The Beauty of the Amazon Buy Box
Hate Amazon because it rules in price? Actually, it's worse than that. It's the king of customer experience, too.
Brick-and-mortar retailers and online sellers all hate Amazon, but they all hate Amazon for the wrong reason. They think it's because of the bargain basement prices that force them to slash their own margins. The real truth, however, is harder to swallow. While enlightened businesses have come to agree that they could triumph if only they could get customer experience (CX) right, Amazon is the one who has. Here's proof.
If you type “Lego Darth Vader” into the search bar on Amazon today, the top item to appear will be a Lego Darth Vader Minifigure with a Lightsaber. Now here's a pop quiz: Why did that particular item land in the top spot instead of the nearly identical Darth below it, or the Darth Lego Kids Watch below that, or the hundreds of cute little Nazi-helmeted figures below that? Because it's sold by Amazon's retail unit? Nope. Click on it and you'll see it's sold by an outfit called Brick Dudes. It's the cheapest, you say? No again. Look to the right of the large display offer for Brick Dudes and you'll see listed two other sellers of the same item, both with prices below Brick Dudes' $19.99.
The correct answer is that Brick Dudes won the Buy Box competition for that category. The Buy Box is the top spot for an item on any selling page in Amazon, the equivalent of the store window at Macy's or the end-cap display at Kroger's. Anyone can obtain those much-desired placements, as long as they're willing to pay the equivalent of the price of a Mercedes S-Class Sedan. But on Amazon it's the seller that treats the buyers the best that wins the placement. The “How the Buy Box Works” page on Amazon explains that “If more than one eligible seller offers a product, they may compete for the Buy Box for that product. To give customers the best possible shopping experience, sellers must meet performance-based requirements to be eligible to compete for Buy Box placement.”
Doesn't it gall you that the killer e-com you love to hate is so egalitarian?
While Amazon explains in three simple sentences how the Buy Box works, the algorithm behind it is more complex, rating in real time such factors as price, of course, but also shipping proficiency, inventory status, and most important, numbers of positive reviews. The principal reason that Brick Dudes won the Box over runner-up Brick Takeover Germany despite a $2 higher price is that the Dudes had a 100% positive rating based on 2,600 reviews and Takeover had a 97% rating based on much fewer than that.
Here's the real beauty of the Buy Box system: Not only does it ensure Amazon of some 24-carat CX on the part of hard-to-control, third-party merchants, but sophisticated sellers can finesse the game to grab hold of the top spot while charging the highest possible price it can to remain there.
“We change our customers' prices 100 times a day per item. Not only are they at the top of the page, but they're at the top at higher prices than competitors,”says Shmuli Goldberg, director of marketing for Feedvisor, an Israeli company that performs on-the-fly Amazon price optimization for a thousand-plus retail companies. “We'll look at a company that is selling something at $29 with 7-day delivery and has 95% positive ratings and determine that it can still hold the Buy Box if it charges 5 cents more. If its chief competitor runs out of inventory, we may raise it another quarter.”
Goldberg has worked in the Amazon sphere for several years and is an admirer of the hard line it's taken in customer experience. Amazon, which is also a retailer in its own marketplace, has the ability to put its own items in the Buy Box, but usually defers, he says, preferring to take its standard 15% cut on a third-party sale in favor of better customer ratings.
“Amazon worked something out which nobody else had picked up on before them,” Goldberg observes. “Forget the profit margins and sales numbers, I just want know the customer loves me more than anyone else. That's all that matters.”
Don't you just hate them?