Amazon’s dynamic pricing is causing chaos for school budgets

School districts are paying extra for basic supplies thanks to unpredictable dynamic pricing on Amazon, which is costing them on average 17 percent more, according to a report by the Institute for Local Self-Reliance (ILSR). As reported earlier by The Guardian, unlike the contracts schools and local governments would traditionally make with local suppliers, who would bid to offer the best rates, Amazon Business doesn’t guarantee locked-in prices, resulting in huge pricing swings. 

For instance, the report mentions an employee of the City of Boulder, Colorado, who purchased a 12-pack of Sharpie markers for $8.99, while an employee of the nearby Denver Public Schools was charged $28.63 for the same product on the same day. ILSR cites similar price fluctuations for Crayola markers, Kleenex tissues, Expo dry erase markers, Elmer’s school glue, and more. 

In a statement shared with The Verge, Amazon spokesperson Jessica Martin claimed ILSR’s report was “flawed and misleading,” stating, “Pricing research is notoriously difficult to conduct accurately and typically lacks reliable methodology, including cherry-picked product selections, mismatched product comparisons, and comparing in-stock items with products out-of-stock at competitors.”

ILSR takes issue with Amazon’s lack of transparency around how dynamic pricing changes are calculated by its algorithm, and what triggers different prices for different buyers. However, it seems like the more often an item is ordered, the more significant the price fluctuations can be. ILSR found that “among the 100 most frequently ordered products, the highest prices Amazon charged were, on average, 136 percent higher than the lowest.” 

As the report points out, Amazon Business has also reduced competition for these necessary school and office supplies, cutting down the number of independent suppliers from 1,300 to 900 over the past decade. A price comparison of commonly-purchased school supplies found that an independent supplier was able to beat Amazon’s prices on 68 percent of products. 

A separate study published last month by Profitero and highlighted by Amazon found that Amazon offers, on average, 14 percent lower prices than 23 other leading U.S. retailers. In the case of state and local governments, though, that doesn’t necessarily reflect lower prices that could have been negotiated with local independent suppliers, such as bulk discounts, especially compared with the peak prices from Amazon’s dynamic pricing.

Amazon spokesperson Jessica Martin:

This flawed and misleading report based on data from 2023 misrepresents the facts and does not reflect the significant cost savings Amazon Business provides customers by offering everyday low prices that meet or beat other online providers and powerful tools to lower their spend. Pricing research is notoriously difficult to conduct accurately and typically lacks reliable methodology, including cherry-picked product selections, mismatched product comparisons, and comparing in-stock items with products out-of-stock at competitors. Amazon Business offers customers price ceilings that ensure they don’t pay above an agreed price, while automatically capturing savings when prices are lower.

Update, December 4th: Added comment from Amazon spokesperson Jessica Martin.