Blog Ipsa Loquitur

Published on under Disrupt Everything

Recode on Amazon’s pricing strategies, as researched by a company called Boomerang Commerce:

[A]ccording to Boomerang’s analysis, Amazon identifies the most popular products on its site and consistently prices them under the competition. Amazon priced one of the most popular routers on its site about 20 percent below Walmart’s price. But when it came to a much less popular router, Amazon priced it almost 30 percent higher than Walmart did.

But when it comes to the HD cables that customers often buy with a new TV, … Amazon most likely figures (or knows) it can make a profit on these cables because customers won’t price-compare on them as carefully as they would on more expensive products.

“Amazon may not actually be the lowest-priced seller of a particular product in any given season,” the report reads, “but its consistently low prices on the highest-viewed and best-selling items drive a perception among consumers that Amazon has the best prices overall — even better than Walmart.”

This is nothing new. The product which is such a bargain that it gets customers in the store, where they buy things that make the store more money is called a “loss leader.” You sell the big TV at a loss and then also sell other goods at a normal price. (See: every Black Friday Sale ever.)