Best Practices for Amazon Marketplace Pricing
Selling on Amazon.com? Whatever pricing strategies you use for your other channels, even if they’re successful, you’ll still want to create a standalone, well-thought-out approach to how you price your products on Amazon. There are two reasons for this. First, it’s such an enormous and important retailer that how you price your products there can affect not only your bottom line but also your brand’s reputation. And second, Amazon is probably the most price-sensitive shopping platform in the world.
So let’s review some of the key pricing considerations any brand owner or retailer needs to make when developing a strategy for Amazon marketplace pricing. In this post, we’ll discuss:
- How the different Amazon selling arrangements affect your level of pricing control
- How to handle reseller pricing compliance (including compliance from Amazon Retail)
- Pricing strategies and best practices for Amazon sellers
How the Different Amazon Selling Arrangements Affect Your Level of Pricing Control
The first thing to understand about Amazon pricing is that your ability to control or influence how your products are priced there will be determined largely by how you are selling those products on Amazon.com.
Let’s examine this in more detail, from the highest degree of control to the lowest.
Complete pricing control:
If you are the exclusive third-party seller (3P) for your products, you will obviously have total control over how your products are priced on the Amazon marketplace.
As you add more resellers, however, those resellers will be competing against each other on Amazon (and elsewhere) for the same buyers. This means you will obviously lose some control over your products’ pricing.
Some control (or at least influence) over your pricing:
If you’re going to sell through several retailers on Amazon, your best strategy will be to establish an authorized dealer program and allow only those authorized dealers to acquire and sell your products.
Still, you will need to keep a close eye on these resellers at all times. Yes, you’ve vetted these sellers, and they all have something to lose by violating your pricing guidelines. But the competition on Amazon is fierce, and even your authorized retail partners might at times be tempted to sneak their way up in the search results or into the Buy Box by dipping their advertised price of your product below your approved levels.
This is why a key component of any Amazon pricing strategy is to develop and enforce an intelligent MAP compliance program.
Another option here would be selling through Amazon Retail. But even if you make Amazon Retail your brand’s exclusive seller on their marketplace, you can’t assume or expect total MAP compliance.
Although the company’s official policy is to abide by brands’ MAP pricing, the truth is Amazon Retail gives itself an enormous caveat in its policy: It also states it will match or beat any seller’s price, anywhere. In practice, this means that if any retailer (even one not authorized to sell your products) advertises your products below your MAP pricing, then Amazon Retail gives itself permission to violate your MAP policy as well.
This is why another key component of any effective pricing strategy is to stop unauthorized Amazon resellers.
No control over your Amazon pricing:
Unfortunately, this is what happens to many brands and manufacturers, because they don’t think through their pricing strategy on Amazon.
If you don’t maintain any distribution control — no authorized wholesale program, no authorized dealer program, no checks on how your internal sales force sells your inventory — you can expect all sorts of grey-market sellers and other unauthorized 3Ps to list your products on Amazon at MAP-violating price levels.
It’s also worth pointing out here that Amazon itself tends to stay out of pricing-guideline disputes between brands and retailers. So if you don’t implement these controls upfront, and you find retailers advertising your inventory on Amazon at prices that violate your policy, you probably won’t find much recourse if you ask Amazon for help.
How to Handle Reseller Pricing Compliance on Amazon (Including Compliance from Amazon Retail)
The disappointing answer here is that there is no surefire, guaranteed solution to keep all violations of your MAP or MSRP policy off of the Amazon marketplace at all times. There are too many retailers out there — including unauthorized 3Ps who use deception to acquire your inventory — and Amazon itself often favors the retailer offering the lowest price.
And remember, Amazon in most cases will not intervene if you complain that a seller is advertising products below your MAP. In fact, Amazon Retail itself might advertise below your MAP if it spots another seller doing so elsewhere.
So, to give your brand the greatest chance of success in enforcing your reseller pricing policy on Amazon (and elsewhere), you’ll want to implement an effective, automated MAP monitoring and enforcement software app.
Pricing Strategies and Best Practices for Amazon Sellers
One of the most important things to understand about Amazon is that the marketplace weighs price heavily in deciding which sellers’ listings to reward with high search results or the buy box. If your products are priced higher than the identical items listed by other Amazon sellers, shoppers might never even see your listing in a search.
The lowest price isn’t the only factor in determining whether a given seller’s listing will get the best placement. Amazon also takes into account other things, such as seller history, whether or not the item is in stock, the number (and ratings) of customer reviews, etc. But, yes, price is a major consideration.
That means you’ll need to be very strategic about how you price your products on the marketplace. Here are a few best practices to consider.
Factor shipping fees into your pricing
When reviewing the list of competing sellers offering the same product, the Amazon algorithm quickly calculates the entire price of each offer — including shipping and related charges. That means you need to factor in shipping, and whatever other fees a shopper will have to agree to when calculating the final price of your product on Amazon.
Don’t underprice just to be the lowest
Most Amazon experts agree that it’s a bad strategy to intentionally price your products below those of all similar items, hoping to show up higher in shoppers’ searches. Because Amazon also weighs factors other than price in positioning sellers’ listings, this strategy will be no guarantee you’ll rank higher. Worse, consumer psychology suggests shoppers could see you as a low-quality brand or a company just trying to dump unpopular inventory.
Make sure your listing is a viable “Buy Box” candidate
More than 80% of all Amazon sales begin with the Buy Box — the box on every product detail page where shoppers can click to start the purchasing process. No wonder it’s one of the most sought-after positions to be in as an Amazon seller.
If you employ smart, disciplined strategies as an Amazon seller, you might find yourself on the shortlist of “Other Sellers on Amazon,” below the Buy Box. But even then the odds are obviously low — less than 20% — of your company earning that sale over the Buy Box holder.
So it’s important to take into account the key factors Amazon considers when deciding which seller will earn the Buy Box position in any shopper’s search. Those factors include:
– Fulfillment method
(Fulfillment by Amazon is your best bet here.)
– Competitive pricing
– Whether the item is in stock
– Customer reviews
(How many, and how positive the overall feedback.)
– Shipping options and costs, and delivery time
(Amazon obviously favors more choice and the option for faster delivery.)
Need help figuring out your company’s strategy for Amazon marketplace pricing? Talk to a TrackStreet Amazon marketplace specialist.