The View from England

The end of automated Amazon repricing?

We all know of Black Friday and the sale prices offered on that day to kickstart holiday sales. But the repricing software Repricer Express created an entire new meaning to Christmas sales. For about an hour on Friday, December 12, this software mistakenly reduced the sales price of thousands on items on Amazon to 1 penny. The software is meant to be safe. It is meant to never price an item at lower than the minimum price set by the seller. Somehow, this safeguard was ignored.

This error has left the affected retailers in a difficult position. For those who do their own fulfillment, the choice is obvious: Cancel the order. Amazon has said that it will not penalize any retailer who cancels such orders. From this we have to assume that Amazon will not count the cancellations as part of the 2.5 percent pre-fulfillment cancellation limit and it will remove any negative feedback on such orders. Since Amazon uses automated processes to do this, however, it may be that it will penalize the retailers initially and then remove the penalties on appeal.

It cannot be easy for Amazon to change these processes overnight. Thus these retailers may suffer a suspension of selling for a few hours whilst their appeal is being processed. This is not good news for the retailers over this hectic holiday sales period.

The real problems lie with the Fulfillment by Amazon merchants. For a long time these merchants have had the easy life. These merchants have been relying on Amazon for fulfillment and customer service. They have also relied on third-party repricing programs to set prices. Now they have been caught big time.

Since they have no control over the fulfillment process, they do not necessarily see and review all their orders. I wonder how many even noticed a problem during the brief hour whilst their stock was effectively given away? I have seen reports of sellers saying that their entire stock was wiped out in that hour. Some have contacted Amazon, begging Amazon to cancel the orders and not sending the stock out. I have heard that many orders have been cancelled. I have also heard that the priority orders and the two-day orders have not been cancelled and have been shipped. We will soon find out what the immediate damage has been. Some smaller companies may well go bankrupt over this. Others will be hurting badly but will likely survive.

In the longer term, it will be interesting to see what effect this will have on the Amazon marketplace. It is difficult to see how Repricer Express will survive this. But it is not the only repricing tool. This disaster has likely affected merchants’ confidence with all such tools. It could also damage merchants’ confidence in using Fulfillment by Amazon. After all, the merchants using FBA have suffered the most from this error.

The business model most affected by this is the retailer that holds no stock in-house, employs few people, uses Fulfillment by Amazon to do all the work, and use re-pricers to do all of its thinking. These retailers are not very popular with other Amazon sellers, who view them as driving prices down. However they are popular with Amazon’s consumers, for the same reason.

In the future, some of these retailers will likely choose to do manual pricing. This may slow down the price drops and might even improve the pricing competition and result in more intelligent re-pricing of fast moving items.

Others may move away from Fulfillment by Amazon and either do their own warehousing and shipping, or find alternative fulfillment companies.

The bad publicity arising from this may also prompt changes at Amazon. It is possible (but unlikely) that Amazon will stop the use of repricing software. This would be good for specialist retailers, but a disaster for the mega sellers with millions of items. I would be surprised if Amazon did something that would upset these giant retailers.

Amazon may, however, change the rules. Amazon has recently introduced minimum and maximum price fields. Amazon may prohibit any re-pricer from touching these fields — insisting that only sellers can access the fields. Thus Amazon will be seen as protecting its sellers. I wonder if Amazon will go a step further, by releasing its own repricing software and using these fields itself. If Amazon were to do this, it could wipe out the third-party repricing companies.

Once the dust has settled and we find out the true scale of the problem, we may see a change in the entire Amazon marketplace. It is possible that this disaster for some merchants will ultimately be fantastic news for others.

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