Sponsored Link
Email This Post Email This Post

The Impact of Amazon’s New Pricing Tool

Amazon has launched a repricing tool in beta mode that could have a big impact. Why? Prices change quickly on Amazon as new merchants and new inventory enter the market, other inventory is sold or exits, and conditions change. Sellers need an easy way to keep their prices competitive without having to manually analyze and make changes to their Amazon stock.

EcommerceBytes blogged about the new Automate Price by Amazon tool on Wednesday with a link to Amazon’s video on Youtube. The company explained in the video, “Identify the maximum and minimum price limits you’re comfortable with and Automate Pricing will automatically adjust your prices within the prescribed range.”

There are many “repricing” services from third-party vendors designed to help sellers set up automated rules to maximize pricing efficiency while maintaining margins.

XSellco’s Victor Corcoran said at first glance, Amazon’s tool, called Automate Price by Amazon, seemed to be a pretty rudimentary offering that could perpetuate the dreaded “race to the bottom.”

However, he said winning the Buy box is about more than just price. “For example,” he said, “pricing down to beat a seller with a poor rating will probably mean surrendering margin unnecessarily as you may well have won the Buy Box anyway.”

He pointed out that advanced repricing tools take into account many parameters when determining what price point to set. “Key among these are ratings, stock levels, margin expectations, competitor inventory and many more.”

Alasdair McLean-Foreman of Teikametrics said, “Since the bulk of successful retailers on Amazon are already using some kind of automation, I think the effect to the market price largely won’t be impacted. There may be a short-term correction, but based on the existing competitive dynamics we believe the equilibrium prices will remain largely unchanged.”

While Amazon has yet to announce the program publicly, Ryan Wateska, founder of a seller sourcing group called Amazing Flips and Tips, published a Youtube video that shows screenshots of the new tool (beginning at about minute 7:30).

When creating a pricing rule, sellers choose the price they want to reprice by – the Buy box price, or the lowest price.

They then choose either:

“Stay below the Buy Box price by a specified amount”

“Match the Buy Box price”

or, “Stay above the Buy Box price by a specified price”

and indicate the amount in either dollars or a percent. Sellers can also limit which offers they reprice to, choosing to reprice against “All offers for the same ASIN and condition”; or “Specific types of offers.” They can limit repricing activity to FBA or non FBA offers, and they can also exclude Amazon offers.

If sellers choose to reprice against the Lowest Price instead of the Buy Box, they have other options, such as limiting to “only offers with the same or better sub-condition,” and “only sellers with a feedback rating within 5% of yours or higher.”

One of the most important features is the “minimum price” field – otherwise sellers could literally end up giving their products away. As Wateska alludes to in his video, users who are new to repricing must be extremely careful or they could make some costly mistakes.

Some sellers have always been skeptical of repricing practices. One seller discussing the new Amazon repricing tool pointed out that unsophisticated sellers could make a mess of things with their prices that could have an impact beyond their own listings.

McLean-Foreman told EcommerceBytes, “I think it’s important for retailers to clearly understand their profitability. Optimizing for pricing with tools provided by Amazon isn’t the full picture. Our team of experts works with every client to optimize for profitability which should be the ultimate goal for any retailer.”

In addition, XSellco’s Corcoran pointed out that sellers may be reluctant to share their pricing strategies with Amazon: “Will sellers trust that Amazon won’t use the min and max data to optimize Amazon’s profit ahead of the seller?”

Comment on the EcommerceBytes Blog.

Ina Steiner on EmailIna Steiner on LinkedinIna Steiner on Twitter
Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.