SAN FRANCISCO — The 48% of Amazon customers who don't subscribe to its Prime service may not always be shown the lowest price for products unless they do careful research on the site.
An investigation by the nonprofit news organization ProPublica, published Tuesday, found that Amazon's price comparison pages favored goods that were either sold by Amazon or through Amazon's program for sellers who pay the company to warehouse and ship their products, called "Fulfilled by Amazon."
Amazon's price comparison tool works for Prime members, most of whom who pay $99 a year for free shipping and a host of other perks, and for people ordering over $49 worth of products who get free shipping.
But for the rest of Amazon's customers, Amazon's price comparison ranking doesn't necessarily result in the lowest prices coming up first, making it necessary to laboriously drill down into the search results to get the best deals, ProPublica found.
ProPublica analyzed 250 commonly bought products over several weeks, watching to see which were placed in the “buy box,” the highlighted, clickable box that appears at the top of an Amazon product search page. The study found that about 75% of the time, Amazon products or those sold by companies that paid Amazon to store and fulfill their orders were in that top slot, even if cheaper options were available from other sellers.
For non-Prime customers with orders under $49, finding the best prices was possible but involved clicking through on multiple options to do true cost comparison.
That's because the rankings displayed on Amazon's price-comparison pages show full price (cost + shipping) for items sold by third-party merchants.
But the price of items from Amazon or third-party merchants who are part of Fulfilled by Amazon are ranked without the cost of shipping included. That makes them look like better deals than they actually may be for non-Prime members who are ordering less than $49 in merchandise, ProPublica found.
In a statement, Amazon said its sorting algorithms are designed for items where shipping costs do not apply. The company said that about 90% of items ordered on its site don't have shipping costs because they're either ordered by Prime members or by people using Super Saver Shipping, which requires no membership and ships orders above $49 for free.
Amazon Prime has 63 million members in the United States, according to a study by Consumer Intelligence Research Partners. That puts it in about half of the United States' 124.5 million households. Prime members also make up 52% of Amazon's customers, Consumer Intelligence found.
Prime members are much more profitable for the company, despite getting free shipping. They spend on average about $1,200 per year, compared to about $500 per year for non-members, according to CIRP.
The difference makes sense given Amazon's focus on offering convenience and also on getting customers into its highly lucrative Prime member program, said Traci Gregorski, senior vice President of marketing at Market Track, a research firm that helps retailers with pricing and advertising strategies.
"Amazon has done a great job of building loyal customers that are largely looking for convenience," she said.
Prime customers are less likely to dig around on the site comparing prices, so it's reasonable that Amazon would place its merchandise in an easily accessible position for those looking for Prime listings.
The system also encourages the behavior of signing up for Prime to eliminate shipping costs, she said.