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Ultimately, your pricing strategy should enable your Amazon business to continue to grow. Increased cash flow gives you the power to make decisions that can save you money or increase brand awareness. For example, placing larger orders with your suppliers may win you a special discount from them or implementing an advertising strategy might net you more sales. Hiring an additional team member, improving packaging for a better customer experience, and sourcing new products all require capital.
While pricing and pricing strategy can be (and often should be) product specific, both begin with your business goals. Ask yourself questions like:
Regardless of where you want your Amazon pricing strategy to take you, it starts with some simple math. You should know your acceptable margin and understand all of the costs associated with each product you sell, from manufacturing to delivery. If your product has a limited shelf life due to seasonality or category (such as grocery or beauty), be sure to factor that into your pricing strategy and have a plan in place for moving any excess inventory.
My pricing strategy begins when I buy products. I am a huge fan of exclusivity agreements with my suppliers as it then avoids any pricing degradation (aka “race to the bottom"). I love bringing new products to Amazon. Couple this with exclusivity agreements and I don’t have to worry about other sellers tanking a price. When I can’t get exclusivity agreements, I pay attention to the other sellers that are on an existing Amazon listing. I stay away from products where the competition are known to push prices down past profitability.Charlene Anderson
Let’s face it, we all love a good deal. Amazon shoppers are no exception. They’ve come to expect great prices, fast shipping, and amazing customer service. As eCommerce becomes more ubiquitous, so do price comparisons. Amazon wants you to provide the best possible price for its customers, so competitive pricing is an important factor in the Buy Box algorithm.
Big box stores like Target and Best Buy have been matching competitor prices for years. eCommerce has simply led the charge in digitizing the price-matching process. Now browser extensions, apps, coupon sites, and comparison content help shoppers find the products they want at a bargain price. Comparing prices and features has never been easier for consumers.
But attracting customers isn’t all about having the lowest price. Here are several other factors that shoppers consider when making a purchase decision.
On Amazon, sellers frequently change their prices to compete more effectively. It’s not uncommon for prices to shift multiple times per day for popular items. Product prices shift frequently due to changes in item cost, shipping costs, demand, shopping trends, and other factors. For this reason, remaining competitive can be quite challenging, but it is possible.
Your product pricing depends on several variables, but it’s important to consider how you compare to your competition. If you offer faster shipping or have a better feedback rating, you may get the Buy Box without having the lowest price. The number of sellers for the ASIN also impacts pricing. For example, if demand is high for an item with only a couple of sellers, you can almost certainly maximize your profits. On the other hand, low demand for a product with numerous sellers means you might need to sell at a lower price. You may choose to raise or lower your price depending on your true cost, demand, advertising strategy, and other factors.
In addition to staying competitive, you’ll also need to balance supply and demand. In many cases, sellers leave money on the table by pricing just above or matching the current lowest price for an ASIN. When supply begins to wane and competitors begin running out of stock, it makes sense to raise your price while the item is in demand. Seasonal items often increase in demand during specific seasons; during those times, it is important to have a sense of the competitive field and how you fit into it. Understanding when to raise and lower your price is an intricate art. Repricing ASINs is often the most effective way to stay in the running and get a share of the Featured Offer.
The Similar Products dashboard in Seller Central shows you price comparisons for items customers may consider when shopping for your product. It helps you find similar products and monitor prices so you can make informed pricing decisions.
Monitor your performance in the Buy Box closely to succeed on the Amazon platform. By gaining a comprehensive understanding of the key factors that contribute to winning the Buy Box, you can implement effective strategies to stay competitive. Quick response to any loss of the Buy Box, whether through adjusting your prices or optimizing your inventory management, is crucial for maintaining consistent visibility with customers on the platform.
SellerPulse by eComEngine provides alerts for two types of Buy Box events: lost and suppressed Buy Boxes, where your offer loses the Buy Box to another seller or Amazon, or the Buy Box is completely suppressed; and won Buy Boxes, where your offer wins a Buy Box that another seller or Amazon previously held. These alerts also offer valuable information about the current Buy Box winner, including the product price, seller ID, and seller rating. SellerPulse even alerts you to the competitive price threshold that caused the Buy Box to become suppressed.
Having a minimum price prevents you from selling your item for less than you intend to. If you’re not careful, you could quickly find yourself losing money for the sake of beating a competitor or increasing sales volume. Sometimes this strategy might make sense for your business in the short term, but it’s not sustainable. Deciding on minimum prices for each of your products is an important part of running your business effectively. If finance isn’t your cup of tea, hire someone you can trust to help you.
1. Your total cost per unit, including, but not limited to:
2. The minimum profit per item you’re currently willing to accept for this product.
Adding this all together will result in your minimum price for this item. Note that your desired profit may be quite different for different products. It may also change for the same product over time. As your desired profit margin changes, it is critical to remember to update your minimum price. Also, consider leaving space in your margin for future discounts and promotions to avoid selling at a loss while offering a deal.
