As prices rise on Amazon, analysts note a ripple effect


Editor’s note: An earlier version of this article said Amazon raised prices in October by a higher percentage than Walmart and Target. The Washington Post based that information on an analysis from the data analytics company Profitero, which tracks prices across retailer websites, and on an interview with the company’s president. Two days after publication and after Amazon raised objections, Profitero reached out to The Post to say it should not have made the comparison because the differences were not statistically significant. (It still says the e-commerce giant has raised prices lately on the basket of products that Profitero tracks.) This article has been changed to remove the price comparisons with other retailers.

The Post has made other changes to the article since publication. Analysts have generally documented over time that Amazon influences prices across the web, but there isn’t specific evidence that the recent increases have led rivals to raise prices. The article has also been updated to clarify that some items on Amazon that are priced higher than on rival sites are sold by third parties, not directly by Amazon.

– – –

SEATTLE — As the holiday shopping season kicks off, consumers will find prices higher than they’ve been in months.

That is even true at Amazon, the e-commerce giant that says its algorithms meet or beat competitors’ pricing, according to Profitero, a data analytics company. Profitero tracks 20,000 of Amazon’s most popular items — and identified 1,600 products that were among the most popular in October 2020 and last month. The price of those products had increased an average of 7.5% over that time.

The price increases are significant because Amazon — the dominant online retailer with more than 41% of e-commerce, according to eMarketer — influences prices across the web, according to analysts and economists. Amazon’s algorithms scrape online price tags of its rivals to match or beat the lowest prices.

Because most prices are now available online, rivals such as Walmart and Target can also scan and match or beat prices, something that has resulted in more uniform pricing across the board. The trend generally results in downward pricing pressure.

But Harvard Business School economist Albert Cavallo said it also means eased competitive pressure if prices on Amazon go up, resulting in higher prices across the board. That translates to stores, too, as retailers with brick-and-mortar sites are matching their online pricing to physical shelves.

That matters because consumer prices grew 6.2% in October compared with a year before, according to the Bureau of Labor Statistics. The spike, the largest annual inflation increase in 30 years, is driven by soaring energy prices and ongoing supply-chain backlogs that have pushed up costs.

Amazon has long used algorithms to ensure its merchandise matches or beats the competition. But consumers don’t always find the best prices on its site because it’s a marketplace. An 18-roll package of Charmin Ultra Strong, for example, was recently available on Amazon for $31.03, while Target offered the product for $18.79.

Amazon spokesman Patrick Graham said the Charmin toilet paper was sold by a third-party merchant that sets its own prices on Amazon’s site. Amazon signals when products are being sold by third parties with a small label, although consumers seldom notice the difference.

“Amazon seeks to always meet or beat the best price offered at other retailers on the products we sell ourselves, and our systems continually benchmark prices in other stores to make sure we are delivering on this promise,” Graham said. “If we find an isolated error where we offer a product at a higher price than other major retailers, we quickly investigate and take action to ensure our price meets or beats the lowest price elsewhere.”

The majority of products offered through Amazon’s marketplace come from third-party sellers, and Amazon pressures them to keep prices competitive. Washington, D.C., Attorney General Karl Racine filed an antitrust suit in May alleging that Amazon prevents sellers from offering their products at lower prices or on better terms on any other online platforms, including their own websites. Amazon has said that sellers are responsible for the prices they offer on its marketplace.

Amazon’s prices rose in part because it started with lower prices, Profitero President Sarah Hofstetter said. Even with the increases on Amazon, Profitero found that Walmart’s prices on the 20,000 items are 4% higher than Amazon’s prices, and Target’s are 15% more expensive.

Target and Walmart did not immediately respond to a request for comment.


Leave a Reply

Your email address will not be published. Required fields are marked *