Amazon and Its Pricing Methods
October 8, 2020
The COVID-19 pandemic is harming the world economy with huge job losses and forcing consumers to stay at home, instead of going out and spending their money. Amazon is thrilled, however, because their sales have never been higher. In order to maintain social isolation and distancing, more people are buying products online. The result is Amazon is price gouging its customers. Ars Technica reports on Amazon’s poor business tactics in, “Price Gouging And Defective Products Rampant On Amazon, Report Finds.”
Amazon allows third party sellers to list and sell their products through the marketplace. Many of these sellers practiced price gouging on essential items, such as hand sanitizer, soap, flour, toilet paper, and face masks. Many of these products are also faulty goods. Amazon claims it constantly monitors its Web site in order for consumers to receive the lowest price on the Internet. However, Amazon does not watch itself for price gouging and faulty products with its own brands.
“A new report from consumer watchdog group Public Citizen, however, finds that price-gouging for some critical goods was just as prevalent in Amazon’s own first-party sales as it was in its vendor marketplace. Between May and August, for example, Public Citizen found that ordinary antibacterial hand soap, which usually sells for around $1.50, was going for $7—a 470-percent price increase.
Public Citizen’s report includes two instances of markups of 1,000 percent or more: disposable face masks, which were selling for $40 instead of $4, and corn starch, which sold for $9 instead of $0.90. ‘It is troubling that so much effort was put into blaming third-party sellers, but so little effort was made to stop the price increases—including on the products sold by Amazon directly,’ the report concludes. ‘Amazon is not merely a victim in the price gouging on its marketplace. It is a perpetrator.’”
Amazon and third party sellers treat the marketplace like an “unsupervised flea market.” Amazon makes 60% of its sales from the third party marketplace, while the remaining 40% of sales are from its private label brands. There are hundreds of negatives reviews of AmazonBasics products, including electronics catching on fire. Amazon says reviews alone does not mean an product is unsafe. There are also ten reports filed with the US Consumer Product Safety Commission (CPSC) dangerous AmazonBasics products. Amazon, of course, has only made two official recalls on its products.
Amazon has problems. Amazon needs to fix it problems, but will Bezos do it?
Whitney Grace, October 8, 2020
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