As the coronavirus pandemic continues to spread, people are stocking up on food, hand sanitizer, toilet paper, and other supplies. As most people know, these products, which are not only hard to find but also considered as "essential goods" in the current times that we are going through, can also be found for sale online on Amazon as well as other e-commerce retailers.
However, Amazon is subject to scrutiny for the way its users have been turning its marketplaces into a massive price gouging playground.
What is price gouging?
For those who aren't familiar with price gouging, it's a term for a seller pricing much higher than is considered reasonable or fair. It can also refer either to prices obtained by practices inconsistent within a competitive free market, or to windfall profits.
Basically, price gouging refers to violating Amazon's Fair Pricing Policy (FPP).
How to avoid price gouging on Amazon?
Sellers are responsible for setting their own prices on Amazon marketplaces. Amazon regularly monitors the prices of items sold on its platform, including shipping costs, and compares them with other prices available to customers. Remember that Amazon's ultimate goal is to satisfy customers with the largest selection at the lowest price, and with the fastest delivery.
If Amazon sees pricing practices that harms customer trust, it can remove the Buy Box, the offer, suspend the shipping option, or, in serious or repeated cases, suspend or terminate a seller's account.
Amazon states that its pricing practices that harm customer trust include, but are not limited to:
- Setting a reference price on a product or service that misleads customers.
- Setting a price on a product or service that is significantly higher than recent prices offered on or off Amazon.
- Selling multiple units of a product for more per unit than that of a single unit of the same product.
- Setting a shipping fee on a product that is excessive. Amazon considers current public carrier rates, reasonable handling charges, as well as buyer perception when determining whether a shipping price violated its fair pricing policy.
Which items are overpriced on Amazon?
Over the last month and a half, nearly 3,900 merchants on Amazon have had their accounts suspended for what the e-commerce platform called "seeking to profit off the COVID-19 crisis" in a recent statement on its Sellers Central forum.
Also, more than over half a million offers have been taken off for violating Amazon's fair pricing policies, the retailer said.
"Amazon strictly prohibits sellers from exploiting an emergency by charging excessively high prices on products and shipping," the company said in a blog post. "We have deployed a dedicated team that's working continuously to identify and investigate unfairly priced products that are now in high demand, such as protective masks and hand sanitizer," the company added.
Face masks were being sold for as much as five times their average price, while one merchant was forced to donate over 17,000 bottles of hand sanitizer after being banned by Amazon for selling each bottle between $8 and $70, according to the NYT.
Other examples include a digital thermometer, which was sold for $27 but had an average price of $17.99 over the last 180 days. Some N95 masks were sold for $239, or $3.98 per mask, compared with a normal price of $1 per mask. Toilet paper was sold for $98 a box, nearly three times its normal price.
What’s Amazon’s response ?
The message is clear: Amazon's reaction to its sellers and items violating its FPP policy has been strong as the e-commerce giant vows to continue vetting on its marketplaces. Overpriced items will be removed along with the owners account suspension.
Amazon will also keep an eye out on its marketplaces for the use of false advertising over the effectiveness of items that claim to cure or defend against the coronavirus (COVID-19).
“Amazon has always required sellers to provide accurate information on product detail pages and we remove those that violate our policies,” a spokesperson for the company said in a statement.
Amazon is also no longer accepting applications to sell products considered as "essential goods" such as face masks, gloves and hand sanitizers. The company has made its sellers aware of the new policy by sending the message below:
“You are receiving this message because you are currently selling, or have previously sold, products such as disposable face masks, hand sanitizers, disinfecting wipes/sprays, isopropyl alcohol, or related products. We have implemented more stringent requirements to sell these products in our store, and as a result, your offers have been removed. We are not accepting applications to sell these products at this time.”
3 Tips to avoid account suspension
In a bid to avoid being sucked into Amazon's crack down, here's a list of advice for vendors and sellers:
- Even if the chances of getting your account suspended by Amazon are low and only for extreme reasons. We recommend to think about the long run and to ask yourself if it's worth risking your entire business for gauging the price of your product. Play within the rules of Amazon to keep your business striving, even during these tough times!
- Set realistic minimum (floor prices) and maximum (ceiling prices) to avoid price gouging on Amazon, there are multiple price tracker options available online to get the history of product pages.
- If you’re selling medical supplies and cleaning products that could be considered necessary for the public to use in order to help treat COVID-19, spend time coming up with the right max prices, just as you would with your min prices. Min prices will protect your profit margins and max prices will protect you from accusations of price gouging and possible Amazon account suspension.
Marketing Expert & eCommerce enthusiast writing content to help brands better navigate the Amazon ecosystem.