Amazon undercuts rivals by adding discounts to marketplace seller prices
Amazon.com appears determined that its marketplace sellers will not be undersold heading into the holidays. According to numerous press reports, Amazon has begun lowering prices on goods sold by third-parties on its site.
While marketplace sellers have traditionally determined pricing for the goods they sell on Amazon, the e-tail giant has been lowering prices on items in key categories and marking the additional saving with a tag that reads “Discount provided by Amazon.”
The e-tailer, which reimburses third-party sellers for any discount beyond the original price, is positioning the tactic a win-win-win.
“When Amazon provides a discount, customers get the products they want at a price they’ll love, and small businesses receive increased sales at their listed asking price,” a spokesperson for Amazon wrote to Reuters in an email.
While many third-party sellers may be fine with Amazon’s actions, others may be less sanguine. Some with a luxury price positioning may be concerned that excessive discounting will wear away at brand equity. Others, such as home recreation retailer Dazadi.com, may face business complications on other marketplaces where it also sells its products.
Jason Boyce, CEO of Dazadi, told The Wall Street Journal that Amazon’s discounting may have a downside for his company, which sells on Walmart and other marketplaces.
“At first glance, we thought [Amazon’s discount] was great,” he told the Journal. He then realized that price parity agreements signed with Walmart and others would mean Dazadi is “violating our seller agreement with every other marketplace that we sell on.”
While research typically points to Amazon having lower prices than its online rivals, the e-tail giant is facing stiffer competition from Best Buy, Walmart and others looking to claw back market share.
Recently released research from Profitero, for example, shows that Amazon’s pricing across 13 categories including beauty, beauty, consumer electronics and pet supplies is only 2.9 percent less expensive than Walmart’s. A 2014 study by Profitero found that Walmart’s prices were nine percent higher than Amazon’s on average at the time.
- Amazon Snips Prices on Other Sellers’ Items Ahead of Holiday Onslaught – The Wall Street Journal
- Amazon discounts other sellers products as retail competition stiffens – Reuters
- New Profitero Study Reveals Amazon is Winning the Online Price War – But Walmart is on the Offensive – Profitero
- Why is Amazon paying full price for third-party inventory? – RetailWire
DISCUSSION QUESTIONS: On balance, do you see Amazon adding discounts to items sold by third-party sellers as a net positive for the e-tailer and those retailers on its marketplace? How will “Discount provided by Amazon” affect other online marketplace operators this holiday season?