Andy Geldman explains how to set competitive prices while minimizing effort and maximizing profit.
This posted was originally published in January 2014 and updated in June 2017.
For sellers who only have a few product lines in an uncompetitive niche, monitoring the pricing of competitors is easy – they can simply update their prices manually. This is a great position to be in, but it is not the reality for most sellers. The majority need many SKUs to be successful and often face stiff competition. These sellers need to automate repricing in order to survive.
Despite this, a number of sellers are concerned about using marketplace repricing software as they see automatic repricing as a “race to the bottom”. This is a logical argument, but not necessarily correct as repricing is about more than simply having the lowest price.
So in this post, I will demystify repricing software: what it is, how it works, the differences between repricing on eBay and Amazon and, ultimately, how to choose the right tool for you.
What is Marketplace Repricing?
In essence, marketplace repricing is simply a seller making changes to the price of products they offer on platforms like Amazon and eBay. They might do that for any reason, but typically it’s in response to competition.
On marketplaces, the offers from different sellers are shown side-by-side so buyers can compare prices very easily – uncompetitive prices disappear into the background noise. To be successful, sellers need to find a way to rise above the crowd.
There are three factors that best characterize marketplace repricing today: huge scale, easily available automation technology, and the sophisticated seller ranking algorithms that marketplaces use.
The volume of activity on marketplaces like eBay and Amazon is enormous, and the scale of repricing is huge too. For example, Amazon.com implements more than 2.5 million automated price changes every day to stay competitive not only with other sites, but also merchants selling on their own third-party marketplace. High street retailers like Walmart and Best Buy also change their prices constantly – in their cases around 50,000 times each month.
Major retailers have been “spying” on each other for decades, and setting their prices accordingly – before the internet they would send staff to competing stores to manually note down prices. Ecommerce has made price comparison easier for the retail establishment, and also made automatic repricing possible for marketplace sellers of almost any size. Repricing tools are available as standalone services, or as part of integrated marketplace management tools. Repricing software is itself a competitive market, with plenty of options available.
The third factor is the most complex: successful marketplace repricing is not just about price. Amazon and eBay have sophisticated algorithms which decide how sellers rank for every product and keyword search – price is not the only factor they consider. The seller with the lowest price does not always sell the most.
Repricing? Hell yeah! Even simple rules work on Amazon, without software. One of the businesses I’ve worked with gets an extra 1,000 to 1,500 orders every single week because of automatic repricing. It’s amplified because their competitors don’t have repricing software, but still it’s obscene what it can do.
Matthew Ogborne, Co-founder, UnderstandingE.com
What types of repricing tools exist?
In the Web Retailer directory, we cover the following categories of repricing tools:
Marketplace repricers allow more sophisticated rules than simply “be the cheapest”, or even work without rules and determine automatically which price will maximize total profit. Sometimes repricing software will actually raise prices – using one does not commit a seller to the race to the bottom, and can even help avoid it.
You can get repricing software in one of two ways: as a specialist tool that just does repricing, or as part of an integrated marketplace management system.
Specialist repricing tools have the typical advantages of most single-purpose software:
- They have only one function, so tend to perform that job very well.
- The lock-in effect is relatively low: if you want to move to a different service, the transition should not be very disruptive.
On the other hand, if you already use a marketplace management system and it includes a repricing function, that should be a quick and inexpensive way to start learning about repricing, even though you might move to a standalone repricer later.
If you are considering changing your marketplace management system (or thinking about using one for the first time), it’s worth investigating its repricing support. It is not a core feature like inventory, listing or order management though, so it’s not worth changing to a management system for its repricing support if it’s lacking elsewhere.
Browse the directory for Marketplace Repricing tools, including reviews, news, related discussions, compatibility information and pricing.
Price Tracking Tools
Price tracking tools allow you to monitor the activity of your competitors. You can get data on their prices, promotions and any changes to their catalog, for instance whether an item is out of stock. These tools won’t make automatic changes to your prices. They provide you with actionable data on your competitors and it’s then down to you to make the changes accordingly.
The data is collected by “scraping” online retailers and marketplaces. You choose what you want the tool to scrape and it starts collecting information. The price tracking tool then analyzes the data and creates reports. You can either view these online or download the raw data for use in your ecommerce system. Some trackers also have APIs that you can make use of for more direct integration with other systems.
Browse the directory for Price Tracking tools, including reviews, news, related discussions, compatibility information and pricing.
How to choose a repricing tool
Repricing is still very much associated with Amazon, so it’s not surprising to see almost all repricers offer Amazon support.
The important question to consider is if you want to reprice on any other marketplaces. Relatively few repricing tools support eBay. Of those that do, ChannelMAX and Appeagle rely on listings being associated with eBay’s product catalog– they can only reprice cataloged items against other cataloged items. Price Spectre supplements catalog IDs with keyword matching and claims good accuracy with that approach.
