For sellers on Amazon, price matching may initially be a confusing subject. In the traditional sense, pricing matching is when shoppers can show a seller that a given product is available for less in another store, and ask the seller to match that price. Amazon does not do this.
However, as sellers, we know that doesn’t quite capture the full story. While Amazon may not offer price matching on a case-by-case level, they effectively try to force price matching through their seller contracts, which can penalize sellers if a product is offered for a lower price somewhere else.
Amazon Pricing Parity Provision
Up until 2019, Amazon had a clause within its third-party contracts requiring sellers to set their Amazon prices at or below prices on other marketplaces. This clause, known as the price parity agreement, helped to ensure that shoppers did not find the products elsewhere for cheaper. Amazon stated that they did this in order to provide consumers with the best user experience and lowest prices.
If sellers did not adhere to pricing parity clause Amazon enforced, their Buy Box would roll up, their ASINs would be suppressed, and their accounts may also be suspended. This change in policy was due to political backlash against the company as many individuals claimed that the section was anti-competitive in nature and violated antitrust laws.
So, if Amazon took out the clause that made this occur in 2019, what has happened since then?
Amazon’s Marketplace Fair Pricing Policy
Amazon replaced the price parity clause with their Marketplace Fair Pricing Policy. While this policy was a change, it didn’t actually make much difference in their pricing model. If a seller does not price its products at a competitively low price, Amazon still has the ability to alter the product’s listing. To abide by the new policy, sellers must:
- Set a competitive price for products in relation to other platforms (like eBay, Alibaba, Walmart, etc.)
- Set shipping fees that are reasonable
- Set reference prices that are not misleading for shoppers
If sellers do not abide by these rules, among others within the policy, they may be subject to Buy Box roll up. This “bait and switch” maneuver of pricing parity with the fair pricing policy laid the grounds for the Washington, D.C. attorney general to announce a lawsuit against Amazon in May 2021. The lawsuit argues that Amazon has created an artificially high price floor through both policies, harming business competition and consumers.
What is a Suppressed Buy Box?
Buy Box suppression refers to a condensed Buy Box in comparison to the regular, full size Buy Box consumers are used to seeing.
Here is what consumers expect to see as they go to purchase a product on an Amazon listing:
When rolled up, the Buy Box does not contain the expected “Add to Cart” or “Buy Now” option like it usually would. Instead, the listing contains an option forcing shoppers to take the extra step to look through all sellers in order to choose which to purchase from.
While this is only one extra step in the buying process, it has real negative consequences. The Buy Box is a very important selling point for consumers as 82% of purchases happen within the Buy Box. To lose this critical part of your listing could be detrimental to product sales.
Do Sellers Still Have to Price Match on Amazon?
While this change in policy does mean that Amazon will no longer require sellers to sell for the lowest amount on their platform or match prices on other platforms, it does mean that sellers still need to take the steps to stay competitive in order to keep their Buy Box open.
Amazon takes numerous factors into account, specifically your product’s pricing, to determine if the Buy Box is open or suppressed. In order to mitigate the possibility of you losing this important portion of your listing, it is absolutely vital you watch your competitor’s pricing on other online marketplaces.
Which Marketplaces does Amazon Fair Pricing Monitor?
Specifically, Amazon watches Walmart, Target, Alibaba, and eBay. There’s also reason to believe that Amazon monitors category-specific websites, such as Chewy.com for pet products, and larger direct websites, although no official list of monitored sites has ever been publicly shared.
Amazon’s Marketplace Fair Pricing Policy page keeps the details vague, stating that Amazon can “remove the Buy Box, remove the offer, suspend the ship option, or, in serious or repeated cases, suspending or terminating selling privileges” when sellers offer products for “significantly” (another ambiguous term) anywhere on or off Amazon.
How to Craft an Effective Pricing Strategy for eCommerce
With Amazon holding the lion’s share of U.S. ecommerce market share, most consumer goods brands cannot afford to ignore the sales channel. If you want to take a multi-channel approach to ecommerce – selling on Amazon, Target, Walmart, eBay, direct websites, and more – you should know that Amazon isn’t alone in enforcing pricing parity either: Target and Walmart both have similar fair pricing policies for their online marketplaces.
The natural conclusion, then, is that your pricing strategy should feature a consistent retail price for all sales channels (remember the D.C. AG’s argument about an artificially high price floor?).
The easiest way to ensure consistent pricing is to limit the number of sellers you work with. The fewer sellers carrying your product, the easier and quicker it is to communicate and enforce your pricing strategy. You can take this all the way to working with just a single third-party seller across all online sales channels and/or being your own seller across all online sales channels.
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