Above List Price – Amazon Finally Shows (small) Action Against 3rd Party Seller Price Gouging.

by El Plumber (admin) on October 13, 2009

Amazon quietly rolled out a new feature to take some of the sting off 3rd party seller price gouging in the past couple of days (we’re not even exactly sure when it went live) without any announcement that we could find, then quickly removed it.  No idea why it was removed, but hopefully it will be back.

What is the problem with Amazon Sellers?

There are many what are called “Amazon Sellers” where you could have your stores item listed for sale on the same page as the Amazon item. If your price is lower that the Amazon price (including shipping), you item will show at the top of the list on that page and people coming to buy it will click on yours. If the item is not carried by Amazon or is out of stock, the Seller items rise to the top by default. And many Sellers have been using this fact to price gouge unsuspecting consumers thinking they are paying regular price to buy from Amazon when in fact they could be paying 150%-500% or more of the list price for an item to buy from some random Joe that does not even have their own web store.

Amazon has had this problem for a couple of years now and has done very little (as in nothing really) to dissuade the practice.  There are some Amazon Sellers who appear to make a pretty good business of price gouging.  There is one Seller that has over 241 items listed for sale and over 1341 ratings for products sold over the last 12 months.  Every single item they sell is listed for 3-5x the suggested retail list price.  Every single one.  And the items are priced anywhere from $30 to $300.  Many of them are discontinued items that are hard to find anywhere else, but would not be considered collectables by any stretch.  That means they are making PROFIT anywhere from $10 to $200 per item for the most part.  Do the math, especially considering that most people likely never come back to rate the store they bought from and the 1341 ratings are probably just a fraction of what they are shipping.

How Do Amazon Seller Price Gougers Do It?

It seems that they live on the fringes of the product inventory that moves through Amazon everyday.  Picture a popular item at Amazon, maybe moving hundreds of units a day.  At some point the Amazon inventory system will show that item as Out Of Stock and the 3rd party sellers items rise to the top of the list as being for sale.  If an item normally sells for $40, they mark it at $120 or $160.   Maybe a couple times a week their item will rise to the top of the inventory stack when everyone else runs out.  And maybe, just maybe someone comes along that needs that item just enough to decide to pay through the nose for it.  Or that does not realize the item is not normally priced that high, just see that it is popular.  Either way, it seems to be working, at least for some of them.  To become a seller it costs $39.95 a month and approx 15% of everything you sell, which does change slightly depending the items one is selling.

Why has Amazon let it go on for so long?

Let’s be h0nest here.  It is hard to say if the behavior of any large corporation is due to actual bad business intentions or due to the sheer inertia and incompetence that very large organization can fall prey to.  And I will not be making any judgments in intent here one way or another.  Suffice it to say that since Amazon earns 15% per item, they do not have a large incentive to stop this practice.  After all, people are buying of their own free will.  If you do not like the price, do not buy the item.  Simple.  It’s an example of the free market at it’s best.  You need it, they have it.

What Are They Changing?

Now for the possible change.  This morning at around 8am for a short time Amazon started identifying items that are priced by third party sellers as far above their typically price.  A quick scan only showed a small number of items that had this designation, and only for items that it looks like Amazon normally stocks.   It basically said right below the price in giant bold black letter “$54.47 above list price, list price $14.99″

Tonight as I finish writing this, the functionality is completely gone.  It’s possible that it was just a glimpse of future functionality that they plan to roll out around Christmas time to hit the price gougers at the time when they seem to be at their worst.  Here is an image I was able to recover from the Google cache of the item that clued me into it.  It no longer displays the “above list price” message as of this writing approx 14 hours later:

amazonlistprice Above List Price   Amazon Finally Shows (small) Action Against 3rd Party Seller Price Gouging.

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{ 4 comments… read them below or add one }

Amazonseller October 19, 2009 at 11:01 am

The problem with this is the fact that items that are getting targeted for this warning are collectibles that have been out-of-stock for years. People would of course be happy to get some of the rarer items listed below or at the previous list price. Sure there are some idiots doing what you say they are doing in this article, but what about he honest sellers that sell out of print and rare items that warrant the higher price? How will this make them look?
This method is flawed to no end.

Marvin October 20, 2009 at 11:47 am

I’ve seen these high prices on some CDs/vinyl albums that are out of stock. But that seems reasonable enough to me. If something is hard to find, then it’s price goes up. The customer has the choice of buying the product at that higher price or not.

Alison December 10, 2009 at 7:27 pm

Here’s the reason I bet… Amazon does their fair share of price gouging, too. Oh yes… it’s not just third party sellers. And hey, they wouldn’t want their trusting customers to know that, now would they? I’ve been a loyal Amazon customer for years, but just this week discovered they are price gouging on nearly every toy on the website.

Try looking for lego sets on Amazon. I came across a bunch of sets I bought (from them!) earlier this year for my kids. Those same kits (not hard to find or special in any way) are now more than DOUBLE the cost. It’s shameful that in this rough economy when parents are already struggling to get their kids nice toys for Christmas are now dealing with formerly trusted online retailers who are essentially halving our spending power. Some toys are even worse- marked up 500% or more (for hard to find toys like Zhu Zhu).

Luckily for me, I figured this out before commiting to any toy purchases through them. Who would have thought that in this day and age of competitive online shops that the local Toys R Us has the best deals, and that “deal” is retail pricing + tax. Go figure.

Happy Holidays!

El Plumber (admin) December 10, 2009 at 10:15 pm

Alison, go read the article again. The toys and prices you are talking about are all being sold by third party sellers, not Amazon themselves. However, the fact that they hide it so well and make consumers think they are buying directly from Amazon is really a problem.

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