News & Insights
Explore the Ups and Downs of Amazon’s Automated Pricing
Every seller on the platform hopes to see their Amazon sales grow. Signing up for Fulfillment by Amazon or building and maintaining an optimized Amazon store are among the most common ways that retailers try to capitalize on the marketplace’s massive base of shoppers.
But many merchants may overlook an option that can help them reach their goal. Whether looking for a way to manage inventory better, trying to find the perfect price for a new product, or one of several sellers competing for the Buy Box on a product listing, Amazon’s automated pricing service is worth exploring. Utilized correctly, the automation service can free up time for other responsibilities and give sellers an all-important edge against the competition.
Fight for the Buy Box with automated pricing rules
Amazon’s automated pricing system relies on rules customized by an Amazon seller to automatically adjust prices on designated SKUs in response to specific events. For example, this could include creating a repricing rule to lower the price of a product when the Buy Box win percentage for that item drops below a certain threshold or when another seller drops their pricing for the same item.
While the automate pricing tool may sound like it takes control out of the hands of a seller, it is entirely dependent on the parameters you set. The automation is designed to save you the time and hassle of manually monitoring every aspect of a product’s status or competition and avoid delays in responding to changing circumstances. Automated pricing only applies to selected SKUs rather than a seller’s entire catalog, and the system can be started or stopped at any time. Sellers using the system can set minimum and maximum prices and other optional boundaries to keep any adjustments within their pricing strategy.
Clearly, winning the Amazon Buy Box is the goal for competing retailers, but automated repricing can also play a role in growing sales for brands that are the exclusive seller of their products on the platform. In addition to creating rules designed to win the Featured Offer, it’s also possible to create an automated pricing structure that helps retailers manage inventory or find the right price for a new product. You can accomplish this by designating how many units you hope to sell during a set time frame and letting the system reprice accordingly.
Getting started with automated pricing on Amazon
Of course, automated pricing is not a strategy to rush into without a proper plan, the good news is that implementing the tool is simple once you’re ready. More importantly, the ability to utilize the service is included in the cost of your selling plan at no additional charge.
As with most of Amazon’s seller resources, automated pricing is initiated via Amazon Seller Central. A “Get Started” button is available within the Pricing tab under the Automate Pricing option. From there, you can create a new rule from scratch or choose from a pre-defined “competitive price rule.” As mentioned, custom rules can be built around pricing, inventory, feedback rating, fulfillment channel or other options.
Once you have selected the appropriate rule, you may choose the SKUs you want it to apply to and the upper and lower pricing limits for that item. Setting the minimum price is especially important to maintaining proper margins for your sales. Assigning rules to SKUs can be done individually or in bulk if you intend automated pricing to work similarly across an extensive catalog of products.
Automated pricing rules will be effective almost immediately. While it may take up to 15 minutes for price changes to appear in product listings, the repricing adjustments will occur as soon as actions within the Amazon marketplace trigger a rule to direct an adjustment.
Even with this Amazon automation tool in place, monitoring your price updates is important. This can be done via the automate pricing page and by accessing the business sales reports that are available in Amazon Seller Central. One metric to pay particular attention to is how automated pricing impacts your Buy Box win percentage.
Pricing strategies can avoid a race to the bottom
Whether they are the only retailer carrying a product, or one of many, every brand looking to succeed on Amazon should take a deliberate approach to price. As e-commerce continues its rapid growth, pricing policies will become more critical for retailers and manufacturers. Online sales will likely continue their growth trend while consolidating among the largest online retailers, including Amazon. As this happens, the desire of smaller resellers to compete with industry leaders is more likely to lead to destructive price wars for products that aren’t backed by effective pricing strategies.
Implementing effective pricing policies can help companies create mutually-beneficial relationships with retailers and shoppers. Any resellers, whether on Amazon or elsewhere, will appreciate the support from the brand that protects their margins. At the same time, consumers will enjoy more confidence in the value of a product and a less frustrating shopping experience due to the consistency across both e-commerce and brick-and-mortar stores. In addition to the positive impacts a successful Amazon pricing strategy can have on a company’s retailers and customers, there are also substantial benefits for the brand. Prioritizing margins and protecting retailers from price wars significantly increases a brand’s value.
If your business operates under a Minimum Advertised Price (MAP) policy, be sure to account for it with any automated pricing rules you create. MAP is the minimum price a retailer can advertise for a product it sells. It applies to any retailer who carries the item and is intended to level the competition among sellers and avoid price wars. It differs from the more familiar Manufacturer’s Suggested Retail Price or MSRP, which refers to the amount a manufacturer thinks a product should sell for. It does not create any restrictions on the advertised price. Brands can use MAP pricing to control the gap between MSRP and advertised prices. In this way, they can avoid the less-than-ideal message that a product is worth substantially lower than what the brand suggests.
If other retailers sell your product on Amazon, you don’t want your focus on winning the Buy Box to undercut your MAP policy and create a race to the bottom. When a reseller opts to go below an established MAP price, automated pricing can lead you to follow suit and quickly eat into your profits. Therefore, monitoring and enforcing MAP violations diligently as they arise is critical.
Unfortunately, Amazon does not proactively enforce a MAP pricing policy and, in some cases, can be guilty of violations itself. Therefore, to truly protect your brand value, you’ll need effective MAP monitoring of the sales of your products. However, patrolling physical stores and online retailers like Amazon and Google shopping can be time-consuming, so you may need to use a third-party tool or agency team to do so correctly. Also, remember that platforms hosting your authorized or unauthorized retailers may not be active participants in your efforts.
Automated pricing won’t make winning automatic
While it may make your efforts to succeed on Amazon more efficient, automated pricing won’t guarantee growth. For one, you may not always be able to beat a competitor. Multiple sellers may have a rule directing a SKU to drop below the lowest listed price. In this scenario, the pricing will adjust immediately to the lowest minimum price for all sellers.
Automated pricing could also leave money on the table for companies with an exclusive product. If a competing retailer exits the marketplace, the remaining seller’s prices won’t increase automatically. The opportunity to raise a product price due to being the only seller must be done manually and requires paying close attention to the current market.
Due to shipping costs and time, many shoppers are attracted to products that are fulfilled by Amazon and opt to buy from an Amazon FBA seller rather than purchase the identical product from a third-party merchant. However, creating a pricing rule that accounts for those preferences can be complicated, especially for sellers new to automated pricing. If your product faces competition from both FBA and Merchant-fulfilled sellers, it may require additional effort and expertise to create a set of rules that responds appropriately to maximize sales and profit margin.
Trust Amify to grow your Amazon business
If building dynamic pricing rules to support your business seems overwhelming, you don’t have to face the challenge on your own. Since 2011, Amazon sellers have trusted Amify to help them win the competitive Buy Box and achieve success in the marketplace.
Our team of experts can help you navigate the platform’s extensive landscape of options and fill the gaps holding back your brand’s growth on Amazon. Contact us today to ask how.