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How Does Amazon Dynamic Pricing Work?

By Tami Ben-David December 22, 2014
How Does Amazon Dynamic Pricing Work?
About the Author

A British ex-pat, Tami been writing and content-strategizing for Israeli tech start-ups for the last 5 years. When she's not writing nerdy content, you can find Tami on open water charity swims or traveling to far-flung countries.

Dynamic pricing is a blanket term for any shopping experience where the price of an item fluctuates based on current market conditions.

On Amazon, as well multiple other marketplaces, eCommerce stores, and sales-related businesses, dynamic pricing is utilized by retailers to optimize product prices.

Dynamic Pricing Explained

Dynamic repricing creates flexible prices depending on many different variables. A retailer might change the price of an item based on consumer demand, price fluctuations at a competing retailer, or even the time of day and weather conditions.

Although dynamic pricing was utilized before the Internet?most notably within the realm of airline tickets?it was eCommerce that made it much more widespread.

What the Internet did was to break down doors in comparison shopping by allowing consumers to compare prices easily, which in turn drove prices down. Why get ripped off, when you can get a product for a better price somewhere else?

Advantages of Dynamic Pricing

The advantage of dynamic pricing is that it keeps the competition fair for everyone.

The customer benefits because they can easily price match between sites, as well as take advantage of dips in the market when they can purchase the item they want for a cheaper price.

The seller benefits because they can learn to adjust prices to maximize profits. Due to complex algorithms and fancy pricing solutions, a retailer can know exactly how much to increase revenue by in both high demand and low demand situations.

Amazon Dynamic Pricing for the Buyer

Dynamic pricing works in exactly the same way on Amazon. A buyer who is searching for item in the morning may see a different price to the price he sees when he searches in the evening. In addition, if he places the item in his shopping cart in the morning, and then that seller changes his price during the day, the price in the buyer?s cart will also change to match the seller?s new price.

Amazon themselves do have a policy of refunding buyers for certain items if their price has changed within seven days of purchase. For more information, click here.

Amazon Dynamic Pricing for the Seller

The Amazon seller too should take advantage of dynamic pricing. If he does not take into account seasonal changes, consumer demand, weather changes and so forth, he could end up missing out on profits.

While many sellers opt to constantly assess the market themselves and then change their prices manually, many other sellers (especially large volume ones), decide to employ the services of an algorithmic repricer to do this “work” for them.

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