Amazon drives prices down two ways:
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By using its enormous purchasing power to negotiate unbeatable discounts with manufacturers, then pricing those goods at a level that drives competitors out of the market. In instances where manufacturers seek to implement Minimum Advertised Price policies, Amazon flagrantly disregards them.
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By encouraging cutthroat competition between independent sellers on the Amazon platform. This means that if I create a brand new listing on Amazon for a widget, and that widget sells well, Amazon will automatically send notifications to other sellers encouraging them to offer the same widget for sale on Amazon. These internet sellers have very low overhead, and will use automated tools called repricers to compete for the “Buy Box” on Amazon. Those repricers reduce a seller’s offer price until that seller has the lowest price. When no other sellers are active on a listing, the repricer will increase the item price to a preset ceiling that is usually unreasonable.
You can probably imagine the impact these techniques have on small local businesses, especially if they’re not savvy enough to sell online.
