Amazon’s algorithms encourage customers pay more than they need to for popular products and appear to give more prominence to items that benefit the retail giant, according to an investigation by ProPublica.
The investigation looked at 250 frequently purchased products over several weeks to see which ones were chosen to appear in the highly-prized “buy box” that pops up first as a suggested purchase.
Amazon not only sells products directly itself, but also allows other retailers to sell their own products through its platform. This means that the same product – say a particular set of headphones – could be offered by dozens of different vendors at different prices and with different shipping costs.
When customers search for and click on the product they are looking for, the Amazon algorithm chooses one vendor’s offer to put in the buy box. Having your product in this buy box offers a major advantage for the retailer, as most customers end up clicking “add to cart” and buying the product.
ProPublica found that almost three-quarters of the time Amazon would place its own products or those from companies that pay Amazon to fulfill orders into the buy box – even though they weren’t always the cheapest.
If a customer bought everything recommended by Amazon’s buy box they would have paid 20% more than if he or she had bought the same products at the lowest price on the platform – a premium of $1,400 for the same basket of goods.
Amazon does offer a tool to allow customers to compare product prices by producing a list that ranks sellers of the same item by “price + shipping”. However, 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, and for those buying more than $49 worth of goods in one transaction, but for anyone else the ranking is misleading.
In a statement, Amazon said: “With Prime and Super Saver Shipping (which requires no membership and ships orders above $49 for free), the vast majority of our items ordered – 9 out of 10 – can ship for free. The sorting algorithms the article refers to are designed for that 90% of items ordered, where shipping costs do not apply.”
Amazon insists that its algorithm chooses products to go into the buy box based on a range of factors which it chooses not to disclose, including price, seller rating, the closest item to the customer and free delivery.
Amazon founder and CEO Jeff Bezos said in 2007 said that it uses “very objective customer-centered algorithms” to automatically award the buy box to the lowest priced seller, provided they had the item in stock and were able to deliver it. This is clearly no longer the case.
A whopping 94% of sellers who were selected for the buy box placement but who did not have the cheapest listing were either sold by Amazon itself or by companies paying Amazon. Some companies that don’t pay Amazon fees of between 10% and 20% of sales to fulfill orders find themselves sidelined – as highlighted by ProPublica.
Amazon won’t reveal how exactly the buy box works, but outlines tips for sellers looking to win placement in the hallowed box.
It’s another example of how hidden algorithms govern our online interactions, from Google search results to our Facebook news feeds. Amazon is no different. However, for a business founded with the mission to be the “Earth’s most customer-centric company” the findings of ProPublica’s investigation represent a difficult pill to swallow.
