Sunday Times exaggerates price gauging on Amazon

It has been many months since last posting on this blog due to being engaged in setting up a small business after many years working as a management accountant, mostly in manufacturing. For the first time this year I purchased the Sunday Times. What caught my attention was an article “Amazon sellers rolling in dough from flour crisis“. As my speciality was product costing I noticed a few inaccuracies and exaggerations.

Sunday Times article from page 6 of print edition 03/05/20


The first issue was on the fees.

Amazon sells many products directly to consumers but more than half of its sales are from third-party sellers on its “Marketplace”. They pay fees to the online giant of up to 15% of the sale price.

The fees at least 15% of the sale price. This is if the seller despatches for themselves, incurring the cost of postage and packing.

Let us take an example of the price rises.

A packet of 45 rolls of Andrex lavatory roll rose from under £24 to more than £95.

For somebody purchasing from Amazon with prime, they will get free postage on purchases over £20. So they can get 45 rolls delivered for about the standard price in a supermarket of 5 x 9 roll packs at £4.50 each. Using an third party app (which might not be accurate) for the Classic Clean Andrex, I find that third party sellers were selling at £23.45 up to March 8 when stocks ran out. Further Amazon were selling for about 3 days at £18.28 until Sunday March 8, when they also ran out. Apart from on Fri Mar 13 Amazon did not have supplies until late April. It was during this period that 3rd party sellers were selling at between £50 & £99.99. Any items offered for sale sold very quickly.

Now suppose an enterprising individual managed to grab some Andrex from a wholesaler (est. £15 inc. VAT) and list them for sale on Amazon. How much would they make? If they already had an account (cost about £30 per month) they could despatch themselves. They would need a large box (at least 45 x 45 x 35 cm) which they might be able to buy for under £30 for a pack of 15. They would have to pay postage. It is £20.45 at the Post Office. If anyone can find a carrier (for 6.5kg) cheaper than £12, including insurance and pick up, please let me know in the comments. If the selling at £50, the costs would be at least £7.50 + £15 + £2 + £12 = £36.50. To make a quick buck it is a lot of work.

This is, however, a bad example. Let us try a much lower weight product. The classic Uno Card Game, that the Sunday Times claims was listed at £5.60 on March 1st and £5.60-£17.99 on April 30th. This compares with £7.00 at Argos & Sainsbury’s and £6.97 at Asda. The inaccuracy here is with the range of prices, as there were multiple sellers on both dates, with £5.60 being the price sold by Amazon themselves. Actual selling prices fluctuate during March and this evening the prices are between £5.49 and £17.99. It is usually the case with popular products that there are multiple sellers. During March and April Amazon were out of stock, with actual selling prices between £4.99 and £19.00. Most often it was in the range of £9.00-£11.50.

A final example from the Sunday Times is for Carex Handwash Sensitive 250ml. As an antibacterial product, as soon as the Government recommended frequent hand washing the product sold out in supermarkets. As such it was ripe for making super-profits dueing the period of panic buying. This product used to be frequently available at £1 or slightly more. The Sunday Times lists the Amazon price at £1.99 on March 1st and at £5.98-£11.50 on April 30th. My App shows a single seller at £7.99, with the March 1st price of £3.25. The Sunday Times have probably picked up a different listing that is no longer available. The best value Carex antibacterial at the time of writing appears to be this listing for 2 x 250ml, where the price ranges from £9.49 to £13.16 including delivery. Selling at around £3.64 prior to March, the selling price peaked at around £32.99 in mid-March.

Whilst the Sunday Times article may not have the best examples, it does highlight that some people have made extraordinary profits by either being in the right place at the right time, or by quickly reacting to changing market information and anticipating the irrational panic buying of many shoppers. Here the problem is not with entrepreneurs meeting demand, but with consumers listening to the fearmongers in the media and social media believing that a pandemic “shutdown” would stop the movement of goods, along with a cultural ignorance of the ability of markets to rapidly respond to new information. In the supermarkets shelves many needlessly emptied shelves. Much of the fresh food bought in panic was binned. Further, many households will not be purchasing any more rice, tinned tomatoes and toilet rolls for many months. Since then there has been an extraordinary response by suppliers and supermarkets in filling the shortages. The slowest responses to shortages have been where the state is the dominant purchaser or the monopoly supplier and purchaser. The former is in the area of PPE, and the latter in the area of coronovirus testing.

Finally, there is a puzzle as to why there is such a range of prices available for an item on Amazon. A reason is that many of the the high-priced sellers were competitive, but the price has fallen dramtically. Another is that the higher-priced sellers are either hoping people make a mistake, or have “shops” on Amazon, that lure people in with low price products and hope they occassionally buy other, over-priced products. Like the old-fashinoned supermarket loss-leaders, but on steroids. Alternatively they may have the products listed elsewhere (e.g. actual shops or on Ebay) and/or a range of products with the extraordinary profits of the few offsetting the long-term write-offs of the many. There is the possibility that these hopefuls will be the future failures, as will be the majority of entrepreneurial ventures in any field.

Kevin Marshall

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