The Amazon “stock market”

Just beneath the placid surface of a typical product page on Amazon lies an unseen world, a system where third-party vendors can sell products alongside Amazon’s own goods. It’s like a stock market, complete with day traders, code-slinging quants, artificial intelligence algorithms and, yes, flash crashes.

Amazon

Sellers of commodity items on Amazon are constantly monitoring and updating their prices, sometimes hundreds of thousands of times a day across thousands of items, says Mr. Kaziuk nas. Most use “rules-based” pricing systems, which simply seek to match competitors’ prices or beat them by some small fraction. If those systems get into bidding wars, items offered by only a few sellers can suffer sudden price collapses — “flash crashes.”

It’s clear, after talking to sellers and the software companies that empower them, that the biggest of these vendors are growing into sophisticated retailers in their own right. The top few hundred use pricing algorithms to battle with one another for the coveted “Buy Box,” which designates the default seller of an item. It’s the Amazon equivalent of a No. 1 ranking on Google search, and a tremendous driver of sales.

http://news.morningstar.com/all/dow-jones/us-markets/20170326515/the-high-speed-trading-behind-your-amazon-purchase.aspx

Why It’s Hot

Getting under the hood of how retail monster Amazon operates is always fascinating. The idea that prices are updating hundreds of thousands of times a day is nuts.