Most repricing tools have low entry-level pricing, and remain very affordable even for a high volume of 20,000 SKUs. For high-volume sellers with very thin margins, RepriceIt followed by RepricerExpress, ChannelMAX and Mean Repricer are all well under $100 per month for 20,000 SKUs. They do differ in update frequency, however.
Four repricers position themselves at the top end of the market: Marketplace Repricing, WisePricer, FeedVisor and Teikametrics. Sellers new to repricing, even if they have very high volumes, would benefit from learning on an entry-level tool rather than a high-end repricer. But those with sizeable budgets and repricing experience might benefit from taking a demo of a high-end system, to see if they offer any additional opportunities.
Rules-Based Versus Algorithmic
All repricers allow more sophisticated control than simply beating the lowest price by a penny. Many provide that control by allowing the user to define a set of rules that tell the repricer what to do for a specific product or group of products, for example:
- Beat the existing Amazon Buy Box winner by a specific amount or percentage.
- Aim to appear in one of the top three price positions.
- Only compete against sellers with a specific minimum feedback rating.
- Only reprice against items of a specific condition: new, used or refurbished.
Rules-based repricing offers a huge amount of control, and that flexibility can be very useful. The downside is the time and effort the seller needs to spend deciding what the rules should be, and configuring the system.
The alternative approach is algorithmic repricing. You only need to provide an algorithmic repricer with the minimum price you are willing to accept for your products. The system will then use its own predefined rules, competitor data and price experimentation to find the optimal price – one which maximizes sales while keeping the price as high as possible.
Note that with algorithmic repricers you rely entirely on the effectiveness of their algorithm – two algorithmic repricers could achieve quite different results. In contrast, two rules-based repricers with exactly the same configuration should set the same prices.
ChannelMAX is an example of a rules-based repricer, offering sixty repricing rules. FeedVisor is a purely algorithmic repricer, having no rule settings at all. Appeagle allows the seller to choose either rules-based or algorithmic repricing, on a product-by-product basis. WisePricer also supports both rules-based and algorithmic repricing.
Repricers vary quite widely in how often they will check for price changes. For example:
- RepriceIt allows up to ten daily or weekly price check schedules.
- RepricerExpress has an hourly limit of 50,000 so sellers with fewer SKUs can reprice more frequently.
- ChannelMAX and Appeagle offer more frequent repricing (including a continuous option) for an additional fee.
Frequency matters most when competition is high, particularly if competitors are also repricing. At peak sales times, waiting an hour or more to react to price changes could result in a significant loss of sales. Sellers with highly seasonal trading could look for a solution which allows the frequency to be “boosted” temporarily rather than committing to a higher fee in the long term.
Repricing on Amazon
When people talk about marketplace repricing, they are often – without even mentioning it – only talking about Amazon. For many, marketplace repricing and Amazon repricing are synonymous.
It is possible to reprice automatically on other marketplaces, but on Amazon the practice is more common and the technology more mature. There are three important factors driving that: the strength of the Amazon catalog, the “Buy Box”, and Amazon’s own support for repricing technology.
The Amazon Catalog
From the outset Amazon has been underpinned by a product catalog. On Amazon, it is not possible to list a product that isn’t connected back to the catalog, although you can add new products to it. If you do add new products, they become part of the core catalog and other sellers can offer them too.
The catalog-driven nature of Amazon means it’s very easy to find a specific product. In fact, if the catalog is working as it should, each unique product will exist only once and have a single product detail page. That is in stark contrast to eBay’s listing-driven approach where searches often yield thousands of results for the same product.
When a product has one description, one set of images, one collection of reviews, and so on, there is relatively little left to distinguish between multiple sellers of that product. How does that affect Amazon sellers? Well, they must do their utmost to optimize the few attributes under their control – and the one thing Amazon sellers can control fully and frequently is price.
The Buy Box
When a group of Amazon marketplace sellers get together the conversation will quickly turn to the Buy Box, and specifically to “winning the Buy Box”. The tone will run the whole gamut of enthusiasm, resentment, confusion and violent disagreement. To the uninitiated, the heated conversation will be completely baffling.
The Buy Box is simply the box at the top right corner of the product detail page which contains the “Add to Cart” (or Basket) button. The format varies, but an example is shown here. (This particular Buy Box is for a product that is not available new either from Amazon or a third-party seller who uses Amazon FBA to fulfill their orders.)
Winning the Buy Box means being the seller who gets the order when a buyer adds a product to their cart and completes check out – in the example shown “my Goods” has won the Buy Box.
