Amazon boasts its business model as offering online shoppers the lowest price they can find. But an Amazon veteran has launched a new startup that shows that Amazon’s pricing strategies don’t always result in the cheapest products.
Guru Hariharan, a former Amazon manager, has introduced Boomerang Commerce, a new software that tracks the pricing habits and strategies of retailers to aid competitors in their own pricing. Recommendations for product pricing are made based on rules Boomerang clients declare regarding which products to match prices on and which products it wants to see with higher or lower prices than those sold by rivals.
Boomerang released a white paper Tuesday (Jan. 13), titled “Introduction to Price Perception Index – Achieving Competitive Pricing without Racing to the Bottom.” Among the study’s most revealing pricing trends revealed by Boomerang are those of Hariharan’s former employer.
According to Boomerang’s findings, Amazon does not always offer the lowest prices. Rather, the company consistently prices the site’s most popular products at lower costs than the competition.
In one example, the startup found that in the six months leading up to 2014’s Black Friday, Amazon tested out various price reductions on one popular, $350 Samsung TV. But on Black Friday, Amazon dropped the price to $250, far below rival prices.
But HD cables often purchased along with a new HDTV were actually priced higher than the competition by Amazon, Boomerang found, because they were not the most popular product in their category. Analysis says this price hike was due to the fact that an unpopular product’s pricing will not have much impact on consumers’ overall perception of Amazon pricing habits.
“Amazon may not actually be the lowest-priced seller of a particular product in any given season,” Boomerang’s report reads, “but its consistently low prices on the highest-viewed and best-selling items drive a perception among consumers that Amazon has the best prices overall – even better than Wal-Mart.”