by Alasdair McLean-Foreman, founder and CEO of Teikametrics
Recently, ProPublica dug into Amazon’s pricing algorithm and concluded that the “Earth’s most customer-centric company” was “hiding” deals from its users. Rather than functioning as an open market, the report noted, Amazon was using its proprietary algorithm to further its own retail business while giving independent sellers a pay-for-play boost. ProPublica’s findings are noteworthy for a couple of reasons:
- Without a doubt, what sellers have been speculating for a while is true: Amazon’s algorithm is biased toward Prime-enabled listings and Fulfilled by Amazon (FBA) sellers.
- Sellers, more than ever, need to align with Amazon’s Prime strategy – without letting FBA requirements bring down their businesses.
The convenience of FBA comes at a cost. This includes storage fees, returns, damaged goods, short-term FBA surge pricing for the holiday season, and more. If a seller’s not monitoring their inventory closely, these pesky fees can quickly add up.
ProPublica’s report couldn’t come at a more critical time. In the last year, Amazon has opened 120 new U.S.-based fulfillment centers, and Prime Now is available to consumers in 27 domestic cities – in January 2015, the service was only offered in one. While the amount of Prime users continues to skyrocket, the platform’s search algorithm is evolving. For brands and resellers alike, getting products discovered on Amazon requires a careful balance of fulfillment types, pricing, conversion rates, customer reviews and keyword relevancy. The road to success is far from black and white, and sellers need to plan their moves and inform their decisions with big data as they reach for their goals.
As Amazon gains even more of the retail market share, the retailers who know how to play the Amazon game will come out ahead. In order to do this, sellers must:
- Take advantage of FBA
- Optimize their product pages for search and conversion
- Determine an effective pricing strategy
- Be smart about which products go into FBA
- Collect positive reviews (both quality and quantity matter)
- Eliminate stockouts to prevent profit loss
Sellers that keep these tips in mind will find that Amazon’s biased pricing structure and search results can actually boost, not deter, their sales and company growth.
We’ve been helping retailers win this game for years — learn how big data can maximize your Amazon sales.