Amazon’s Buy Box Is Creating the Most Brutal Conditions for Merchants

Time and again, Amazon has demonstrated that they are really good at creating dynamics that help them increase the quality of their marketplace offering for end consumers. Excuse me the pun, but prime example: „Prime Dynamics: Merchant Increased Sales by 20 Percent with Seller Fulfilled Prime

The buy box is another ingenious way of creating the right incentives to make the overall marketplace better.

Buzzfeed published recently a piece about the buy box: There’s A War Going On Behind Amazon’s “Add To Cart” Button:

To the average user, who lands on a product page, it’s all pretty straightforward. On the left, photos of the item — lets say, a cell phone charger. To the right, there’s the “Add to Cart” button. Pretty simple, right?

But dozens of sellers may all be offering that same charger, and only one is chosen by Amazon’s systems to get the sale when you hit Add to Cart. The others are relegated further down the page, and the vast majority of Amazon users never bother to look at them.

​There‘s nothing really new in there but it highlights the harsh competion for the one spot that actually creates sales on the Amazon Marketplace:

Amazon sellers compete tooth and nail to please the algorithms that determine who sits in the buy box. It’s a privilege they earn — and it’s not for sale.

“The majority of the sales that occur on Amazon goes to the seller who is in the Buy box, about 85 to 90-plus percent,” said Phillip D’Orazio, president of the Palmetto Digital Marketing Group, which manages Amazon accounts for clients.

The obvious comparison is Google, but in reality this is far worse. Only one spot matters, the rest is essentially meaningless. Imagine a Google with one search result per page. That is what Amazon Marketplace and the Buy Box mechanism represent for merchants who sell products others sell too.

​Here‘s more on the selection mechanism:

The exact details of how its systems make the choice are kept secret, but the company tells sellers they can increase their chances by keeping prices low, updating their inventory, offering multiple shipping methods, and offering fast, reliable service. Sellers who have been on the marketplace longer and offer shipping from Amazon’s own warehouses also get preference.

That means the Buy box doesn’t always feature the cheapest option. Instead, it’s a balance of price, service, and Amazon’s evaluation of the seller.

​What the buy box is doing is essentially commoditizing everything merchants can bring to the table on the Amazon Marketplace by creating the most brutal conditions for competition.

​ There is really no other way to put it. And it works because merchants have to go where the customers are.

​ Of course, Amazon prioritizes merchants using its own services. Those services make sure the user experience is consistent (and Amazon controlled) and it‘s good for Amazon‘s bottom line:

Amazon’s buy box algorithms prioritize vendors who pay to house their products in its warehouses, giving the company more control over the shipping process. Lans sends some of his products to Amazon to fulfill and ship, offering many products over Amazon Prime.

​Make no mistake, this is good for end consumers and Amazon alike. It makes the Marketplace better for both and thus will increase its overall popularity further:

“You have to learn to play the algorithim game rather than just using common sense,” Andrew Tjernlund, who sells gas and electric appliance parts on Amazon under Tjernlund Products Inc., told BuzzFeed News. “Even if they think Amazon is gaming the system, it’s based on real data,” he said.

Marketplace Pulse’s Kaziukenas believes in the data. “The Buy box is much smarter than it appears,” he said. “It’s trying to do things beyond the price and trying to help customers. Customers probably should not try to outsmart that. There’s a reason why Amazon did not pick another seller.”

As I said, rather ingenious.

​​​More on this topic:

​* Prime Dynamics: Merchant Increased Sales by 20 Percent with Seller Fulfilled Prime
​* Jeff Bezos & The “Flywheel” Metaphor for Amazon Prime and Prime Video
​* The Amazon Marketplace Juggernaut in Context
​* Amazon Marketplace Services, AWS & Prime Each Doubled in Revenue Since 2014
​* Subscribe With Amazon: The New Self-Service Marketplace That Will Dominate Subscriptions
​* From Caterpillar to Butterfly: Amazon, eBay & Zalando’s Services Revenues Explosion

One comment

  1. […] we have said before regarding the buy box on Amazon, which sees similar dynamics (intentionally, I might add): Imagine a Google that only gives you one […]

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