Successful sales on Amazon are dependent on a variety of factors but one of the most important is undoubtedly pricing.
Competitive pricing on Amazon is essential if you are to succeed. You only have to look at one of the quotes attributed to founder Jeff Bezos to be understand how important price is to Amazon.
“It's impossible to imagine a future 10 years from now where a customer comes up and says, 'Jeff I love Amazon; I just wish the prices were a little higher,'”
You can see that quote and what the Motley Fool claim are the 20 smartest things Jeff Bezos has ever said by following this link. The full quote is given as item 6.
It’s important to take that comment on board and to fully appreciate that if you are selling on Amazon then you must price competitively. Indeed recent TV adverts in the UK (2021) have a variety of consumers all exclaiming about the low prices that they can see on the Amazon site. On short if you are selling on Amazon then expect to be pushed on price.
Is it worth your bother? Do you fear that you won’t make a sensible margin to make selling on Amazon worthwhile?
Although it can be tough to sell on Amazon it is worthwhile. The huge customer base who seek out Amazon and the reputation it has for price, customer service and delivery means that it simply cannot be ignored.
Because of the price pressure and the highly competitive nature it’s essential to use some form of automatic price adjustment. That’s why you’ll see repricing as a feature within Seller Dynamics for example, and why even Amazon have their own repricing system that they offer sellers.
You’ll need to decide on a pricing band for the item you are selling, ie the lowest price that you are prepared to go and the highest price you want to limit things to. Setting the lowest price point requires some care, you’ll need to consider a number of factors including cost of supply, Amazon’s commission (varying depending on category) and any additional fixed fees. You’ll also have to consider how much to include for packaging and for delivery if you are offering delivery for free (ie included within the price).
To simplify the process of calculation you can find calculation tools on this site, you can start here on our Amazon Profit Calculator page. It takes you through all the elements you will have to consider.
You might be concerned that using repricing will simply drive your price down to the lowest price all the time, but this is not the case. Amazon is dynamic and retailers drop out and in depending on stock availability, so with automatic repricing your price can go up as well as down. This means that your margin is always maximised.
Clearly repricing is essential on Amazon if you are selling items that have direct competitors, but what if you are selling a uniquely branded item that you control.
In those cases automatic repricing is not appropriate and instead you’ll need a simple way to periodically change the price as costs of production change or where you see a seasonable demand rise or decline.
That’s where being able to update the fixed prices you have quickly becomes important. You may have many thousands of products that are impacted by forex or raw material costs and the need to upload changes easily is vital.
That’s why systems like Seller Dynamics allow for a variety of ways for you to update your listings’ prices. Uploading a CSV file with multiple price changes or feeding these changes in via our API are all possible. That means you can update Seller Dynamics and allow Seller Dynamics to in turn update Amazon.
As we’ve made clear pricing is vitally important, but one final point that may surprise you. The Amazon Buy Box is not wholly dependent on price as you might have expected. Instead the Amazon Buy Box depends on the retailers past performance, stock levels and of course price. So if you are competing for the Buy Box make sure your seller metrics are nothing short of excellent.