Amazon insists that its algorithm chooses products to go into the buy box based on a range of factors, including customer service and free delivery
When customers search for and click on a product, the Amazon algorithm chooses one vendor’s offer to put in the buy box
Having the product in this buy box offers a major advantage for the retailer, as most customers end up adding it to the cart and buying it
Sept 21, 2016: The online shopping portal Amazon’s algorithms make customers pay more for popular products giving prominence to items that benefit the retail giant, a study by ProPublica said.
ProPublica on Tuesday said it reviewed 250 frequently purchased products over several weeks to see what all were chosen to appear in the highly-priced ‘buy box’ that pops up first as a suggested purchase.
Amazon that bills itself as the “Earth’s most customer-centric company”, not only sells products directly itself, but also allows other retailers to sell their own products through its platform.
When customers search for and click on a product, the Amazon algorithm chooses one vendor’s offer to put in the buy box.
Having the product in this buy box offers a major advantage for the retailer, as most customers end up adding it to the cart and buying it.
ProPublica found that almost three-quarters of the time Amazon would place its own products or those from companies that pay Amazon to fulfil orders into the buy box, even though they might not always be the cheapest.
If a customer bought everything recommended by Amazon’s buy box they would end up paying 20 percent more than if the same products was bought at the lowest price on the platform, the study said.
Amazon, however, offers a tool to allow customers to compare product prices by producing a list that ranks sellers of the same item by “price and shipping”.
Although even there, the company gives itself an advantage by omitting the shipping costs for its own products.
This would mean the rankings were accurate for Amazon Prime members, who get unlimited ‘free’ shipping for $99 per year, but for anyone else the ranking is misleading.
Amazon insists that its algorithm chooses products to go into the buy box based on a range of factors, including customer service and free delivery.
Amazon founder and Chief Executive Officer (CEO) Jeff Bezos had said in 2007 that it uses “very objective customer-centred algorithms” to automatically award the buy box to the lowest priced seller, which is clearly no longer the case.
At least 94 percent of sellers who won the buy box placement without having the cheapest listing were either sold by Amazon itself or companies paying Amazon.
The companies that do not pay Amazon hefty fees (between 10-20 percent of sales) to fulfil orders, find themselves sidelined.
ProPublica concluded that it shows how hidden algorithms govern online interaction from Google search results to Facebook news feeds. (IANS)
In a serious threat to package delivery giants like FedEx and UPS, Amazon is now delivering 50 per cent of its packages itself especially in the urban centres globally, media reported.
According to Morgan Stanley estimates reported first by CNBC, analysts estimate Amazon Logistics — the company’s in-house shipping and delivery service — will soon overtake UPS and FedEx in the total volume of packages delivered in the US.
Jeff Bezos-led company still relies on third-party couriers for last-mile deliveries in rural regions.
Amazon Logistics now ships more than 2.5 billion packages a year in the US, while FedEx ships 3 billion and UPS delivers 4.7 billion.
Amazon’s deliveries will probably reach 6.5 billion by 2022 for $10 a package, the analysts said, meaning a massive loss of $65 billion in revenue for UPS, FedEx and the US Postal Service.
Amazon’s number doubled in just the last year alone, from delivering about 20 percent of all of its own packages to now about half (46 per cent).
After losing air-shipping contract of global courier company FedEx amid competition, e-commerce major Amazon has added 15 cargo aircraft to its fleet, aiming to reach 70 planes by 2021.
In a bid to expand its airborne ambitions, e-commerce giant Amazon is investing $1.5 billion in building a three million square-foot Prime Air airport outside Cincinnati in Kentucky as a parking garage for a 100 cargo jets.
“We’re investing $1.5 billion in our new air hub to get you your packages faster. Three million square feet, and it’s going to create 2,000 jobs. And if you’re guessing that driving a front loader was fun, you’re right! #amazon #prime,” Bezos tweeted recently.
Amazon has a few dozen planes flying several hundred flights per week while UPS and FedEx have hundreds of planes flying thousands of flights. (IANS)