Understanding Amazon's Buy Box:

How Amazon controls quality and competitiveness in the marketplace

It probably won't come as a shock to you that Amazon is ranked # 1 in the American Customer Satisfaction Index. In fact, among various other surveys, Amazon is almost always # 1. Only bested on rare occasion by the likes of L.L. Bean and Nordstrom. There's a good reason for that. The company is built on it's customer service. In an almost literal way. Jeff Bezos, the founder and CEO of Amazon is quoted as saying that "The most important single thing [for Amazon] is to obsessively focus on the customer". The same man is also quoted as saying "The best customer service is if the customer doesn't need to call you, doesn't need to talk to you. It just works." That last quote is what we're going to focus on moving forward. Hidden in that statement is the secret to Amazon's success and how we'll learn exactly what the Buy Box is and why it's so important.

Let's start with finding products on Amazon. At it's most basic, Amazon is just a search engine. Customers visit the site and perform searches using whatever terms come to mind in the same way they would if they were searching for something on Google. After hitting enter on the keyboard, they are presented with a list of products that match their search criteria. Products are listed automatically by their relevance to the search terms and the customer can then begin evaluating all of the products to figure out which best suits their needs. Products that are popular and selling well show up at the top of results. Products that are unpopular and selling poorly are found further down in the results. Seems simple, right? Conceptually, it is. In practice it's a little more complex.

Remember that quote about things just working? Bezos is talking about algorithms. Little pieces of computer code that tell the software how to behave based on some data point or triggering event. In the case of search, events are constantly occurring as the customer interacts with the site. The algorithm looks at each customer's profile, their purchase history, which listings they're viewing, etc. It's also adjusting for product sales ranks, reviews, customer comments, and more. The algorithm takes into account every data point that Amazon can measure and then it adjusts the customer's experience accordingly. All of this aimed at optimizing conversion rates (i.e. customer purchases). The algorithm's job, as a function of search, is to match the right product to the customer's inquiry. On the user level, the algorithms here operate with ease and intuition. As follows:

You type in search words.

The algorithm shows you products that match those search terms.

You select a product from your search.

And the algorithm then shows you that product and similar products others have either searched for or purchased.

And so on, and so on, as you the customer navigate the site.

Amazon makes it all seamless. The search engine is every bit as proficient as Google and with 353 million product offerings on Amazon, it's hard to believe that a customer would not be able to find a product that worked for their purposes. Let's move onto the product listing page and buy box now that we understand the basics of algorithms.

This is a product listing page. Each box is listed as follows from top left down and then top right down:

Product Name and Description

Product Price and Shipping Information

Current Seller (this is who owns the buy box)

Add to Cart or Buy Box

Other Sellers Section (this is for all other offers on the same product)

On any listing with multiple sellers there will be one seller that"owns" the buy box. Buy box ownership or "winning the buy box", as it is more frequently referred to, is the ultimate goal of every seller. That's because whatever seller is "in" the buy box when a customer clicks the add to cart button gets the sale. In order to deviate from the buy box seller a customer would have to click on the other product offers and select from a list of all available sellers. That is not a very likely scenario. Customers do not deviate. 82% of all sales on Amazon happen through the buy box. For the most part the other 18% can be attributed to categories like books which people are more likely to buy used (which requires them to review other seller info and condition ratings of products prior to purchase).

So how does one win the buy box. To explain that we'll have to get back to the algorithm and what factors it uses to make that determination. Before we go any further, however, you should know that what follows regarding the algorithm and how it works is just our best guess. We can't be sure because every bit of Amazon's algorithm is proprietary and has never been shared. Still, what follows is based on years of observation and when tested, it is fairly reliable and accurate.

It is also important to note that the buy box will continually rotate between all qualified sellers throughout the day. The most qualified sellers (those sellers that meet the algorithm's criteria) will receive more time in the buy box than others. Okay, let's look at what matters when determining the buy box. The algorithm uses a mix of all of the criteria below. Each item is listed by order of importance and are specific to each individual seller.

Fulfillment Method

Fulfillment method seems to carry the most weight when it comes to who is getting buy box time. There are 3 main fulfillment methods. These are Fulfilled by Merchant (FBM), Fulfilled by Amazon (FBA), and the newest is Seller Fulfilled Prime (SFP)

Using Fulfilled by Merchant, a seller will package a product and send it directly to the customer via their preferred method of shipping. Shipping costs and times are varied. The major downside here is that products cannot be offered via prime.

Using Fulfilled by Amazon, a seller will package product according to Amazon guidelines and will then ship the product to Amazon to be stored in an Amazon warehouse. Once Amazon receives the product they then handle all further logistics. Shipping, returns, etc. Products offered through FBA are also prime eligible and will always include free 2 day shipping.

FBA sellers have the advantage here and will consistently win the buy box over MF sellers.

Seller Fulfilled Prime is the latest introduction in fulfillment methods. SFP is essentially FBM with the ability to offer prime. Sellers must qualify for this by showing Amazon consistently strong performance metrics. SFP sellers will more consistently win the buy box than FBA but these sellers are far more rare due to the kind of requirements necessary to qualify.

Price

All things being equal, the lowest Prime offer price whether FBA or SFP almost always wins a higher percentage of buy box time. This causes all sorts of issues for sellers and brand owners but we'll save that discussion for another time.

Seller Rating/Feedback Score

This is the rating given to sellers by Amazon's customers. The seller's rating is measured on a moving average and it's important that each average be as high as possible. That said, the most recent feedback is the most significant. Seller's whose 30 day ratings drop below 98% positive feedback will see significant losses in buy box time.

Order Defect Rate

This is the amount of returns received by an individual seller. It is determined by the return rate of the seller's overall product catalog.

Customer Response Time

Customers are able to reach out to sellers through Amazon and when they do the seller needs to respond to them as quickly as possible. 12 hours or less seems to be the target for this.

Shipping Rates

Late shipment rate, on-time delivery rate, tracked delivery rate, and cancellation rate all play a factor here but only for merchant fulfilled orders. FBA is not subject to any of this as Amazon handles all logistics.

Inventory Depth

The seller maintains sufficient inventory to meet demand. In this instance, the higher the inventory the better.

Inventory Duration in Stock

Products are in stock consistently and rarely out of stock.

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Knowing all of that we come full circle to when we first quoted Mr. Bezos. "The most important single thing [for Amazon] is to obsessively focus on the customer". This is exactly what the buy box accomplishes. It focuses relentlessly on the customer in a way that humans cannot. Take another look at the algorithm's criteria for winning the buy box. These are all factors that play into customer satisfaction. Amazon pushes FBA and SFP because it knows that those fulfillment methods are consistent and tested. Deliver on time and keep the customer happy. Price? Well, I don't think I need to explain why a low price is good for the customer. A poor seller rating equals a poor seller and Amazon will not subject their customers to a poor customer service experience. The same goes with order defect rates and customer response times. Can't sell a quality product. See you later says Amazon's algorithm. Won't respond to our customers in a timely manner. No sales for you.

The buy box is more than a mechanism for sales. With an estimated 2 million third party sellers on the platform the buy box is a much needed gatekeeper that brings a consistent and convenient experience for Amazon customers. Each customer trusts that they will have a positive experience when they click add to cart. Instilling that trust is the algorithm's true job. The algorithm rewards the sellers that uphold the criteria that drives trust in the platform and it punishes the sellers that don't. The algorithm giveth and the algorithm taketh away. Just the way Amazon wants it.

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