Amazon’s Secret Algorithm Makes Price Gouging Look Like a Hobby
Amazon is known for having competitive pricing; however, it seems that they’ve tweaked more than a few knobs to put themselves ahead, including the use of their secret algorithm. According to Ars Technica, Amazon’s algorithm spiked prices across the internet, boosting their revenue by $1 billion – and that’s no small feat.
Unveiling Amazon’s Secret Algorithm
Amazon’s secret algorithm plays an infamous role in generating revenue for the company. It uses real-time databases and constantly updates them, identifying and monitoring competitors. It then adjusts their prices while boosting Amazon’s based on factors such as time of day, geographical locations, and much more. This algorithm provides Amazon with an almost unfair edge over its competitors.
The Revenue Generated by Price Spikes
Amazon’s extravagant pricing enabled it to rake in a massive $1 billion through the use of their algorithm. While this amount might seem insignificant compared to Amazon’s net revenue in the billions, it is still a hefty sum. Needless to say, this has bolstered Amazon’s position in the market by far, to the detriment of competitors.
Consumer and Regulatory Response
Amazon analysts have stated that price gouging is not synonymous with running a tight ship. There are concerns about how accurate this algorithm is and how it impacts customer behaviour. Where is the transparency? Is this isn’t going to spiral into a regulatory lockdown? There’s worry about whether algorithmic price manipulation can drive out competition and promote unfair competition. Moreover, what if there was a loophole in the system lying in the furthest corners of the net?
The Future of Algorithmic Pricing in E-commerce
Only time will tell if the algorithmic pricing used by Amazon and other companies will continue to be part of the e-commerce future. Besides the negative impact it has had on some customers, price spikes can stifle growth, shut down small businesses and prove unsustainable. Current calls to action show that innovation and technology, especially in tech will not hold still. Nonetheless, companies will continue to use different means to stay ahead of the curve. In the end, innovation will drive growth.
Conclusion
While Amazon continues to generate buzz with its secret algorithm, one can’t help but wonder whether it’s productive. In spite of the billions in revenue it’s garnered for the company, customers are crying foul play and raising valid concerns about price manipulation. One thing is definite; this should be a call to action for competitors to offer real-time competitive pricing, transparency and innovation to challenge the leading tech giant.