Amazon has suspended price monopolies for thousands of third-party sellers during the COVID-19 pandemic, but sellers have found a loophole in raising prices to avoid detection: labeling their products “collectible,”media outlet The Verge reported.
The Verge reporter Josh Dzieza gives examples of Bowflex dumbbell weights, and his colleague Casey Newton meets amazon. Amazon had been selling the weight for $279 until it sold out in mid-March. This week, the only weightavailable comes from 20 sellers offering dumbbells for between $899 and $1,275 ,including free shipping. All sellers list the item as “collectable.” If the condition of the product is classified as “collectible” rather than “new,” then the automated system for detecting price-gouging does not appear to monitor the product.
Sellers who price dumbbells for $1,275 also sell a Coleman Salu Spa inflatable hot tub for $1,400, which is said to be of collectible value. In March, it sold for $359. Other sellers are selling the “collectible” Cuisinart bread machine for $239 ($82.76 two months ago) and the previous “collectible” Nintendo Switch console, which sold for $79.99, for $279.99. Amazon removed the items that Dzieza asked for, but other examples still exist, including a “collectible” $450 barbell stick and a “collectible” USB cable, priced at $259.99.
Third-party merchants account for more than half of Amazon’s merchandise, and under normal circumstances, competition forces them to keep prices down. Amazon uses algorithms to give sellers a “buy box” reward on listing based on a combination of shipping times, reviews and prices — meaning that when customers click “Buy,” they get a sale. This is a system designed to push sellers to price each other. But this is broken when demand is high and supply is low, allowing the last few sellers to effectively adjust their prices ($900) with the PowerBlock Pro 50 adjustable dumbbells.
When that happens, Amazon has a number of other ways to control prices. The company had asked sellers to set prices for products lower than elsewhere under contract, but Amazon last year scrapped the policy, known as “price parity,” amid regulators’ concerns. Now, Amazon relies on something called a “fair pricing policy”, a vague set of rules and penalties. The policy says Amazon monitors the price of goods on its platform and, if it finds pricing that “undermines customer trust,” removes the purchase box, blocks sellers from shipping, or suspends sellers. Ways to undermine customer trust include setting a price that is “significantly higher than the near-term price on or off Amazon.”
Amazon seems to have set a price cap on certain items. A seller, who asked not to be named, was closed last year when he ran into a price cap while trying to sell a Millionaire game kit for more than $100. He said listing games as “collectible” rather than “new” would be a way to bypass the cap because Amazon does n’unapply the same price controls for products in that category. “By listing it as a collection, it will bypass the possible price cap, because something that can be collected will generally get a higher price, ” he said.
Sellers say the vulnerability has been around for some time, but it was rarely used before the pandemic, because sellers only encounter price caps when an item is unusually popular and in short supply, such as the Monopoly game above. But with the advent of COVID-19, there has been unprecedented demand across the entire product category — cleaning products, webcams, home fitness equipment. Interruptions in the supply chain mean that some goods are already in short supply, and security problems in Amazon’s warehouses mean that they take longer to replenish and ship. Amazon, and sellers of items with normal prices, quickly sold out. The remaining sellers sometimes deliberately raise the price, and sometimes use automatic re-pricing software, and start to encounter price caps.
As Amazon tries to control prices on its platform, it has begun to suspend sellers’ transactions on the grounds of price violations. The company said it had suspended 500,000 offers and more than 6,000 seller accounts for violating fair pricing policies. Chris McCabe, a former Amazon employee who now works as a seller consultant, has learned from hundreds of sellers who have been suspended or warned about price violations, many of whom say they are fake — those who haven’t changed their prices for years, or who don’t sell the product at all. “I think they’re just using the kind of technology they’ve always used, which is carpet bombing,” he said. “
Amazon did not respond to questions about how it would cap prices or detect illegal prices. An Amazon spokesman said in a statement that sellers set their own prices and that the company monitors its stores and removes quotes that violate the policy. After being contacted, Amazon removed a list of items that could be collected, such as dumbbells and hot tubs, but other vulnerabilities remain.
McCabe said the opacity of Amazon’s price rules, and the difficulty of returning after being suspended for violating price rules, were exacerbating shortages on the site because sellers decided to sit back rather than risk violating algorithms. “To avoid the whole nightmare scenario, most people understand that it’s best not to take the risk in the first place, which means that the number of offers for this type of product will be lower, ” he says. “
“There is no clear definition of what a pricing cap is on Amazon, or how it is calculated,” said Juozas Kaziukenas of Marketplace Pulse. “If there is a lot of demand and the supply is very low, the item will be sold in one way or another, ” says Kaziukenas. “It’s usually the seller who finds the vulnerability in the algorithm. “