This is how you outshine your competitors on Amazon with Dynamic Pricing!
Anyone who sells professionally on Amazon cannot avoid one topic sooner or later: Amazon Dynamic Pricing. The automatic adjustment of prices has long been common practice, whether in the area of retail goods or private label. Repricing has become an integral part of the online and even offline world. Even buyers have become accustomed to price fluctuations on the Amazon marketplaces. In contrast to repricing, the variant of Dynamic Pricing is not yet so well known. For this reason, it has the potential to put pressure on the competition.
However, especially the product prices of competitors play a significant role. But factors such as the margin, the most purchasing power time of day, or the desired sales volume are also taken into account in Dynamic Pricing. There are many Repricer on Amazon – why should companies trust a tool that allows for a dynamic pricing strategy? One could also manually adjust the prices or simply use Amazon’s free repricing tool. Or maybe not?
Spoiler: Because it doesn’t work or even harms.
Why Dynamic Pricing is the solution on Amazon instead? We will find out together in this blog post.
Dynamic Pricing on Amazon: Definition
Dynamic Pricing refers to the price adjustment using software based on the current market situation on Amazon and generally in eCommerce. In particular, the product prices of competitors play a significant role. But factors such as the margin, the most purchasing power time of day, or the desired sales volume are also taken into account in Dynamic Pricing.
Amazon Repricing for Advanced Users: Dynamically into the Buy Box
Price fluctuations are normal on Amazon, but not everyone has yet discovered dynamic pricing in the stricter sense. Of course, as soon as sellers manage their prices using a tool, it is referred to as repricing – but there is often little dynamic about it. Instead, rigid rules dictate what the tool should do under what circumstances. The “dynamics” here usually only go in one direction, namely downwards.
This has brought rule-based or static Repricer and thus repricing in general into disrepute. Even though a good Dynamic Pricing strategy on Amazon looks very different. Because if everyone only lowers their prices, it leads nowhere except to the limits of what is still a margin – or even below that. Such price wars have existed and still exist on online marketplaces. However, selling without profit or even at a loss should never be an option for a business.
Manual pricing as a solution?
At the same time, it is immensely important for Amazon sellers that as many of their offers as possible win the Buy Box, and the product price plays a crucial role in this. After all, around 90% of all transactions are made through the small yellow box in the upper right corner of the product page. Those who slip into the list of other sellers hardly get a piece of the pie anymore. Furthermore, there is a persistent rumor that the Buy Box can only be won and maintained with the lowest offer price.
What is the Buy Box?
The Buy Box is the focal point on Amazon. Dynamic Pricing is an important part of the sales strategy, but not the only one. Read here why the shopping cart field has such significance and how you can ensure that your offer wins the Buy Box: Everything important about the shopping cart field.
So what then? If static Repricer only lead to price decline and negative margins, is the conclusion then to adjust product prices manually? This approach is feasible if you have a maximum of five products and work at least 24 hours a day. Because for this, companies would have to:
Sounds not only unrealistic, it is.
The bad news is that a person cannot possibly weigh all the factors against each other that influence the algorithmic decision-making mechanisms that determine the offer in the shopping cart field. The good news is that no one has to, because there is intelligent Dynamic Pricing software for eCommerce.
What do Amazon tools with Dynamic Pricing technology do differently?
The question now is why dynamic prices help Amazon sellers not only to prevent a price war but can even ensure that the price of a product rises in the long term. Yes, you read that right, the price range of a product can shift upwards on Amazon through Dynamic Pricing. But more on that later.
First of all, it is important to know how an intelligent, dynamic Repricer works. It continuously analyzes the market situation and registers every price change or shift in the structure of competitors on a product. Based on this mass of data, the user’s prices are then adjusted – not according to the same rules that static tools do, but adapted to the requirements of the market and their own market share.
If Amazon now reports back to the software that the user has won the Buy Box with a certain price, the work of a rule-based Repricer like that of Amazon would be done. Dynamic Pricing tools like the SELLERLOGIC Repricer, on the other hand, raise the user’s product price again until the optimal, that is, the highest possible price that can still maintain the Buy Box is set.
Because as mentioned: It is not necessarily the cheapest battle price that gets the shopping cart field, but also the shipping duration, the shipping method, and many other factors play a significant role. In this way, the SELLERLOGIC Repricer not only achieves the Buy Box, but also the highest possible price for the user, thereby increasing sales and margin simultaneously.
Amazon’s internal price range
By the way: Amazon sets an internal price range for each product, within which offers qualify to win the Buy Box. By using Amazon Repricer that support Dynamic Pricing, this price range can be shifted upwards, allowing the Buy Box to be maintained at increasingly higher prices.
And Private Label? The right strategy is key!
Due to the focus of many tools on the Buy Box, it is not surprising that Dynamic Repricing on Amazon is particularly common among sellers of retail goods. However, the really good tools can do even more and offer additional optimization strategies alongside fully automated price adjustments for the shopping cart field. This makes such tools interesting for sellers of Private Labels, who typically occupy the Buy Box automatically with their listing.
These include, for example, time-based and sales-based strategies that allow the price to be adjusted according to the time of day or current demand on Amazon. Dynamic Pricing in eCommerce using software is thus also capable of improving the ranking of a listing in Amazon search or boosting demand.
If many price fluctuations of a Private Label product are noticeable on Amazon, it is likely also related to the use of an Repricer. The SELLERLOGIC Repricer also offers such pricing strategies. These include, for example,
The Amazon Marketplace and Dynamic Pricing: Is it legal?
Clear answer: Yes! Amazon even has an interest in this, as dynamic price adjustment not only allows sellers to increase their margin – it also generates more revenue for Amazon in the form of commissions. The more attractive the marketplace becomes for new sellers, the more offers are listed, which in turn attracts new customers.
This is also reflected in the fact that Dynamic Pricing tools have access to the AWS interface at Amazon, and providers must undergo extensive audits to, for example, accredit the security of their servers.
Conclusion: Dynamic Pricing is on the rise on Amazon
Amazon without dynamic pricing is hardly imaginable, even if not every seller has recognized the advantages yet. In the future, especially those sellers will be successful who manage their prices using intelligent Big Data software. A study has already shown that 50% of offers make more than 14 price changes per day and that Dynamic Amazon Repricing is more profitable.
This study clearly shows: Those who want to sell successfully on Amazon cannot avoid dealing with repricing in the long run. However, it should be ensured that it is a dynamic tool that can be adapted to the needs of the user.
Frequently Asked Questions
Under “Dynamic Pricing,” Amazon, as well as in general eCommerce, refers to price adjustment using software based on the current market situation. In particular, the product prices of competitors play a significant role, but factors such as the margin, the most purchasing power time of day, or other factors are also taken into account.
In contrast to rule-based Repricern, dynamic pricing tools incorporate a wide range of different factors into price adjustment using Big Data. This allows them to respond much more effectively to shifts within the price structure of a market. Additionally, for example, the SELLERLOGIC Repricer raises the product price again after the profit of the Buy Box, preventing a price war. On the other hand, however, retailers must partially relinquish control and trust the tool.
Especially for traded goods, it is hardly possible to sell successfully on Amazon without Repricer. This is because there are far too many price changes per day for manual price adjustments. However, private label products can also benefit from the time- and sales-based strategies that the SELLERLOGIC Repricer offers.
The most important factors are the prices and price changes of competitors as well as the general price development. However, the shipping method (FBA vs. FBM), shipping speed, current demand, or the overall performance of the seller can also be important.
Yes, in eCommerce in general and also on Amazon, dynamic repricing is allowed.
Image credits in the order of the images: ©ZinetroN – stock.adobe.com / ©Alex from the Rock – stock.adobe.com / ©Blue Planet Studio – stock.adobe.com
