Amazon changes prices on its products about every 10 minutes — here’s how and why they do it

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Business Insider – Neel Mehta, Parth Detroja, and Aditya Agashe

Published: August 10th, 2018

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Rating: 1 out of 5.

Credibility rating

Rating: 4 out of 5.

Author

Neel Mehta has a strong background in product management and tech strategies. He is currently employed as a product manager for Google. He has previous experience as an author, and previous employment includes positions at Khan Academy and Microsoft. He graduated from Harvard with a BA in computer science. Authors Parth Detroha and Aditya Agashe work as product managers at Facebook and Microsoft, respectively. Both graduated from Cornell with degrees, Detroha with a BS in applied economics and management, and Agashe with a BS in computer science and business. 

Sources

“Swipe to Unlock: A Primer on Technology and Business Strategy”

Note: this article is an excerpt from the book. The book may contain more sources.

Analysis of Potential Bias

The authors of this excerpt are highly educated with solid product management backgrounds, coming from various, highly respected tech companies. The piece does not take a side for an argument. Rather, it focuses on providing understanding to the average consumer interested in Amazon’s pricing strategies.

Article Decryption

Amazon collects and uses a mass amount of data about its customers and products to predict purchasing habits. These predictions are used to fluctuate prices and maximize profits. The online retailer can fluctuate it’s prices almost every 10 minutes, more than 50 times as much as in-person retailers such as Walmart can. Using this technique, Amazon has increased its profits by approximately 25%. As described in this excerpt, one strategy is to price uncommon goods higher to make their discounted, common goods comparatively more affordable. Additionally, this technique allows Amazon to undercut the prices of competitors when necessary. 

Amazon also uses this data for their “Anticipatory Shipping Model” that anticipates a customer’s future purchases. To do so, they look at a consumer’s search history, previous purchases and compare purchases of similar customers to predict what the consumer is most likely to buy next. Amazon then ships the predicted items to the most convenient warehouse, which allows for an overall faster shipping experience.

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