 25 buttons and free delivery is still very cheap. So it doesn't matter much. But what happens when it's a coffee machine, television or baby clothes?
What can I do about it? (How to beat the algorithm)
- Be the first - buy before others and avoid the price increase
- Be the last - wait until everyone else has bought and wait for the price to drop again
- Use price history graphs - see when the product was cheaper
- Don't worry about it - if you can afford it and need it, buy it.
- In the example of buttons, if you were the first to buy you would get it for 13p. If you waited for a few hours, you'd pay 246% more at 32p. Get ahead of the pack and buy before the algorithm updates.
- Wait for the price to drop again. Note - prices nearly always drop again to their cheapest level, it's just a question of time.
- In the example of the buttons, the price started to drop again with 12 hours. You can see in the screenshot above how it fell to 28p by the next day, and would continue to drop.
- Price history graphs show you what price the product has been before.
- In the image above, you can see the buttons were cheap even at 34p. Only a few months before they were almost £1. So it can be reassuring to see that even though the price has gone up, it's still cheap relative to the past.
- Price history graphs might also show you that you're buying at an expensive time and should wait.
Why Amazon automatically changing prices might be a good thing
Amazon's ability to automatically change prices can help you save money.
Amazon does not only change prices based on what's happening on its own site, but also on competitor's sites.
This is why you will see price drops happen almost immediately: If Tesco drops a price, Amazon does too. If Argos discounts a product, Amazon tends to follow as well.
You can think of it like robots fighting against robots - it can be to our benefit.
Compare that to American giants BestBuy and Walmart, who made only 1,666 changes per day.
Amazon's ability to watch competitors' prices means it can lower its own, making things cheaper for us consumers.
There are wider question here as to whether that's good for the economy as a whole, but that's for a different discussion.
If you want to learn more about pricing strategies, have a read of these two articles: