This post is by Todd Ryan, a Florida-based IT manager who has been selling online since 1999.
On the Amazon Marketplace, the Buy Box reigns supreme. Almost all sales go to the seller who is “in the Buy Box”. Few buyers even realize that they can choose to buy from another merchant, because it’s an integral part of the experience to trust that Amazon has already found the best offer for you.
So as a seller, you really need to “win” the Buy Box to make sales, and one of the most important factors in deciding who wins is price. For better or worse, price also happens to be a factor that you, as a seller, have complete control over. By regularly adjusting prices you can potentially make a huge difference to your sales.
It’s quite common now for Amazon sellers to use automated pricing tools, and dozens of repricers have sprung up in recent years to meet that need. Most repricing tools use preset rules and algorithms to frequently adjust prices.
However, there are still many sellers who are wary of repricers, for a variety of reasons – some of which are way off the mark! In this post, I will tackle the most common myths I hear about repricing. I’ll try to pick apart the reality from the myth, and address the biggest concerns which sellers often have.
Myth #1: Repricing tools always cause a “race to the bottom”
A lot of sellers are afraid that a repricer will get them into a race to the bottom, and that’s understandable. It seems like the only thing they can do to get that elusive, incomprehensible Buy Box is to keep beating each other on price, and end up repricing themselves into oblivion.
But you can use repricing tools to your advantage. If you use them intelligently, repricers can actually drive your prices up. That’s not some marketing hype from the companies who make these tools, it really happens.
Why is that? One scenario is that if you are pricing aggressively to beat a competitor, and then that competitors pulls out of the listing, a properly configured repricer will increase your price again because you no longer need to beat that seller.
FBA (Fulfillment by Amazon) is also a very important factor in the Buy Box. In another scenario, if you have competitors who are not using FBA, you might be able to price significantly higher than them and still win the Buy Box. Again, a good repricer will allow for that situation and help you price as high as you can while remaining in the Buy Box.
Additionally, some repricers are not content to just get you the Buy Box. Some will also push your price as high as possible without losing control of the Buy Box. Price is an important factor, but not the only one, so it’s quite possible to remain in the Buy Box without having the lowest price.
Finally, repricing tools are only as good as the data you feed them. You need to create specific rules on how to set the price, and if you get those parameters wrong then it can quickly drive prices down. But when you’ve got them right, they will keep you clear of the race to the bottom, and you should only occasionally need to touch them again (based on seasonal demand, scarcity, etc.).
Myth #2: Repricing tools are all the same – just choose on price
How a repricer works is straightforward. It looks at your minimum and maximum, then updates your prices based on parameters you set. Generally, repricers use the same Amazon API and most of them have the same basic features.
But repricers do have their unique quirks and features. Many of them are innovating in specific ways such as cost calculators, advanced analytics, time-based rule resets and more.
I consider the user interface (UI) an important feature. Besides having different additional features and settings, UI differences should be factored in. These applications can have complex settings and detailed reports so being able to find what you want quickly, and use it accurately, makes a big difference.
A lot of repricing tools have customizable settings based on who you’re competing with, and those can vary between repricers. You might be competing with FBM sellers, FBA sellers, or Amazon themselves, and want to treat each of those differently. When you have gained experience of repricing, you will learn which rules are important for you and will be able to look for a tool that meets those needs.
I find that one of the best features is a built-in FBA cost calculator. That saves time over using a separate calculator and doing a lot of manual copying and pasting. A good calculator can take your sale price and calculate the net profit, or take a desired net profit and show you the sale price, all right inside the repricing console. Some of them even includes analytics that visually show where your price falls among other sellers.
Repricers are great time savers. Most will reprice every hour, some will reprice every 20-30 minutes, and some will reprice continuously. Since they automate the process of repricing using the strategies you put in it, it takes less time to monitor and keep up with the competition. The time savings alone justify using a repricer.
So price is an important factor when choosing a repricer, but certainly not the only one.
Myth #3: A repricer won’t help if you have just a few products.
If you don’t have a big product range you might think, “Well, I’ve just got 10 products. I could check the prices manually each day and make the decision myself.”
You could do that, but even with a small number of products an automated repricing tool can make a difference. For example, when you reprice manually you can forget how much you paid for an item, and price yourself out of profitability.
But for me, one of the greatest advantages is that repricers take emotions out of the equation when you’re repricing your items. It’s easy to get carried away in the battle to win the Buy Box and keep lowering and lowering your price until you are making a loss. A repricing tool won’t do that. If the current price is lower than you want to sell at, it will just keep you out of the game until prices rise back up – then it will start competing again.
An ever greater fear for me is not raising my price quickly when (for some reason) a product skyrockets in popularity. It happens! I had a board game that’s selling for $42 right now, but not long ago it was selling for $130 because Amazon couldn’t keep them in stock. They were flying off the shelves, and I would have missed out massively if I was a hundred dollars cheaper than the next competitor. Prices can spike up for just a few hours sometimes, and if you rely on manual pricing you could miss that and sell much lower than you need to.
Myth #4: It’s easy to calculate your minimum selling price
If you are selling in only one product category, then the Amazon fees can be reasonably straightforward. When you’re selling in multiple categories it’s more difficult, because the fees vary between categories. Then there’s FBA fees to consider as well. It’s a common rookie mistake to say, “If this item is selling for $20 on Amazon and I can get it for $10, that means I’ll make $10.” It’s not as simple as that.
As a business owner (which is what you are!), you need to factor in all of your costs when calculating your profit. That includes a variety of expenses, but at a minimum, the Amazon fees should be an integral part of your calculations.
But another complication is that your minimum price can change, depending on how quickly you want to sell your stock. If you can afford to be patient, you’ll set your minimum to a price that generates an acceptable profit margin for you. Or if you want to liquidate a particular line as quickly as possible, you might set it to to your total product costs (including fees) or even lower.
Or – a more optimistic example – is an item that you’re selling may go out of print or no longer be generally available. In that situation, I always increase my minimum price to allow everyone underneath me to sell out so I can make my sales at a higher price.
For those reasons, I don’t keep my minimum price set in stone.
Myth #5: Repricers are a “set it and forget it” kind of tool
To some extent, this is true – your repricing software should be a “set it and forget it” tool on a daily basis. But repricers are more like “review, analyze, and assess” tools on a weekly and monthly basis. You shouldn’t completely ignore what they are doing.
It’s worth doing a spot-check from time to time to make sure your repricer is behaving as you expect. It’s quite easy to make a mistake in your configuration and have prices changing in a way you did not intend.
Several repricers have current and historical price reports. These are the key ones that I run:
- Below minimum price
- Above maximum price
- No competing offers
Depending on the results, I might reconsider my minimum and maximum prices and pricing rules.
For “below minimum price” items, I reevaluate my position on the product. Has it declined in popularity? Has it been “outed” as a good product to sell in an arbitrage group? Are there bad reviews or safety concerns?
For “above maximum price”, I try to stay on top of those the most. If it’s a hot selling item, that means demand continued to rise and I’m probably out of stock already. Otherwise, it means competitors have raised the price above my maximum and they are still somehow getting the Buy Box.
“No competing offers” can be complicated. It can mean either that you’re the only seller at all, or that you’re the only seller with a reasonable price. If you’re the only seller, analyze the market and set your price to take advantage accordingly. However, don’t price it too high as Amazon will often suppress the Buy Box if all offers are priced outside of their acceptable range for that product (usually based on the MSRP).
Another thing that can change is the price of products from your suppliers. It is time consuming to check all your cost prices, but it has to be done. I check them every time I replenish an existing item to make sure my costs haven’t changed. If my costs have gone down, I consider dropping the minimum to stay competitive. If my costs have gone up, I’ll want to raise the minimum to stay profitable, or completely rethink my position on that item.
Myth #6: Repricing tools can go haywire and set all your prices to a penny
In the past there have been at least two public cases where exactly that happened: a repricer went rogue and set many sellers’ prices to exactly one penny. Buyers were quick to notice and they exploited it, sometimes clearing out a seller’s entire stock for just a few dollars. Sellers scrambled to cancel orders but many were dispatched before the errors were identified and fixed.
So why is this is a myth?
Well, in early 2014 Amazon started deactivating listings if they detected a potential pricing error. But they provided a blanket opt-out so sellers could choose not to use that feature on any of their listings. Then in early 2015, after the most recent incident, Amazon removed that opt-out (for most but not all accounts) so you have to set minimum and maximum prices on Amazon itself if you want to avoid Amazon using its automatic pricing error detection. Even though the repricing software companies were the ones at fault in these cases, some sellers blamed Amazon and they took action in response.
In short, the fail-safes are now pretty robust. Even if a repricer goes haywire as they have in the past, the Amazon system should step in and prevent them from doing too much damage.
Personally, I’ve never set the minimum and maximum prices on Amazon for any of my listings. I’ve not experienced a rogue repricer myself, or had my prices change in a way that triggered Amazon’s potential pricing error system and deactivated my listings. But I do know the system is there as a final safety net if things go wrong.
Myth #7: You can’t justify the cost of the expensive repricers
There are a few high-end repricing tools that cost upwards of $500 a month. It’s true that you can’t justify this kind of software if you don’t have the right type or scale of business. But there’s a certain volume where the expense of high-end repricers makes sense. One person in a garage has different problems than a business with a warehouse and thirteen employees.
