This is how you outshine your competitors on Amazon with Dynamic Pricing!
Anyone who sells professionally on Amazon cannot avoid one topic: 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 a fixed 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 as well known. Precisely 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 Amazon Repricers – why should companies rely on a tool that allows for a dynamic pricing strategy? One could also adjust prices manually 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, we will find out together in this blog post.
Dynamic Price Adjustment 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 often there is 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 repricers 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. Furthermore, the rumor persists that the Buy Box can only be won and held 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 is so significant and how you can ensure that your offer wins the Buy Box: Everything important about the shopping cart field.
So what then? If static repricers only lead to price decline and negative margins, is the conclusion to manually adjust product prices? 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 also to ensure that the price of a product can increase 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 use, but tailored to the demands of the market and the user’s 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 Amazon’s 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.
As mentioned: It is not necessarily the cheapest battle price that gets the shopping cart field, but also the shipping duration, shipping method, and many other factors play a significant role. In this way, the SELLERLOGIC Repricer not only wins the Buy Box but also achieves the highest possible price for the user, thereby increasing both 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 repricers 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 on Amazon, dynamic repricing is especially 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 a 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
It is hard to imagine Amazon without dynamic pricing, even though not every seller has recognized the benefits yet. In the future, especially those sellers who manage their prices using intelligent Big Data software will be successful. 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 is essential to ensure that it is a dynamic tool that can be adapted to the user’s needs.
Frequently Asked Questions
Dynamic Pricing on Amazon, as in general eCommerce, refers to the 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 repricers, Dynamic Pricing tools incorporate a wide range of different factors into price adjustments 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 winning the Buy Box, preventing a price war. On the other hand, sellers must partially relinquish control and trust the tool.
Especially for retail goods, it is hardly possible to sell successfully on Amazon without a repricer. This is because there are far too many price changes occurring per day for manual price adjustments. However, Private Label products can also benefit from the time-based and sales-based strategies offered by the SELLERLOGIC Repricer.
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, and the overall performance of the seller can also be important.
Yes, Dynamic Repricing is allowed in eCommerce in general and also on Amazon.
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
