Understanding Amazon Pricing

Importance of the buy box

The 83% of sales come from seller who hold the buy box.  The Buy Box rotates between sellers (including Amazon) who have Buy Box Eligibility and are competitively priced.

Although pricing is a major factor, having the lowest price does not guarantee the Buy Box. The Buy Box price is not always the lowest price on Amazon.

The Buy Box is only for items in new condition.

Buy box ranking factors

Amazon uses a wide range of factors to govern which seller wins the buy box.  The most important of these are:

  • Fulfilment method.  Amazon will award the buy box to Prime eligible sellers (FBA or SFP) over other sellers
  • Landed price.  The landed prices is price + shipping.  This is a vitally important ranking factor but not the only one.
  • Shipping time.  Offers which can be shipped more quickly will get better placement
  • Seller performance.  The performance of the seller including feedback, online shipping rate, valid tracking rate and order defect rate are all considered.

Note: Not all sellers are eligible for the buy box.  For example, new sellers are not eligible for several months.  Sellers with an Order Defect Rate (ODR) of over 1% are also excluded.

Dynamic pricing

When trying to win the buy box, a small change in pricing can make a huge difference to sales.  Changing the price by as little at £0.01 is the difference between 1st and 2nd place.

If you are repricing a large number of SKUs then it will be necessary to automate the process.  This required setting a minimum and maximum price and varying prices between these based on the competition.

Amazon’s Automate Pricing tool

Amazon has its own dynamic pricing tool which can be found at Pricing + automate pricing.  Merchants create pricing rules and then assign these to SKUs.  Pricing options are:

  • Competitive Price Rule by Amazon. Match the Featured Offer price, on all offers for the same ASIN and condition. Also compare with prices from retailers outside Amazon.
  • Customised pricing rule – Buy Box.  Matches against the buy box price
  • Customised pricing rule –lowest price.  Matches, or beats the buy box price by a set amount
  • Customised pricing rule – external price.  Matches, or beats the Buy box and an external price by a set amount.
  • Customised pricing rule – sales volume.  You can decrease the price of your SKU based on the sales volume target that you select within a set time period.

Amazon’s dynamic pricing tool is free to use and simple to set up.  It also works across multiple Amazon sites. It does however miss some of the advanced features available in third party tools

3rd Party pricing tools

There are many third party dynamic tools on the market which aim to optimise sales. Their advantage over Amazon’s tool is that they provide a wider range of functionality, for example:

  • Filter sellers by feedback
  • Filter sellers by delivery time
  • Reprice based on landed price
  • Time based repricing

The range of rules can be bewildering so it is best to keep the rules as simple as possible.

Pricing Health

Amazon’s pricing health dashboard will give you information on the pricing health of your products including:

  • Pricing health.  Price alerts from Amazon where they deem to price too high or too log
  • Fix pricing alerts.  Alerts where the set price is outside the set min/max
  • Automate pricing.  As discussed above
  • Fee discount.  Certain product may have fee discount available if the price is reduced.

Conclusions

Pricing is a very important factor for optimising Amazon listings.  A small change in pricing can increate your buy box percentage and lead to a step change in sales.

If you are managing a large catalogue you will need a tool to manage your pricing. The Amazon Automate pricing tool is a good tool to start with but for better performance consider using third party tools