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thanks for watching tech wiki click the subscribe button and enable

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notifications with the bell icon so you won't miss any future videos did you

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ever set up a lemonade stand during the summer and come to the realization that

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you might sell more lemonade if you knock a bit off the price in the evening

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when it isn't quite so sweltering hot assuming that is that the cops didn't

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shut you down for the heinous crime of selling flavored water without a permit

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well if so congratulations you essentially did the same thing that

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amazon does every day obvious they do it

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on a much bigger scale now the exact

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formulas are treated as closely guarded trade secrets so we're gonna be relying

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on some pretty good third-party analysis of the sophisticated mechanisms that

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Amazon uses to make millions of changes

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per day to the pricing of the items on its site and some individual items even

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get more than one price change in a single day first up obviously Amazon

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sometimes raises prices when items are in high demand that's simple enough to

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track through orders and pageviews but their whole strategy is far more nuanced

17
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on super popular items that sell like hotcakes Amazon's algorithms keep an eye

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on what they're selling for on other sites and then tweak the price to

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undercut the competition not only does

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this lead to more sales of that specific item but it has some great ancillary

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benefits for Amazon as well one is because Amazon has used this tactic for

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such a long time they've cemented themselves in the minds of many

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consumers as the place to go for the best deals dramatically increasing site

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traffic and once the customer has been trained to not bother to look elsewhere

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Amazon can then strategically increase

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the price of items that a customer might want to order together for example if

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it's summer you might find a great deal on a grill but things like spatulas and

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brushes and cheesy novelty aprons might

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actually be more expensive on Amazon as the algorithm figures that people would

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rather simplify their lives by shopping in one place rather than spend time

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looking around to save a few bucks on their propane and propane accessories

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it's Amazon's mostly online presence

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that allows them the flexibility to make these kinds of changes on the fly stores

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that have both online shops and brick-and-mortar retail locations like

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Best Buy or Walmart simply don't have the resources to adjust prices so

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aggressively can you imagine being the guy who has to change all those little

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price stickers every hour all day Amazon

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also uses complex algorithms to determine which price you'll see when

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there are multiple sellers for an item through Amazon Marketplace their service

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that allows third parties to list items on their site now as you can imagine

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Amazon generally gives preference to products its selling directly but the

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algorithm also considers how much more expensive one seller is than another how

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highly rated and popular the seller is how often the seller generates returns

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and whether Amazon itself handles the

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shipping they consider all that before showing you a price which attempts to

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draw you in by offering a cheap deal from a reputable seller of course as

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much computing muscle as Amazon has to crunch all these numbers that doesn't

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mean that they've totally mastered the art of perfect pricing on over a half

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billion items for example they famously listed a used textbook for 23 million

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dollars back in 2011 although come to

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think of it looking at the prices at the campus bookstore lately that might not

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actually be that far off what are you looking for something that isn't

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