News

Amazon sellers playing hardball

July 9, 2012

Amazon's two million sellers are increasingly using high-speed trading tools to undercut one another, causing prices to fluctuate as often as every 15 minutes, according to Financial Times. Some of these tools were designed by stock market pros, others originated in the banking industry. The trend is known as "robo-pricing" and has created tension between Amazon and its clients because although Amazon sellers can use software to set rules to ensure their prices are always lower than their rivals', Amazon still has access to their sales information, and more experience when it comes to data mining.

The tools, according to the story, create the risk of malfunctions similar to the 2010 flash crash, when algo-trading was blamed for some U.S. stock prices falling to near zero, then rebounding in 20 minutes.

Also, some sellers have created dummy accounts with super-low prices, pulling down the prices of rivals. The practice allows them to corner a market, but it violates Amazon's rules of conduct.

Jack Sheng of eForCity told Finanical Times that the interaction of algorithms could trigger dangerous downward spirals.

"If something is mispriced down to $1, your inventory can be cleaned out in no time," he said.

Read more about online retailing.