As an Amazon seller, managing the prices of your products has to become an essential part of your day-to-day life on the Amazon marketplace.
Sellers who leave their prices static are doomed to lose BuyBox and sales (if they ever had them).
Therefore, seeing continuous changes in the prices and positions of the sellers of a product is an indicator that a thorough job of price management is being done.
Even so, this practice is not free from certain mistakes that are made by both experienced and novice sellers.
Today we bring together the most frequent mistakes that sellers tend to make in their pricing strategies and we tell you how to avoid them.
Thinking that BuyBox depends only on price
Obviously, whoever has the BuyBox is the one who usually gets the sales of that product, but usually sellers make the mistake of believing that by offering the lowest price they are going to get it. Nothing could be further from the truth.
The BuyBox allocation depends on three factors: price, seller rating and shipping time.
Without a doubt, offering a low price increases your chances of getting the BuyBox. Even so, sometimes it happens that some sellers with really competitive prices lose it to others who, despite selling at a higher price, have a really short shipping time when placing that product in Premium.
As for reviews, if your shop does not have at least 90% positive reviews, you will have a very difficult time against your rivals.
Keep in mind these other two variables when managing your prices, because if you have good reviews and short shipping times you may win the BuyBox by lowering only a few cents the amount of the product or even not even need to modify it.
Ignoring the FBA
For sellers it can be an advantage to put their products on FBA and increase their sales as a result.
On the one hand, by placing your products on FBA you will access a market of 20 million Amazon Premium subscribers, who spend on average 150% more than non-subscribers.
On the other hand, as a seller on FBA you can increase the selling price by 2-10% without affecting your sales. This is because shipping costs are included in the selling price. For example, if you offer a product on FBA for €15, you will be in the same position as a competitor who offers it for €10 plus shipping costs of €5.
In addition, you will surely beat that competitor, because FBA products have a shipping time of 2 days maximum and this fact counts a lot for you to win the BuyBox.
Not taking costs into consideration in price management
Perhaps the biggest mistake of all. Not taking into account the costs and profit margin means that sometimes the price of a product is lowered beyond the real possibilities and money is lost.
It is necessary to take into account the cost of the product, shipping costs, VAT, Amazon’s commission and FBA costs if any.
The best way to avoid unnecessary scares is to use a pricing software that allows you to incorporate the costs of each product in order to visualise the real profit margin at all times. And if it also allows you to create automatic price management rules based on this margin, so much the better.
Thinking all pricing software are the same
The purpose of pricing software is not just to set simple rules and have prices change on their own, or just to show you information and you are the one who has to take the relevant actions. The job of good pricing intelligence software goes much further than that:
It should be possible to add costs to show the current and future profit margin for each product. It is important that the information from Amazon is captured in real time: price data from 6 hours ago is not useful to make decisions now. The automatic rules should revolve around the profit margin: the goal is not to always sell cheaper, but to always be profitable. It is essential that you take into account whether you or your competitors sell the product in FBA: if you sell in FBA, you may be able to afford a higher price and still win the BuyBox. If you don’t sell in FBA but your competitor does, then you will have to make an extra effort by lowering the price to be able to snatch it.
Forgetting to segment your pricing strategies
A good price management strategy must be differentiated according to different factors. For example, competing against Amazon for a product is not the same as competing against a new seller and our pricing decisions should be different in each case.
FBA, BuyBox, profit margin, competitors, brand, country of origin of the competitor and even a particular product are the different factors that draw different scenarios to which we have to respond with the appropriate pricing strategy for each one.
Creating standard strategies can lead us to miss opportunities to improve our profitability or even lose sales in a particular product.
Running out of stock
Always pay attention to those products that have the highest sales and make sure you always have enough stock. Not having these products in stock gives your competitors an advantage to sell instead of you without having to lower prices.
In addition, if this happens during high volume shopping periods, such as Christmas, the total amount of sales that you will not make because of this mistake can be astronomical.
In conclusion, manage well the BuyBox variables, give proper importance to the FBA, choose a good price intelligence software, segment your strategies and take care to always have stock of products.
If you take care to take these measures to avoid making the same mistakes as other sellers, you will have guaranteed success on Amazon.