There is common ground on the criteria for determining the Buy Box winner:
- Price including shipping
- Use of FBA
- Stock availability
- Customer experience
The last one, customer experience, is where Amazon lumps in a whole bunch of other factors. Those factors are used to determine Buy Box eligibility, which is just the possibility of winning the Buy Box, and include:
- Order Defect Rate (ODR) – a measurement of “bad” orders indicated by poor customer feedback, A-to-z Guarantee claims and credit card charge-backs.
- Delivery, including how quickly orders are shipped, speed of delivery, and participation in FBA.
- The amount of time the seller has been active and their volume of sales.
- Other seller performance metrics.
Amazon do not disclose exactly how the different factors interact, where the cut-off points are, or what the other metrics might be.Amazon’s Buy Box algorithm is sophisticated, constantly being updated and tuned, and is certainly not transparent.
Feedvisor have produced a comprehensive guide called The Buy Box Bible. They have given me permission to reproduce the summary “Cheat Sheet” from the guide below. Download the full guide for a lot more information on each metric.
Is repricing on Amazon safe?
Amazon doesn’t allow repricers to completely run riot on their marketplace. Pricing errors have happened in the past, including a mundane book about flies being repriced to over twenty million dollars, and a repricer malfunction in 2012 causing thousands of items to be listed for a penny.
To prevent customers being disappointed by erroneous prices, Amazon detects potential errors and can deactivate affected listings. Sellers can avoid this by setting minimum and maximum prices or by opting out entirely (or UK version, Amazon login required).
Browse the directory for Marketplace Repricing tools that are compatible with Amazon, including reviews, news, related discussions and pricing.
Repricing on eBay
Sellers who concentrate just on Amazon or eBay can have polarized viewpoints on the merits of each marketplace. That’s not surprising: eBay’s roots are as a trading community, while Amazon has always been a retailer in its own right and is an unusually ferocious competitor (see The Everything Store).
Repricing is one of the many areas where eBay and Amazon sellers differ: it’s much less common on eBay. I think this could be down to the eBay selling culture and eBay’s approach as a listing-driven marketplace. Interestingly, there is a very important factor pulling in the other direction: eBay’s Best Match algorithm.
eBay has a product catalog, but its use is optional except for some electronics and media categories (UK version). A lot of the time the catalog is not used, and sellers can always add their own images and description.
Even the listing title (which a layperson might expect to be an unambiguous way to identify the product for sale) is normally optimized, by using the maximum number of characters allowed and including popular search keywords.
What this means is that it is much more difficult to identify identical products on eBay than on Amazon, and therefore to reprice accurately. It’s not unusual for eBay sellers to dismiss repricing on eBay as unacceptably risky, unnecessary or even impossible.
Despite the difficulties of repricing on eBay, there are automatic eBay repricers available. The developer of dedicated eBay repricer Price Spectre, NullApps, has explained in the Web Retailer forum and on their own site how they are able to reprice on eBay – by supplementing catalog listings with keyword matching.
Not a lot of eBay sellers think about repricing tools, but they should. If you are selling new items, have a condition to only monitor new items and don’t go against auction items – just monitor fixed price. You might run into some listings that are incorrect, so look in your system to see if there are any issues or errors once in a while. As long as you set it up correctly the first time, you shouldn’t have any issues.
Carlo Silva, CEO, 2nd Office
eBay’s default sort order for search results is Best Match. eBay have been honing the Best Match algorithm since 2008, and although it has not been analyzed to the same extent as winning the Buy Box on Amazon, there is expert opinion and seller observations indicating that quite similar factors are considered, such as:
- Feedback including Detailed Seller Ratings (DSRs).
- Outstanding resolution cases or policy compliance notices.
- Free shipping and a buyer-friendly returns policy.
- Historical sales volume.
- Conversion rate: the proportion of people who view a listing and then go on to buy – essentially a vote that the listing is what they were looking for.
Several other factors have been suggested as having an impact on Best Match, but without much consensus or compelling evidence. For example, there are reports that eBay’s search engine penalizes listings with a sophisticated design. If this really does have an effect, I think it is more likely to be due to poorly formatted HTML and not just the presence of a design.
Best Match is our measure of the Buy Box for eBay. When we manage to land the space in Best Match that’s a measure of success for us. Amazon has their rules well documented – how you get into the Buy Box position – eBay does not have those rules quite as well down, so they fluctuate a little bit. It’s a very hungry baby to make sure eBay repricing works effectively.
Zee Mehler, Chief Marketing Officer, Appeagle
eBay and Amazon differ in many ways, but most dramatically in the display of products offered by multiple sellers. Amazon shows a single product page with the Buy Box showcasing the best offer, and puts other sellers’ offers on a separate page. eBay shows all sellers’ listings as search results, and orders them to show the best offers at the top.
But if Amazon took the full list of sellers’ offers and made that their primary product page, or eBay consolidated all their separate product listings onto one page and showcased the top offer, the two marketplaces would look very similar.
