On August 27, 2023, an Amazon driver delivered a package in Washington, DC.
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When Brandon Fishman discounts his vitamin-fortified coffee TargetAmid the week-long promotion, he's not worried about how it will affect his business Amazon. He certainly didn't expect that his sales there would “fall off a cliff.”
Fishman was taken aback. Amazon's automated system detected his bag during Target's sale this week Vita cup The coffee there sells for $13.43, about $1.50 less than what he sells on Amazon.com.
One of Amazon's key principles is that it offers “the lowest prices on the widest selection of products on Earth.” It is the responsibility of Amazon merchants to deliver on this promise, and those who sell items at lower prices on competing sites risk losing the most valuable virtual asset in e-commerce: the shopping cart. This is the first list that pops up when a visitor clicks on a specific product, and it's also the list that shoppers purchase when they click “Add to Cart.”
Although Fishman owns the VitaCup brand, he said his purchase rights were taken away from him by a distributor of coffee products.
“I've had to intentionally lose my buy button all week due to Target issues, and my sales on Amazon have dropped significantly,” said Fishman, who has been selling VitaCup coffee on Amazon since 2017 and makes about $2,000 a year. Ten thousand U.S. dollars.
Amazon has long relied on algorithms that constantly scan the web to match or beat the prices of products listed elsewhere. Other markets include Walmartuses a similar system to offer the cheapest prices.
Amazon's algorithm has drawn scrutiny from lawmakers and regulators who claim the system is anticompetitive. The practice is at the center of a lawsuit filed by the Federal Trade Commission in September, which accused Amazon of using “anti-discounting tactics” and “large web crawling devices that constantly track prices online” to stifle competition.
The company rejected the FTC charges and said the pricing tools were part of running a good business.
“Like any store owner who doesn't want to sell customers a bad deal, we won't highlight or promote offers that are not competitively priced,” Amazon general counsel David Zapolsky wrote. in a blog post After the lawsuit was filed. Amazon also said Third-party sellers set their own prices.
An Amazon spokesperson declined to comment on the concerns raised by sellers.
The Importance of the Buy Box
Amazon launched Prime Day in 2015 to attract new members to its current $139-a-year subscription plan while also showcasing its products, especially electronic devices and other services. Promotions have become an important revenue driver for other retailers, which often hold competitive sales events around Prime Day.
JPMorgan analysts predict total Prime Day revenue of The program, set to launch on Tuesday, will reach $7.9 billion this year, an 11% increase from 2023, according to a note to clients on Friday.
Target began offering discounts on its website on July 7 as part of its Circle Week promotion. Circle Week usually takes place before Amazon’s special sales.
The problem Fishman and other sellers are facing is the result of Target changing the way it sells Circle Week sales. In the past, the company would display a percentage discount from the regular price to avoid revealing Amazon's pricing algorithm, Fishman said.
But this year, instead of marking its items as 25% off, Target showed how much the item was actually selling for. Fishman said that meant it was indexed by Amazon's pricing algorithm, causing him to lose his shopping cart.
An Amazon Rivian electric delivery truck is seen on Interstate 87 near Harriman, New York, U.S., Thursday, April 11, 2024.
Angus Mordants | Bloomberg | Getty Images
Winning the Prime Shopping Box is crucial for sellers to succeed on Amazon. Without it, shoppers can still find a seller's products, but they have to take the extra step of clicking through to a separate window that lists all available offers. The FTC claimed in the lawsuit that nearly 98% of sales on Amazon are completed through the “Golden Shopping Cart” button.
Mason Arnold had a similar experience to Fishman last week.
Arnold said sales of his merchandise increased after Target launched Circle Week sunwick Herbal tonics and powders began to plummet on Amazon as he lost his reseller buying rights.
“The only way to regain the Amazon Prime shopping cart is to lower our prices on Amazon,” Arnold said.
Sunwink did just that, lowering the price of one of its products from $23 to $19. Sales have since picked up, but Arnold doubts he can make a profit at this level. Amazon retail is already a low-margin business due to price competition and all the costs of fulfillment, advertising and other services.
“We lowered the price so we're currently losing money until the problem is resolved,” Arnold said. “We don't know what the total loss is, 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 then sell them on Amazon at a markup, forcing him to compete in selling his own brand.
Fishman said he and other sellers online expressed their concerns to Target. Fishman said the company then adjusted its “Circle Week” discounts on some items, changing them to “Check Price in Cart,” meaning shoppers had to add the product to their cart to see the price. He added that the change bypasses Amazon's pricing algorithm.
Target disputed that account and declined further comment.
Third-party sellers like Arnold and Fishman are at the heart of Amazon's dominant e-commerce business. Since about 2017, they have accounted for at least half of all items sold on the site. In the first quarter of this year, that number soared to 61%.
Still, Fishman said the company is quick to penalize sellers who are just trying to make a living. He said the company was stifling competition by doing so.
“Their focus is we always want to get the lowest price,” Fishman said. “Well, as a brand, if I want to have a sale at Target for a week, I should be allowed to. I shouldn't have a sale everywhere.”
