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Amazon Tricks you into thinking they have the Lowest Price, Here’s how they Do It

January 13, 2015 - Written By Alexander Maxham

I’m sure I’m not the only one that goes into Best Buy, looks at a new tablet, game, smartphone, laptop or anything else then buys it on Amazon because it’s cheaper. It always is, right? Well there’s a trick Amazon has for that. According to a report from Boomerang Commerce, it’s more complex than just undercutting the competition. Boomerang is a startup that makes software that tracks prices on shopping sites that compete with its clients. It recommends price changes dynamically. Those changes are based on rules it’s clients set for which products to match prices on and which to boost higher or drop lower than a competitor to boost profits and sales. Boomerang was founded by Amazon veteran Guru Hariharan.

This study uncovered a few interesting facts. One is that Amazon doesn’t have the lowest prices across the board. But that shouldn’t be surprising. Boomerang’s analysis shows that Amazon identifies the most popular products on their site and keeps their prices under the competition, also known as undercutting them. Boomerang observed Amazon testing price reductions on a $350 Samsung TV over six months leading up to Black Friday. And then on Black Friday they dropped the price to $250. Coming in about $100 below their competitors. When it came to the cables that users buy for their brand new TV, Amazon actually pushed the prices up about 33% during the holiday season. A likely reason for this is that they know customers won’t price compare the price on a cable they need to buy for their new TV or even a monitor.

“Amazon is doing it at scale, with what is estimated to be 10 billion pricing changes across the holidays,” CEO Hariharan said. “Some retailers are doing it every three months.”

So the study didn’t really show us anything new about Amazon and their prices, just how they do it. Instead of randomly dropping the price on an item to get rid of stock. They do it at certain times to drastically undercut their competitors and sell a ton more. It’s smart from a business side, actually. How many of you are surprised by this information? Let us know in the comments down below.