(Here’s a hint: It takes a page from their own book).
Running an eCommerce business can oftentimes feel like plate spinning. In case you aren’t familiar, plate spinning is a circus trick in which someone balances multiple plates and bowls on sticks held by their hands or feet. Basically, eCommerce is a juggling act that leaves very little room for error. You have to manage pricing, inventory, fulfillment, and everything in between.
As if plate spinning wasn’t difficult enough, imagine you’re at a circus convention and you want to attract people to look at your act, but there are thousands of other plate spinners attempting to do the same thing. This is what it’s like to sell on the Amazon marketplace. Competition is intense, and many retailers don’t know how to stand out.
To take the metaphor a bit further, what you use to control your spinning plates represents the four important aspects of your business on the Amazon marketplace. Your two hands represent fulfillment and inventory levels, your foot represents customer service, and your nose represents pricing. If you can successfully balance these four aspects, you can land in the Buy Box.
Pricing on Amazon
Now one of the hardest aspects to control on Amazon is pricing. Some reports show that prices on Amazon can change as often as 2.5 million times a day. Manually changing your prices to keep up presents an obstacle for any seller. However, winning the Buy Box requires having the right price at the right time, so constant fluctuations are necessary for success.
The Buy Box is a mystery that no one knows how to solve. We know the four main aspects that can lead to winning the Buy Box, but Amazon is the only party that knows the exact algorithm it takes. Sellers are often frustrated when they have the lowest price, but they are still outside of the Buy Box.
The “Right Price” for the Buy Box is completely subjective and reliant on other aspects of your Amazon business. There are a ton of moving parts you have to control (like plates), but what if one of those moving parts is automated?
How Automated Repricing Can Help
When it comes to automated repricing on Amazon, there are two main kinds used by sellers: rule-based repricing and dynamic pricing. But which one is best for your business? It depends on how involved you want to be in the pricing process.
Rule-based repricing requires you, the seller, to set rules that will let the repricer do your bidding. These rules can be dependent on a couple of things, such as time of day or competitor prices. You want to lower your price at night? Set a rule. You want to always remain $1 below your competitor? Set a rule. But don’t worry, most repricers require a minimum price setting to always keep your brand image in check.
Rule based repricing puts the power of repricing in the hands of the seller. That way, they can know what to expect from their pricing throughout the day. It’s great for retailers who always want to have a hand in the pricing process, but it can be problematic when it comes to winning the Buy Box.
A much more automated, algorithmic approach would be dynamic pricing. Dynamic pricing takes dozens of factors about your business into account to find the optimal price necessary to win the Buy Box. The “right price” is constantly changing on the Amazon marketplace, and dynamic pricing makes sure it’s always attainable. It’s almost entirely hands-off, and it leaves minimal room for error.
By taking care of your products’ pricing, dynamic pricing allows you to draw attention to the other parts of your business. But does it work well? If you invest your time and resources into the right product, then it absolutely does work well.
The right tool will take competitor prices and your own inventory and fulfillment processes into account to find the perfect price for Buy Box success. The algorithm should then change this price in accordance to various market and internal changes i.e. your inventory is low, you competitors decreased their prices, etc. The right price it discovers offers you the highest margins possible, while still remaining competitive against other sellers.
The Fast Track to the Buy Box
Since dynamic pricing streamlines your entire pricing process, it’s up to you to optimize the other factors that go into winning the Buy Box. All you have to do is make sure you don’t run low on inventory and maintain your seller rating with impeccable customer service. Pricing typically takes up most of a seller’s time on Amazon, mainly because everyone is constantly dropping theirs.
Simply slashing your prices is not only bad for your business, it doesn’t guarantee you anything. Copying other sellers’ prices can lead to a margin-depleting price war. That’s why dynamic pricing is so effective. It will find the right price for your business, in comparison to your competition, and make sure you keep it.
Automated repricing is an absolute necessity for your business’ success on Amazon. It can help you avoid price wars, and help you land in the Buy Box. However, it’s up to you to make sure the other aspects to your business are still functioning up to par against your Buy Box competitors. So instead of keeping your eyes on only your pricing, you can divert attention to the equally-important parts and keep all your plates spinning in perfect harmony.