Amazon.com, Inc. (NASDAQ:AMZN) was criticized on Monday following a report from ProPublica claiming that the company’s algorithm favors its products as well as merchants who pay shipping services.
The report claims that Amazon focuses more on its own products as well as for the prime members even if other traders sell the same products on the website at the same price or at a lower price. The ProPublica article stated that the company’s strategy hurts shoppers because most of them end up paying extra at the checkout. The article also states that this action goes against the company’s philosophy of making sure that the customer is the priority.
The company is currently being criticized as to whether it has been trying to make marginal gains by pushing customers to purchase more expensive products. Amazon went on the defense claiming that it ranks items based on the data that it acquires from customers on its retail website as well as their buying habits. Amazon Spokesman Erik Fairleigh pointed out in a statement that the algorithm that chooses the items that go into the “buy box” also deals with numerous other factors beyond the price.
“Customers trust Amazon to have great prices, but that’s not all— vast selection, world-class customer service and fast, free delivery are critically important.”
The claims from the publication suggest that Amazon has been favoring products sold through the “Fulfilled by Amazon” program which allows sellers to use Amazon to ship their products. The company’s price comparison tool also favors prime members who pay the annual fee of $99. The customers receive a discount worth $49. Amazon’s statement claims that the algorithm only works with items where shipping costs do not apply. Traci Gregorski, Senior Vice President of Marketing at Market Track, a Chicago based retail analysis firm, told critics that the program is focused on offering convenience.
“Amazon has done a great job of building loyal customers that are largely looking for convenience.”
Amazon Stock closed the latest trading session at $789.74, an improvement of $9.52 or 1.22% compared to the value of the stock in the previous session. The stock had a trading volume of 2.72 million shares.