The study “An Empirical Analysis of Algorithmic Pricing on Amazon Marketplace” by Northeastern University Boston* investigated how online sellers use repricers, their pricing strategies, and how widespread repricers are on Amazon. The research team chose Amazon because the online giant has become the world’s largest marketplace for online sellers from the USA, Europe, and Asia.
Over a period of four months, the research team collected public data from nearly 1,700 bestselling products on Amazon. This allowed them to identify 500 online sellers who were very likely using a repricer. Subsequently, methods were developed for the study to recognize and analyze the pricing algorithms and the behavior of repricers on the marketplace. The study team explored the characteristics of online sellers and characterized the impact of repricing strategies on marketplace dynamics.
The theoretical buyer is browsing without a Prime account.
Although the US company Amazon has recorded over 150 million Prime users worldwide, the researchers from Northeastern University Boston chose to use a non-Prime user account when collecting data. FBA shipping has a significant impact on the allocation of Buy Box shares. From the scientists’ perspective, the offers of online sellers who do not provide Prime shipping would likely have been filtered out by the Amazon algorithm. This would significantly alter the study results.
What immediately stands out to the research team?
Throughout the study, the researchers observed that online sellers who use a repricer appear to be more successful than those who do not. The first group of sellers offers fewer products but receives significantly more customer feedback. This suggests that they achieve a much higher sales volume as a result.
Furthermore, online sellers with a repricer win the Buy Box more often, even though they do not offer the lowest price. However, the researchers also noticed that attempting to win the Buy Box with the lowest price leads to significant price fluctuations in the respective listings. This, in turn, confuses buyers and results in customer dissatisfaction.
Summary of the Study Results
During the observations, only 13% of the listings had a static price in the Buy Box.However, 50% of the products recorded more than 14 changes per day.
The seller who wins the Buy Box remains consistent for 31% of the bestseller items. For the rest of the offerings on Amazon, the Buy Box winners and their prices are very dynamic. Some products undergo several hundred price adjustments per day.
Only 60% of top sellers win the Buy Box. In summary, the results of the study show that NOT ONLY the price is decisive in the awarding of the Buy Box.
For meaningful results, the research team considered price, seller feedback, and the number of feedbacks – these also have an impact on the awarding of Buy Box shares. According to Amazon and based on the observations of many online sellers, however, additional factors such as sales volume, response time, on-time delivery, etc., are crucial in the awarding of the Buy Box. These factors could not be measured within the scope of the study and are therefore not part of the study results.
During the observation period, researchers tested the theory that the lowest price wins the Buy Box 100% of the time. This occurs in only 50-60% of cases.
In weighing the factors responsible for winning the Buy Box during the observation period, “Price Difference to the Lowest” and “Price Ratio to the Lowest” received the highest values – 0.36 and 0.33, respectively. The use of FBA was considered with a value of only 0.02. This weighting is solely due to the fact that for the selected non-Prime user account, FBA offers do not play a significant role.
The most commonly used pricing strategies are: the lowest or the second-lowest price compared to Amazon.
The Role of Amazon as a Seller: Amazon continues to dominate the market on its own platform, offering around 75% of all bestselling products during the observation period. When competing with “non-repricer sellers,” the online giant occupies the top positions in 96% of cases. However, when the Buy Box for certain items is held by “repricer sellers,” Amazon appears in the top 5 sellers in 88% of cases.
Typically, the price difference between Amazon and the next lowest price is about 15-30%. According to the researchers, this is due to the fees that sellers must pay to Amazon.
During the study, it became clear once again that online sellers who use a repricer focus on a relatively small number of products that they can purchase in large quantities at low wholesale prices.
Online sellers who use a repricer receive significantly more feedback than “non-repricer sellers.” There are two reasons for this: First, these sellers have a much higher sales volume than “non-repricer sellers.” Second, successful sellers take a more active approach when it comes to gathering customer feedback.
Lastly: Are repricer sellers more successful in winning the Buy Box? The investigation has shown that this is indeed the case: sellers with a repricer are significantly more likely to win the Buy Box. The study also revealed that repricer sellers are more likely to compete for the Buy Box with a higher or equal price than sellers who only focus on the lowest price. However, even though repricer sellers do not offer the lowest prices, they manage to win the Buy Box and generate more sales thanks to their sales history, customer feedback, and sales volume.
Conclusion
As we have already reported, the lowest price on Amazon is not a guarantee for winning the Buy Box – it is more about the strategy. The study from Northeastern University Boston confirms that only sellers who engage with Amazon’s key metrics, know the marketplace inside and out, and position their products correctly can be successful on Amazon. The use of repricers is one of the strategies of successful sellers. Especially when the goal is not only to win the Buy Box but to sell at the best possible price. When competing directly with Amazon, the use of repricers is essential.
When selecting a repricer, the Amazon seller must not only consider the advantages and disadvantages of each provider but also engage with the respective technology. There is a distinction between rule-based and dynamic repricers. If you want to maintain full control over your repricing strategy, a rule-based repricer is the right product – but it requires a lot of time. A dynamic repricer collects data, analyzes it, and continuously adjusts the repricing strategy.
Dynamic repricers are often more profitable – rules can contradict each other and often lead to prices being adjusted only downward. In dynamic pricing, the rules are determined and adjusted by the repricer itself, depending on the market situation.
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