The effect of both Amazon’s Buy Box and eBay’s Best Match is almost identical – to push low-priced products offered by sellers who provide great customer service to the forefront . Amazon’s Buy Box and eBay’s Best Match aren’t all that different, so why shouldn’t repricing be as effective on eBay as it is on Amazon?
Browse the directory for Marketplace Repricing tools that are compatible with eBay, including reviews, news, related discussions and pricing.
Avoiding the Race to the Bottom
The “race to the bottom” or “race to zero” is closely associated with automatic repricing. It’s a logical argument: if sellers consistently beat each others’ prices, even by a small amount each time, prices will inevitably drop to a level where sellers are losing money and have to exit the market, or go out of business.
After prices hit rock bottom you might expect them to rise back to a stable level. But with very low barriers to entry, new sellers can quickly come on board and start the race again. On eBay in particular, there is a constant churn of new sellers who will compete desperately on price – either to build feedback, clear inventory they have overpaid for, or simply through inexperience.
So how can sellers avoid joining the race to the bottom, or at least minimize the impact it has on them? That’s a question that goes to the heart of selling on marketplaces, and it doesn’t have a straightforward answer. Sellers cannot just remove price from the competitive landscape, but they might be able to sidestep the problem and avoid competing solely on price. Here are some suggestions.
Position Yourself Differently
On eBay, you can distinguish yourself as a seller in a number of ways. For example:
- Use a professional listing design.
- Provide a great description.
- Add expert advice or insights to listings.
- Have outstanding images.
- Set a generous returns policy and highlight it to buyers.
- Show your personality.
Encourage buyers to trust you as a seller, help them understand exactly what you are selling, and clearly explain why they should buy it. Take advantage of eBay’s flexibility, because none of this is possible on Amazon (except if you add your own products to their catalog – but even then only to a limited extent).
Branding is so essential. Decide if you are selling in a category, and pick a branding that has some kind of tie and invokes an emotional response in your buyer. If you’re selling everything under the sun, have a strong brand that’s consistent but almost emotionless.
Elizabeth Hitchins, Freelance Consultant, KidsonTalks
Understand Best Match and the Buy Box
Not having the lowest price may reduce sales, but it is not necessarily the kiss of death. Both Amazon and eBay include many factors in their algorithms – sales can certainly be made without having the lowest price. And if your competition isn’t up to scratch in other areas, even more sales can be made without having the lowest price.
On Amazon the Buy Box can rotate between multiple sellers, if the algorithm ranks them equally. eBay provides a more level playing field as Best Match determines only the order of results, not a single overall “winner”. The important thing to understand is that it’s not an all-or-nothing battle on either marketplace.
Retail can be simplified quite dramatically: in order to succeed you either need to be the least-cost provider or you need to offer something that nobody else has. Both of those fall to your buying processes – focus on buying the right products at the right price. Once you’ve got the right products, you can position them differently and you can approach different channels.
Dan Burnham, Head of Account Management, eSellerPro
How do you offer something nobody else has? Sellers have to answer that question themselves, and it will not be easy. If it was, everyone else would be doing it and it would no longer be something nobody else has (also the central fallacy of most get-rich-quick schemes).
There are, however, models for sourcing and product creation that are used often and can be successful:
- Bundle products together to create unique combinations that help buyers.
- Sell personalized, customized, handmade or otherwise unique products.
- Look abroad for brands unavailable in your own country. Niche or designer brands with a narrow target market may work better than mass-market products.
- Buy white-label products direct from the manufacturer and add your own branding, packaging, add-ons, enhancements or instructions.
- Cultivate a relationship with a brand that sells to a limited number of retailers.
- Create you own products from scratch.
Online selling is a retail business. Small businesses who sell only online may not think they have much in common with the old world of high-street retail, but when it comes to sourcing and developing products there is not a vast difference. Learning and inspiration can be found by studying traditional retailers as well as online competitors.
Buyers want low prices, and the marketplaces, whose business it is to satisfy buyers, do a fantastic job of getting those low prices for them. Marketplace sellers can choose to sell competitive products (which the majority are) or try to carve out a unique niche which protects them from direct competition – even if it’s only for a little while.
The reality is that most sellers will offer products that many others also sell. In that case, it’s crucial to have competitive prices. In an environment where millions of sellers are present, the job of manually monitoring the competition and adjusting prices is hard – often prohibitively so. That’s where automatic repricers come in.
Repricing is not a silver bullet for eBay and Amazon sellers, but nothing is. It’s a type of automation that should be assessed and measured, and adopted fully if it provides a positive return on investment. The marketplaces automate their decision on who the best seller is, so every marketplace seller should work to understand how that decision is made and use everything they can to make it work in their favor.