Is Price Gouging Really Happening on Amazon?

Paul Capriolo

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March 25, 2020

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Editor's Note: This is part of a larger series of data-sourced blog posts around the coronavirus. If there are other trends you want us to look into, shoot us a line at news@zentail.com or submit a topic request and we’ll do our best to dig into what’s going on behind the scenes for you!
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After Amazon suspended nearly 4,000 sellers amidst price gouging concerns, Zentail looked at prices on products deemed “essential” during the coronavirus pandemic (as defined by Amazon in the US marketplace). Amazon maintains a "zero tolerance” policy against sellers who exploit “an emergency by charging excessively high prices on products and shipping” and has already removed nearly half a million product offers.

Sure enough, we discovered a spike in pricing of essential items, as well as a dip after Amazon started to take action. 

Here are the YoY trends in per-unit costs for essentials products. Essentials include toilet paper, hand sanitizers, safety masks, safety gloves, cough medications and similar products.

graph showing pricing trends on essentials during coronavirus pandemic

Heading into 2020 prices were stable and in many cases, even lower than prices last year. Once COVID-19 was made public at the turn of the year, per unit prices began to increase. Price increases reached a peak the week of March 8.

Shortly thereafter, on March 11, Amazon started restricting major essential categories and aggressively enforcing it’s Fair Pricing Policy.

Cough Medicine

Cough Medicine had a crazy spike in the last week of February. This coincides with states starting to go on lockdown as well as the first death related to COVID-19 in the US.

pricing trends for cough medicine during coronavirus pandemic

California

Looking at a specific state, it doesn’t appear that the price has to do with specific coronavirus events in California. However, the per unit trends in California do not follow the nationwide trends shown earlier.

graph showing ecommerce price trends in California during coronavirus pandemic

Some major coronavirus events in California for comparison (source: Wikipedia)

  • January 26 - First Confirmed Case
  • February 14 - San Diego State of Emergency Declared
  • February 25 - San Francisco State of Emergency Declared
  • February 26 - First Case of Community Transmission

Read Also: What a State Lockdown Meant for this Online Seller in California

What About Repricing?

One major point that is overlooked is how pricing works on Amazon. Most sophisticated merchants will use a repricer that adjusts prices automatically, driven by the directive to maximize the margins on each sale by selling products at the highest possible price while winning Amazon’s buy box. Zentail’s algorithmic repricer adjusts prices every minute between an acceptable sale price range as defined by the merchant. As supply dwindles and demand increases, these tools will automatically start to raise prices until they lose the buy box. (Do you want to see content around repricing and COVID-19? Let us know at news@zentail.com.)

In Summary

It’s clear why Amazon suspended almost 4,000 seller accounts and continues to take action in investigating unfairly priced products. These suspensions coincide with Amazon’s statement yesterday.

“We are also proactively sharing information with state attorneys general and federal regulators about sellers we suspect have engaged in egregious price gouging of products related to the Covid-19 crisis,” Amazon said.

From our analysis, it’s clear that prices have gone up considerably and consistently through the COVID-19 outbreak in the US. However, it’s not clear how much of this is conscious price gouging versus systems operating under their default capitalistic nature.

What You Can Do About Your Pricing

  1. If you’re using a repricer, make sure you’re setting a maximum price.
  2. Follow Amazon’s fair pricing policy.
  3. Talk to us. We’re a team of ecommerce experts and we’re here to help. Is there an Amazon issue you’re having, do you need to diversify, find new warehousing, or purchase more intelligently and in faster?
  4. Consider what actions you can take now to protect yourself now. Can you manage your cash flow better through improved demand forecasting? Can you improve your listings now to drive more sales?
  5. Plan what actions you can take now make up for lost ground after the pandemic. Is this the right time to increase your efficiency, expand to new channels, partner with new vendors, etc.. that will help accelerate and protect your business as things return to normal?
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