Price adjustments have long been a popular tool in the retail industry to attract customers and ensure they feel confident they got the best deal. With a price adjustment policy, shoppers can receive a refund for the difference if an item they recently purchased goes on sale. It‘s an attractive proposition for customers – who wouldn‘t want to guarantee they‘ll always get the lowest price, even if they buy just before a promotional event?
However, in the digital age, price adjustments have started disappearing as retailers struggle to keep up with the fast-paced world of e-commerce and dynamic online pricing. One of the pioneers of this new approach to pricing is Amazon, the world‘s largest online retailer. Despite its massive success, Amazon notably does not offer price adjustments in the traditional sense.
So what‘s behind Amazon‘s unorthodox approach, and what does it mean for shoppers looking for the best deals? As an expert in the retail industry with decades of experience advocating for consumers, I‘ll share my insights on Amazon‘s pricing model and how you can still save big without price adjustments.
The Decline of Price Adjustments
First, it‘s important to understand just how much price adjustment policies have changed in recent years. In 2017, a study by consulting firm BDO found that 56% of retailers offered price matching and adjustment policies, down from 68% in 2016. By 2019, research from Salesforce showed that only 33% of retailers had a price adjustment policy.
This trend is even more stark among online-only retailers like Amazon. A 2018 survey by Retail Dive revealed that just 3.4% of e-commerce retailers offered price adjustments, compared to 36.2% of traditional brick-and-mortar retailers. Clearly, price adjustments are going out of fashion fast, especially among digitally-native brands.
So what happened? According to Marshal Cohen, chief retail analyst at NPD Group, the shift away from price adjustments is due to the incredibly competitive and fast-moving nature of online retail. "Retailers are realizing that in today‘s transparent world of pricing, where consumers can easily compare prices across multiple retailers with a few clicks, price adjustments are becoming increasingly difficult to manage and can eat away at already thin margins," Cohen explains.
The rise of algorithmic pricing engines that constantly adjust prices based on supply, demand, and competition is another factor making price adjustments less feasible. "We‘re seeing more retailers adopt dynamic pricing strategies, where prices can change multiple times throughout the day," says Meaghan Werle, an analyst at Kantar Retail. "In that environment, price adjustments just aren‘t practical."
Inside Amazon‘s High-Tech Pricing Model
Perhaps no retailer has embraced dynamic pricing as aggressively as Amazon. The company completely forgoes price adjustments, instead relying on complex algorithms to automatically match or beat competitors‘ prices in real time.
Amazon‘s pricing engine, which is powered by cutting-edge AI and machine learning, ingests massive amounts of data to determine the ideal price for every product at any given time. It factors in variables like the cost of goods, historical pricing data, competitor prices, expected profit margins, consumer demand forecasts, and more.
The algorithm is remarkably nimble and responsive to market conditions – Amazon changes product prices an astonishing 2.5 million times per day on average, according to a report by Profitero. That means prices are updated every 10 minutes on average, though some items can change prices even more frequently. For example, one analysis found that the price of a microSD memory card changed 8 times in a single day!
While such constant price fluctuations may seem dizzying to shoppers, the end result is almost always lower prices. By dynamically adjusting to match or undercut competitors, Amazon ensures its prices are extremely competitive across the board. In fact, a study by Profitero found that Amazon had the lowest prices on 94% of the top 100 best-selling items compared to other major online retailers.
"Amazon‘s dynamic pricing strategy benefits consumers by making sure they‘re always getting a great price without having to comparison shop or wait for a sale," says Sarah Hofstetter, president of Profitero. "Shoppers can feel confident that Amazon‘s prices are as low as or lower than competitors‘ prices nearly all the time."
Potential Pitfalls of Dynamic Pricing
However, some consumer advocates argue that the lack of price adjustments, coupled with constant price fluctuations, can actually harm some customers. For example, a shopper who carefully budgets for a $300 TV might be frustrated to see the price drop to $250 just a few days after their purchase, with no way to get refunded the difference.
There have also been concerns about the potential for dynamic pricing algorithms to enable price discrimination, where different shoppers see different prices for the same item based on factors like their location, browsing history, and past purchases. A 2016 investigation by Consumer Reports found several examples of Amazon showing higher prices to certain users based on their zip code.
Amazon has denied using individual customer data to personalize prices, and there‘s no evidence of the practice being widespread. However, some consumer protection groups have called for increased regulation and transparency around e-commerce pricing practices.
