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The Best Buy on Amazon Isn’t Necessarily the Cheapest, Research Shows

What are the cheapest deals on Amazon? You may have to do more digging — or at least more clicking — than you may have thought.

New research from the non-profit journalism organization ProPublica found that Amazon's algorithm doesn't always feature the least expensive product in the "Buy Box" (the box on a product detail page where customers can begin the purchasing process), but may instead promote its own products or those of its paying sellers over products that are actually cheaper.

Amazon President, Chairman and CEO Bezos speaks at the Business Insider's "Ignition Future of Digital" conference in New York City
Amazon President, Chairman and CEO Jeff Bezos speaks at the Business Insider's "Ignition Future of Digital" conference in New York City. REUTERS/Mike Segar

ProPublica looked at 250 frequently purchased products on Amazon and examined the ranking of the items as they came up in as the top recommended. The nonprofit found that roughly 75 percent of the time, Amazon's own products and those of third-party retailers partnered with Amazon (partners who pay Amazon to handle inventory) pop up in the Buy Box ahead of products that are in fact cheaper.

So, is Amazon deceiving customers by furtively embracing a pay-to-play model (one that blatantly goes against the company's purported vision to be "the be earth's most customer-centric company")? And also pushing its own branded items over others?

An Amazon spokesperson told NBC News, "With Prime and Super Saver Shipping, the vast majority of our items ordered - 9 out of 10 - can ship for free. The sorting algorithms the [ProPublica] article refers to are designed for that 90 percent of items ordered, where shipping costs do not apply."

It's not the most direct answer in the world, and perhaps Amazon could better defend itself if it simply explained how its sorting algorithms work. It would appear that Amazon's sorting algorithms aren't programmed to give users the cheapest option, but rather, are sorted to give shoppers what it considers to be the best option. On the same page, you have the option to click to see other, cheaper choices. But the point is, the best isn't always the cheapest — not according to the algorithms, which take into consideration other factors in addition to price.

"Amazon's algorithm considers price, but that's not the only factor," said Jason "Retailgeek" Goldberg, Sr. VP of commerce & content at Razorfish. "The algorithm [for what ends up in the Buy Box] considers not only the cost of the item, but the cost of shipping, seller ratings, location, and [other factors]."

It is true, Goldberg noted, that Amazon will slash prices off its own products to make them more competitive with other sellers, but asserts that this doesn't actually lead to a profit for Amazon, and that Amazon makes its most money off of its third-party sellers.

"Amazon usually makes more money when someone else sells a product for them," said Goldberg. "When they sell it themselves, their profit margins are lower because they have to pay for the goods and the warehouse they're stored in. With third-party sellers they get 15 percent off the top."

The algorithm directing which product ends up in Amazon's Buy Box is probably similar to the one navigating eBay's "Best Match," a search filtering option on eBay.

"Like every search engine in the world, multiple factors go into [eBay's] Best Match," said Mohan Patt, vice president of product and shopping experience at eBay. "We take into consideration price, condition, format, diversity of sellers, of product, of location, [etcetera] to produce the ultimate value."

What every consumer looking for the best deal in terms of price should do, is take some time investigating. A few clicks can go a long way.

"In the case of Amazon, shoppers should absolutely look deeper into the offers from various sellers for the same product," said Courtney Jespersen, shopping expert at NerdWallet. "Don't automatically stop at the first deal you see and assume it's the best price. You'll want to factor in the product price as well as shipping charges when judging the overall value of the deal. And don't stop at Amazon either — once you find a deal there, compare it to other retailers as well."