An absolute titan of e-commerce, Amazon is one of, if not THE, biggest e-retailers on the planet. It is a household name that pretty much everyone has used to buy or sell at least once at this point, and it is THE place to go to for selling products, for companies both old and just starting up.
And a good chunk of this success is just as much to the sophisticated logistical support and financial strategies that Amazon has created for itself as it is anything physical.
Take, for instance, Amazon’s pricing strategy. This one strategy and business model might just be one of the most important factors that have allowed Amazon to stay at the top of the e-commerce game, as well as making sure that customers are always receiving the best deals that they can.
So, how exactly does it work? What goes into making this system work? And how much does it cut into a seller’s profits if they are selling through Amazon?
Businesses and individuals looking to sell their items will be particularly interested in the answer to that last question!
Fortunately, our guide answers all of this, and more!
Amazon’s Pricing Model - What Is It?
Before we go any further and start discussing how sellers can use Amazon’s pricing strategy, we should probably give an overview of what exactly it is.
As we stated in the beginning, the Pricing Strategy that Amazon uses is the system that allows Amazon to sell the products that are available in their store at the lowest price possible.
This sounds rather simple until you realize that Amazon’s prices aren’t fixed, and are often constantly changing to remain the cheapest options for buyers on the market.
Why Buyers Would Want This?
Now, this may seem like a detriment to sellers of Amazon, as the overall price that their products are selling is less than they may be wanting.
So, why exactly do sellers still choose to… well, sell, on Amazon?
Well, aside from the fact that Amazon opens sellers up to an enormous market of potential customers, Amazon’s pricing strategy means that lowering the price of your items means that your product will still be a viable option for customers who are looking for the best deal for their money.
Plus, this is a way for sellers to create some kind of solid audience for their product if it works well enough, helping establish some brand loyalty for your items.
And given how big Amazon Marketplace is, that’s a very enticing offer to sellers!
Plus, lower prices give sellers a better chance at appearing in the Buy Box
What Is The Buy Box?
You know that little white box that appears on the right side of a product on Amazon when purchasing it? The one that has other price listings for an item that you are adding to a purchase?
That is the item box, and it is a field that many sellers are often fighting to get into if they are selling similar or the same items. Keeping your prices low and getting into the buy box is the equivalent of appearing on the first page of a Google search result, which is something that you want to happen to your product!
How Are Items Priced?
So, how exactly do sellers price their items on Amazon?
Well, there are a few different ways that a person or business sells on Amazon, but the ultimate goal is the same: Make sure that your transactions remain profitable for you, whilst also giving customers the best deal they can get on a given product.
Quite often, this means lowering the price tag on a given product for it to appear in a buy box for a product, but there are other ways of being found by customers.
Better Search Results
One of the other most popular ways for sellers to garner more attention to their product is to optimize their product for specific searches through Amazon Marketplace, in the same way, that SEO works for internet search engines.
This often means that their products appear higher in a given search, and increases the chance for buyers to click through to their items and make a purchase.
Many sellers will often make their products seem more appealing by accruing more positive reviews and ratings for their product, which in turn will allow a product to rank higher in a search result.
Pricing Items On Amazon
So, while we’ve discussed factors that can affect a seller’s choice of pricing, how exactly are products themselves priced through Amazon? After all, a few cents or dollars above or below an appropriate price range, and a seller can find themselves losing money instead of making it!
It all comes back to Amazon’s pricing strategy, and how you can use the various pricing plans and strategies to better meet your business’s own financial goals when selling your products.
Dynamic Pricing Strategy
This is the pricing strategy that Amazon is best known for, and one that adjusts the price of products as competitors raise or lower their prices.
Considering that consumers today are arguably more informed than they’ve ever been with their products, this is a vital step in making sure your product is viable in a volatile market.
Keeping your product competitive is the name of the game here, and helps you decide on the highest and lowest products that you’re competing with directly.
Manual Repricing
While not quite as popular, Amazon does also allow for manual repricing of your items. This strategy is pretty time-consuming and intensive on your part, however, and is only viable if you know you are selling only a few items.
Algorithmic Repricing
While this pricing plan is expensive, this strategy does often allow sellers to get into buy boxes, without having to be the cheapest available product on offer at Amazon.
Final Thoughts - How Effective Is Amazon’s Pricing Strategy?
So, as you can see, the fact that so many sellers are prepared to compete with each other on Amazon means that these pricing strategies are pretty helpful for your business on the site, all things considered!