Another potential downside of Amazon‘s dynamic pricing model is that it can result in rapidly fluctuating prices that make it difficult for shoppers to know when they‘re getting a good deal. "Prices can change so quickly that it‘s nearly impossible for the average consumer to keep up," says Edgar Dworsky, founder of Consumer World. "You might think you‘re buying at a low price, only to see it drop even further a few hours later."
Amazon‘s Price Matching Policy
While Amazon doesn‘t offer price adjustments per se, it does have a limited price matching policy. If you find a lower price on an identical item at select other major online retailers like Walmart.com, Jet.com, BestBuy.com, or Target.com, Amazon will match the price.
However, there are some significant caveats to Amazon‘s price matching policy. It only applies to items sold and shipped directly by Amazon, excluding third-party marketplace sellers. Amazon also doesn‘t price match against physical retail stores, discount sites like Overstock.com, or online marketplaces like eBay.
Perhaps most significantly, Amazon‘s price matching policy doesn‘t apply retroactively to past purchases. So if you buy an item from Amazon and then find a lower price on an approved competitor‘s site, you can‘t get refunded the difference like you could with a traditional price adjustment policy. You can, however, return the item and repurchase it at the lower price if it‘s within Amazon‘s return window.
While Amazon‘s price matching policy is a nice perk, it likely doesn‘t factor into most customers‘ buying decisions, given the company‘s algorithm almost always has the lowest prices to begin with. "Amazon‘s price matching is more of a symbolic gesture than a practical benefit for most shoppers," says Sucharita Kodali, an e-commerce analyst at Forrester Research. "The vast majority of the time, you won‘t find a lower price to price match anyway."
Savvy Strategies for Saving on Amazon
So if price adjustments are off the table, how can deal-seeking shoppers maximize their savings on Amazon? Here are a few expert tips:
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Keep an eye out for Lightning Deals, which offer deep discounts on limited quantities of popular items for a short time. These deals are especially abundant during major sales events like Prime Day, Black Friday, and Cyber Monday.
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Check the Today‘s Deals page regularly for a curated selection of the day‘s best bargains across all categories. You can also subscribe to the deals newsletter to get a daily digest of top deals delivered to your inbox.
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Use Amazon Coupons to save even more on top of sale prices. You can find coupons on individual product pages, or browse the dedicated coupons page for a full list of current offers. Some coupons are automatically applied at checkout, while others require a single click to clip the coupon.
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If you missed a great price on an item, use a price tracking tool like CamelCamelCamel to set up alerts for future price drops. You can see an item‘s price history over time to get a sense of whether the current price is a good deal.
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Consider buying items from Amazon Warehouse, which offers deep discounts on open-box and gently used items that have been returned by other customers. These items are inspected and graded by Amazon to ensure they‘re in good condition.
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Look for items that are eligible for Subscribe & Save, which offers a 5-15% discount on recurring deliveries of household essentials like toilet paper, pet food, and snacks. You can cancel or modify your subscriptions at any time.
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Don‘t assume Amazon always has the lowest prices, especially for specialized or high-end items. Use a price comparison tool or browser extension to quickly check prices across multiple online retailers before making a purchase.
By combining these strategies, savvy shoppers can save significant money on Amazon purchases, even without a price adjustment policy. It may require a bit more research and vigilance, but the savings can add up quickly.
The Bottom Line
Amazon‘s approach to pricing is a prime example of how technology is rapidly transforming the retail industry. By leveraging big data, AI, and dynamic pricing algorithms, Amazon can offer consistently low prices and remain nimble in a hyper-competitive e-commerce landscape.
While the lack of a traditional price adjustment policy may be frustrating for some shoppers, it‘s clear that Amazon‘s tech-driven approach is resonating with customers. The company continues to dominate online retail, with over 100 million Prime members in the U.S. alone.
As an expert in retail and consumer behavior, my view is that the benefits of Amazon‘s pricing model outweigh the drawbacks for most shoppers. While there are valid concerns about the potential for price discrimination and the psychological impact of constant price fluctuations, the vast majority of Amazon customers are getting extremely competitive prices on a massive selection of products delivered with unparalleled convenience.
If you‘re willing to put in a bit of extra effort to track prices, compare deals, and take advantage of promotions, you can still save a huge amount of money on Amazon without a formal price adjustment policy. Ultimately, it‘s up to each individual shopper to decide whether Amazon‘s approach aligns with their priorities and preferences.
As an industry watcher, I‘ll be closely monitoring how other retailers respond to Amazon‘s influence and whether price adjustments continue to fade away in the years to come. One thing is certain: the retail landscape is undergoing a massive shift, and companies will need to leverage every tool and technology at their disposal to stay competitive and meet the ever-evolving needs of consumers.
