Amazon and The Rise of the Guerrilla Part II
Part II: Amazon? Is that you?
Just as I was about to to hit Amazon’s Buy Now button on a water bottle for my 3-year-old the other day, I noticed that the price on the most popular brand had skyrocketed overnight. Or had it?
My firm, Accelerated Intelligence, has risen in the last five years to be one of the leading Amazon acceleration firms. We consult for Fortune 500s and startups alike on how they can win in the Amazon marketplace. Because I’m at the forefront of Amazon selling, I knew what was going on with that pricey water bottle. It was the rise of the guerrilla marketers: third party sellers had won the Buy Box, an Amazon feature that most consumers are not even aware exists. Buy Box, simply put, is the little button you click on to add to cart. The ability for third party sellers to dominate the Buy Box is why Amazon has become the wild west of retail. The site’s loosely regulated Seller Central platform allows virtually anyone to resell any legal product on their platform at any price, high or low.
From our preliminary research, over 97 percent of consumers select Buy Now or One Click, adding items to their carts unaware that they may not be buying the product from Amazon or even one of Amazon’s authorized resellers. Some of buyers, a small percentage, looked at the “may be available for less from other sellers” link where they could opt to purchase the item from other buyers, sometimes with as much as a 50 percent lower pricing. Both those who choose to click and those who are unaware may not realize that what they are actually doing is making a purchase from an unauthorized third party reseller.
Amazon and the A9 Algorithm
The holy grail and key to the whole system for Amazon is their A9 Algorithm, which is a complex and carefully designed series of code crafted to create a buyer centric search experience. Unlike Google’s search algorithm that is focused on delivering information, A9 is focused on shopping and converting customers to buyers.
In order to make the marketplace fair for the millions of sellers on Amazon, the A9 algorithm is designed to give the Buy Box in seemingly random intervals to different buyers regardless of price. If you go to the same page to buy the same product, one day you are buying from Amazon directly and another day from a third party seller.
What Amazon is effectively doing is rewarding the low price leader on a product with the majority of the Buy Box occurrences. Yet, they don’t want to discourage other sellers, so they throw them a bone to keep them engaged and selling on their platform. The philosophy is that 10 million sellers at $10 is better than 1 million sellers at $100. As it turns out, Amazon has been playing the long game all these years. It’s a great strategy for customers, but it can be brutal for sellers.
In the third part of this four-part series, I will unfold the buyer-centric practices of Amazon to see how all of this affects sellers.