Before you crack a million dollars, I recommend you stay with the affordable $25-$100 a month repricers. Once you crack that level you might be able to justify the expense of high-end repricers, which have additional functionalities for businesses of that scale.
Most multimillion-dollar sellers I talk to tell me they have the kind of problems that the high-end repricers address. Within the past couple of years we’ve seen the development of forecasting tools, for example, and they’re a big piece of functionality you only find in the more expensive tools. The high-end repricers tend to consolidate a range of features into a single application, that you can’t replicate even with an extensive package of lower-end tools.
Myth #8: You don’t need to update your prices more often than daily
It’s not that long ago when daily price changes seemed cutting-edge. But we’ve come a long way since then.
If you have a product which sells more than once a day, daily price updates are unlikely to be sufficient. Particularly in the fourth quarter, when sales volumes and price volatility go through the roof, daily price changes would definitely put you at a disadvantage. The rest of the year, depending on your product mix and sell-rate, there are more opportunities for you to check and readjust your pricing.
I’ve talked to a couple of sellers who thought they should only reprice once a day. They were also adamant that they wanted to do their own repricing. I think a lot of that is down to personality. Some people want to control all the variables while others are willing to let go. Some sellers either don’t trust software or don’t understand software. Those are the people who I’ve known to staunchly defend manually repricing. But once they try a repricer and see a couple of extra sales, it becomes a much easier conversion experience.
However, I think you should do everything yourself at first to really appreciate the value of an automated tool. I tell new sellers, “Don’t pay a penny when you first start out”. Do not pay for a professional merchant account with Amazon. Don’t pay for a repricer. Don’t pay for any other tools. Why? Because you need to understand exactly how Amazon’s ecosystem works, and you need to learn what your pain points are. When you’ve learned all that, and appreciate the pain, you can make much better decisions about how to spend your money.
Myth #9: My customers will be upset if my prices are always changing
The majority of Amazon shoppers today really expect prices to change. Every time I put something in my Amazon cart as a consumer, if I leave it in the cart and go back later, there’s at least one of them that says the price has changed. That’s a given. There are even consumer applications like Paribus which look for price changes and get refunds on your behalf using the retailer’s price-matching guarantees.
Also, on Amazon you have to remember that the buyers are not our customers – they’re Amazon’s. It’s very hard on Amazon to build your own customer base. Even if a buyer wants to buy from you again, there’s no easy way to search for your favorite seller. You have to make an effort to go and find that person’s store. If you sell through your own website or bricks-and-mortar store, maybe your customers there wouldn’t like frequent price changes, but Amazon’s customers have totally different expectations.
However, there are sellers who have totally non-competitive, unique products that lend themselves to repeat purchases. In that case, they may well have loyal customers who buy from them again and again. But a seller who doesn’t have direct competitors also doesn’t need to change their prices frequently. The same tends to be true of private label sellers.
If you have a mix of products that includes items that are in some way unique or exclusive to you, all the repricers can exclude, pause or manually set prices for a subset of products. There’s nothing stopping you from setting a static price that will never be touched.
Myth #10: The more repricing rules a tool offers, the better
From time to time I hear a seller say, “Hey, this is the most complex repricer. I’ve gotta have it.” All those complex rules are valuable if they actually have a business need for them, but often they just want it because it feels comforting to have so many options.
Repricing can be extremely confusing when you start to get into it. It’s very easy to get yourself stuck in the weeds because you are trying to account for every parameter.
So I always ask them, “What is it that you can’t do with your current repricer?” If the problem can be solved with the repricer that they are already using, then that is the best approach to take. I try to make them qualify why they need more pricing rules, and tell me why they can’t do it already.
I like repricers which give you a compromise, with enough variables to automate effective repricing decisions, but also a set of training wheels to start you off on. Several repricers come with a selection of built-in rules that you can pick from to get started. You can also run them in “observation mode”, so you get to see the effect of the rules you chose without it actually making price changes.
Once you’ve seen what action a repricer will take from running its built-in rules, you can start to plan changes that will improve its pricing decisions. You certainly need enough variables to account for the different types of sellers you compete against, but beyond that you should only look for parameters that you see a definite need for in your business.
So look for flexibility as well as a good set of training wheels to get you off to a safe start – not as many variables as possible.
I hope you’ve found this useful. If you have questions or comments go ahead and post them below – I’d be happy to help you out.
This post was by Todd Ryan, a Florida-based IT manager who has been selling online since 1999. He currently concentrates on the Amazon marketplace, growing 100% year-on-year and employing three people in the business.
Todd uses a range of applications, including automated repricing software since 2012. He has tested more than a dozen repricers in the sub-$500 per month range including RepriceIt, Appeagle, Sellery, ChannelMAX and BQool, and regularly advises other sellers on repricing.
Credit: This post was written with Andy Geldman and Delwin Rose Villarey.