Repricing on Amazon is much more than a trend. Amazon as a retailer changes the prices of their products several times a day, leaving many other sellers on the marketplace and beyond scrambling to update prices and stay competitive against the eCommerce behemoth. This dynamic pricing strategy was previously unheard of in the retail industry, and was only common in hospitality and airline industries.
Many retailers aim to capture the so-called “wisdom of Amazon”. They want to collect a plethora of competitor data and use it to their advantage to reprice their products in real-time. The easiest way of doing this is investing in a repricer for the Amazon marketplace. The only problem? There are a lot of repricers to choose from, and they all have different benefits.
One of the main points of pricing competitively on Amazon is to win the Buy Box, which accounts for 90% of sales on Amazon. The Buy Box is complex, and the algorithm Amazon uses to choose its occupants is largely unknown. We know which factors go into it, like inventory levels, price, and seller ranking, but we don’t know their exact weights.
A lot of repricers will simply change your prices, and won’t necessarily optimize them. This constant undercutting has given repricers a bad reputation among many sellers. What’s the point of constant undercutting to win a sale when you can’t earn any money? Most retailers can’t live off razor thin profit margins.
So when you’re looking for a repricer, you want one that will help you stay competitive, but also one that will help you boost your margins and win the Buy Box. What does it take for your repricer to win the Buy Box exactly?
It Understands How the Buy Box Works
In order to help you win the Buy Box, your repricer has to have a general understanding of how the Buy Box works. There’s a lot more that goes into winning the Buy Box than just price, and your repricer has to know how to weigh those variables against one another. It takes more than a low price to win the Buy Box, and it’s all subjective to the conditions of your competitive landscape.
If you have a lot of competition, you have to understand that you aren’t going to simply stay in the Buy Box forever. Amazon cycles through sellers in the Buy Box, and you have to make sure your repricer can readjust how it prices against your competitors’. The easiest way to do this? Algorithmic repricing.
Use Algorithms to Satisfy Amazon
Rule-based repricing is a beginner’s way of pricing on Amazon. The way it works is that an end-user sets a rule for a certain product or category of products (price X% below competitor Y), and changes the retailer’s prices around that one rule. It takes minimum and maximum prices into account, but other than that, it only works with one rule.
Algorithmic repricing essentially uses a demand estimation engine to change prices in accordance with several different variables. These include time of day, competitor prices, desired margin, and more. On the Amazon marketplace, repricing algorithms follow Buy Box algorithms and build out a formula to find the right price for your product.
Finding the Right Price, Not Necessarily the Lowest
Algorithmic pricing engines do more than simply undercut your competitors to win the Buy Box. They find the highest price possible that maximizes your Buy Box share. If your inventory levels and customer service have been perfect throughout your store’s existence, you aren’t going to need the lowest price possible to win.
Your repricer should recalculate its algorithm any time a Buy Box variable changes, like inventory levels or prices. An intelligent repricer will also take the number of competitors into account when calculating the right price. If there’s no competitor to challenge your Buy Box possession, it will increase your price by a certain percentage to maximize your profits.
It’s important for your repricer to obey certain parameters you establish. For example, if you set a minimum price, your repricer should never go below that. Same goes for maximum prices. In fact, if a repricer doesn’t have that option, it’s best to look somewhere else. Smart, algorithmic repricers require these price guards to protect your brand and your margins.
The Amazon marketplace is remarkably competitive, and retailers will search for anything that helps them keep up and beat the competition. Don’t fall for mediocre repricers, as they can only damage your store’s bottom line and branding. Invest in an advanced, algorithmic Amazon repricer to win the Buy Box and come out of Amazon on top.
Contributing writer: Brian Smyth