Amazon has become the benchmark for marketplaces, the retail giant and the first place where online consumers go to look for their products.
The fact that it is one of the most visited marketplaces has to do with the trust it offers: any seller on Amazon is strictly and continuously monitored for its quality standards on an ongoing basis, and the delivery of orders is virtually guaranteed.
As an Amazon seller it is difficult to differentiate yourself from the competition, and in any ecommerce business every seller relies on three vital aspects: price, delivery and reviews. This is where price comes into play, how good you are at cutting costs and avoiding making the most common mistakes.
Quality pricing is, therefore, something basic in a marketplace, where every penny counts and profit margins are adjusted to the maximum. At Boardfy we know how the giant created by Jeff Bezos works and we want to make your life a little easier with the definitive guide to pricing for Amazon.
Let’s get started
Enter your costs and find out where you’re losing money
The first step is to enter all possible costs in your catalogue: acquisition cost, Amazon commission, shipping costs, FBA costs (if any), other fixed costs and VAT.
This way you will be able to know exactly the profit margin for each product and see how far you can go in pricing each one.
This is also the time when you may discover that you are losing money on an item. In these cases, our advice is to study the situation carefully, as there are two very different situations:
•You have the best price: here the appropriate thing to do would be to raise the price until we have a positive margin and see if we still maintain the first position. If so, we leave it at the new price and breathe easy; if not, the best thing to do is to withdraw that product or try to reduce costs, as it is an item in which you are not competitive and it will give you more problems.
•You don’t have the best price: here there are only two ways, either reduce costs to be competitive or simply withdraw it from Amazon because you are totally out of the game.
Once you have cleaned up your catalogue, it is time to take it one step further and go into detail. Believe it or not, the world of profit margin is not only limited to positive or negative, but also depends on when and where you have the profit margin.
Let’s look at an example.
As you can see in this article, right now the margin is positive so there should not be a problem. But in this case we are dealing with a seller who is in second position, what would happen if we lowered the price to put us in first position?
We would incur losses.
Whenever you do not have the best price, you should always take into account both your current and expected margin. Not paying attention to these details can cause you to start selling products at a loss without realising it.
Increase your margins to the maximum
Once you have the loss-making products under control it is time to move on to increasing the margin on as many products as possible.
In all catalogues there are products in which, because you have very competitive prices or because, after a pricing war, some competitors have withdrawn, there are products that you have in first position at a considerable distance from the second.
It is in these situations that we should take advantage of to increase the price slightly and make some pure profit without any risk.
Go for the BuyBox
In Amazon BuyBox matters, and a lot. It is the best showcase for your product, because it shows you as the most recommended seller without mentioning the competition, unless the buyer digs into the total list of sellers. And if Amazon recommends you, it must be for a reason.
As you know, to determine the BuyBox three factors are taken into account: user reviews, shipping time and price. We can’t help you with the first two, but we know a lot about prices.
In fact, we can say that a few cents difference can quickly swing the BuyBox from one seller to another.
Part of price management on Amazon is to play with the prices of your items until you get it, as long as your profit margin allows you to do so.
Put on automatic and save time
Pricing is a balanced mix of strategy and routine tasks.
The first part depends on your knowledge of the market, your company’s objectives and competitors. The second part is an inevitable process which, in case of very large catalogues, can become tedious. This is where automation plays an important role in saving both time and money.
Once you have reviewed the previous steps and you have a clear pricing strategy for your products, it is appropriate to establish a series of automatic rules that are executed periodically.
Imagine that every half an hour, 2000 products automatically change their price according to the criteria you have set. Sounds nice, doesn’t it? Well now imagine all the time it would take you to do it manually.
Monitor the competition on Amazon
With the costs already entered, your products chasing the BuyBox and the automatic rules running, you only have the last step left: check the competition on Amazon.
Regularly reviewing the state of the market can be very revealing. The first thing to do is to find out which competitors are the ones to be most concerned about.
It is not the same to know that you compete in most of your catalogue against Amazon, who is usually unbeatable, as against another ecommerce. It can also be the case that you have shops competing against you in few products, but with a much better price than you.
On the other hand, you will also be able to find out which sellers are most active in price increases and decreases. This can give you a rough idea of which ones are pricing, or even which ones are using professional pricing software.
This broad view of the competition on Amazon serves as a basis for future decisions on strategy and automated reviews.
These are the basic steps to a good pricing strategy, but we recommend that you don’t stop there. It is an ongoing process that you can complicate and refine as much as your imagination and your desire to increase sales will allow.
We hope you find it helpful and wish you the best of luck with your sales.