Imagine you need batteries. You’re a modern consumer, so of course, you turn to Amazon to order them and have them delivered to you. When enter your search criteria, the site returns several options, and you click on 24-pack option offered by your preferred name brand, say, Energizer. But before you can put it in your cart, a pop-up message appears on screen, promising a lower price on a similar product—namely, private-label Amazon batteries. You can click to ignore that offer, or you can switch to it. What do you do?
Amazon is betting that, at the very least, you consider the cheaper option. It tested this prediction recently, in a limited experiment that imposed such pop-up ads on several product pages. Some of the affected products were national brands, like Energizer batteries and Glad trash bags. Others were offerings from smaller companies, like a sleep aid sold by a Canadian supplement company called Nested Naturals.
Asserting that the experiment was not a form of advertising, but rather an effort to determine the best way to help consumers find lower-priced offerings, Amazon carefully limited the span of the test to selected products and only some consumers. That is, some customers shopping for Energizer batteries might not have seen the pop-up window, while others did. In line with its reputation for closely guarding its strategic choices though, Amazon would not confirm how many brands were subjected to the experiment, how it chose which consumers would see the pop-up offerings, or whether touting the alternative had any effects on sales of the targeted products. It also claimed that not all the lower-priced options were Amazon-branded products, though without clarifying which other brands were featured in the pop-up windows.
For sellers on Amazon, the experiment likely appears somewhat threatening. Several national brand manufacturers declined to comment, but the CEO of Nested Naturals acknowledged concerns. The experiment implies that it will need to find a way to compete directly with Amazon, as both a retailing giant and its primary channel to reach customers. Noting that approximately 85 percent of its sales came through Amazon, the executive cited the company’s “stomach of steel” when it came to working with Amazon. It has little choice but to continue selling through the site, so it must put up with such “sneaky” tactics.
Other tactics and tests have raised similar concerns. For example, Amazon ran a short-lived test of some sponsored advertisements on registries that appeared as if consumers had selected certain items to request for their baby or wedding shower. The settings made it nearly impossible to determine if expectant parents were actually requesting that their friends purchase large diaper packages or if the promotion was sponsored by Kimberly Clark.
Overall, these tests and experiments reinforce Amazon’s existing reputation: It is an innovative retailer, willing to try lots of different things to meet its customers’ needs more effectively. It also is an aggressive competitor, willing to leverage the power it wields over the suppliers that appear on its site to ensure it dominates them, even as they continue to need it.
1. What is Amazon doing to compete with branded manufacturers that also sell their products on its site?
2. Is this strategy ethically defensible?
3. What should these name brand manufacturers and sellers do about it?
Source: Jay Green, “Amazon Tests Pop-Up Feature Touting Its Lower-Priced Products,” The Wall Street Journal, March 15, 2019