The High-Speed Trading Behind Your Amazon Purchase – WSJ (Mar 27, 2017)
This is a fascinating article looking into some of the mechanics behind how Amazon’s third-party sellers price their products on the site. I was actually aware of quite a bit of this already because I have a neighbor who runs a business which operates as a third-party seller on Amazon, and he’s told me a little of how his company operates. This piece only has a couple of examples, but in essence these sellers hunt down product categories where there’s room for price arbitrage by undercutting the current lowest price while still maintaining a margin. Suppliers in China will make many of the products cheaply enough to allow undercutting of the current top option on the site, and so there’s this constant hunt for the next product category with an opportunity for becoming the top seller by offering a lower price. It’s obviously great for Amazon and for its customers to have sellers competing so aggressively for business, because it brings down prices and raises sales, but Christopher argues in this piece that in some cases the same computerized models sometimes lead to price increases rather than just drops. Well worth a read of the whole thing.
via WSJ
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