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Amazon Defends Its Pricing Algorithm, But Leaves Out Billions in Sales

Earlier this week, we reported how Amazon often makes its products look like better deals than they actually are. When the website ranks products by price that are available from Amazon and other sellers, the company excludes the cost of shipping only on the products sold by Amazon and vendors that pay the company.

Amazon has long described itself as “Earth’s most customer-centric company.” But it declined to answer our questions about why the detailed Amazon’s product rankings excluded shipping costs only for itself and its paid partners.

A few hours after we published our story, we got a new statement from Amazon:

With Prime and Super Saver Shipping (which requires no membership and ships orders above $49 for free), the vast majority of our items ordered – 9 out of 10 – can ship for free. The sorting algorithms the article refers to are designed for that 90% of items ordered, where shipping costs do not apply.

Our story noted that the prices Amazon shows are ranked correctly for those who pay for Prime or buy enough to be eligible for free shipping. But the new statement is interesting for two reasons.

Amazon Says It Puts Customers First. But Its Pricing Algorithm Doesn’t.

Amazon bills itself as “Earth’s most customer-centric company.” Yet its algorithm is hiding the best deal from many customers. Read the story.

Assuming the figures from the company’s statement are correct, that means buyers are not being given a clear picture of prices on 10 percent of items sold. Since Amazon books more $100 billion in annual revenue, that likely adds up to billions of dollars in sales where customers are not shown the best deal.

The other interesting thing is that Amazon’s statement says its “sorting algorithm” is designed to be relevant only to orders where “shipping costs do not apply.” Amazon’s own website appears to contradict that. Here’s how Amazon describes how it ranks products among multiple vendors: “The default sort order of the offer listing is ascending Price + Shipping.”

We just asked Amazon about that, and a spokesman responded, “There is no disparity. Offers are listed in ascending order, Price + Shipping, and where shipping can be free, either through Prime or Super Saver Shipping, that offer is listed accordingly.”

Julia Angwin contributed reporting to this story.

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