Understanding your product cost is vitally important. First you must understand how much gross margin you are receiving on each product. That determines how much you have available to fund advertising and other marketing costs as well as your operating costs. I recommend people build profit into their product evaluation. If you can’t achieve a high enough sales price to cover landed costs plus profit at 30% plus advertising and operating expenses, then pass. That product will typically only go down in sales price over time and you will be left trying to figure out how to pay for everything."Cyndi Thomason
You might wonder why you need to bother setting a maximum price. After all, the higher your product sells, the better. Right? Well, not exactly. Setting a maximum price is important because it allows you to avoid something called price gouging. Price gouging occurs when a seller increases pricing to a level that is much higher than what is considered fair or reasonable. This usually happens after a sudden increase in demand. You may recall news stories about this regarding high prices on bottled water and other supplies when Hurricane Dorian struck Florida in fall 2019, and again with medical supplies during the coronavirus outbreak.
Sellers are required to set fair prices within the limits set by Amazon. Your price must also align with Amazon’s reference prices policy. Having a maximum price in place prevents you from accidentally breaking the law or Amazon policy by price gouging. We’ll cover these policies in the next section.
Competing effectively on price is a delicate art and science, especially when it comes to maximizing your profit margin. There are a few different ways to reprice your products: manual repricing, rules-based repricers, and algorithmic repricing tools.
If you’re using a third-party repricing tool, you’ll enter your Amazon Seller ID during setup. This allows the tool to import your account and listing information from Amazon. The tool will sync with your products via an integration with Amazon. This notifies your repricing tool when there are competitive pricing changes for any ASIN you have listed. Your Amazon repricer then makes adjustments automatically.
We’ll skip the technical details here, but it’s good to have a general understanding of how Amazon repricers work. Below we’ve outlined four options for repricing your ASINs.
If you only have a couple of SKUs or are just getting started selling on Amazon, manual repricing might work for you. To get started, go to the Pricing Dashboard in Seller Central to see if you are not getting the Buy Box for any of your ASINs. If you are getting the Buy Box, great! If not, you'll need to do a little research to see how other sellers are pricing the item. Then you'll adjust your pricing. You can do this by updating one item at a time on the Manage Pricing page. You also have the option to quickly price match the current lowest price. (Of course, this may result in lost profits for you, based on a variety of factors discussed elsewhere on this page.) You can also manually change your price on the Manage Inventory or Pricing Health pages.
To manually manage repricing effectively, you or one of your employees will need to go through this process several times a day. It involves a lot of data entry and calculations to determine minimum and maximum pricing. Keeping focused on the bottom line can be tough if you get involved in a price war and want to “win” against your competitor. There is also a lot of room for error, especially as you get tired. In short, manual repricing might work for a little while but it can quickly become a challenge, which is why many Amazon sellers turn to automated solutions.
You can set repricing rules within Seller Central using the Amazon Automate Pricing functionality, which is included for sellers with a Professional selling account. Amazon automated pricing is pretty simple: choose the pricing rule that suits your business objectives and select the ASINs you'd like to enroll in Automate Pricing.
Amazon Automate Pricing generally works by lowering your price beyond those of your competitors. That's great for customers, but not for your bottom line. Automate Pricing does an excellent job of lowering prices, but it won't help you maximize your profit. It is also less nuanced than an algorithmic repricing tool.
In October of 2022, Amazon made it possible to set minimum and maximum prices for your listings in bulk, which was a nice (and much-needed) update. You may now also use the tool to increase your price when its external price increases and there are no other offers for the same product in Amazon's store that meet your rule criteria.
You can use the Automate Pricing feature to create custom pricing rules for your ASINs as needed. You cannot change the rule after creating it, so if you need to use a different rule, you'll need to create a new one.
Rules-based pricing tools allow you to select pricing rules that align with your goals. By automating the process of repricing your ASINs, these tools save time. Due to the structure of the approach, you must be prepared to reevaluate your pricing rules regularly. Failure to do so could negatively impact your bottom line. For example, if all of your competitors increase their prices due to increased demand, you may run out of stock quickly while selling at unnecessarily low margins.
There are some additional limitations to the traditional rules-based repricing approach. You may find your products stuck in a race to the bottom. You could be losing profits by consistently selling just above your minimum price. Sure, your order volume increases, but if you’re constantly operating on a razor-thin margin it is difficult to grow your business. You need a solution that will intelligently and automatically price your items based on the competitive landscape.
Many experienced sellers prefer to keep a single source of truth for all cost data outside of Seller Central by using third-party Amazon repricing software. Third-party solutions typically provide more robust functionality than Automate Pricing. Including exact cost information in Seller Central could result in even lower margins, as the tool encourages sellers to price match the current lowest price. Another benefit of a third-party tool is the ability to keep all cost information in a single location, which makes it easier to make decisions about what to restock, when to raise prices, and more.
Keeping cost information in a single location makes it easier to make decisions about what to restock and when to raise prices.
Smart sellers who want to maximize profits rely on third-party algorithmic solutions, which are the best in the business. Algorithms work for you to automatically determine the best possible price for your products based on the competition, your chosen minimum/maximum prices, and other data points.
A quality algorithmic FBA repricer will automatically calculate all Amazon fees and allow you to enter all of your costs for each product, giving you a complete view of the financials of your product. Once you’ve entered your product information, the algorithm constantly works to optimally price any product you list on Amazon, without having to store your product information in Seller Central. It keeps your pricing competitive, allowing you to grab a bigger share of the Buy Box.
Competitive repricing is the most challenging aspect of selling on Amazon. It seems there is no rhyme or reason for who gets the Buy Box anymore. Strategies that work in one category will most likely not work in another category. And even individual items within a category may require a different approach. It is imperative as a smart seller to constantly reevaluate your repricing strategy to stay competitive in this market."Chris Anderson
