Amazon Pricing Strategy Explained: Tips to Compete in E-commerce

As an Amazon seller, you have lots of competitors to compete with. To beat your competitors, you must have a solid strategy that meets your business goals. But what is that Amazon pricing strategy?

The answer to this question might depend on every business. But you should know that your strategy should include a pricing model focused on the competition behind Amazon. And this is the topic of today’s article: Amazon pricing strategy.

Since Amazon is one of the leaders in the e-commerce industry, many online stores create an Amazon store to get more traffic and drive sales. But the price wars behind Amazon can be intense, and retailers need help to keep up with them. For this reason, Amazon sellers have adopted various pricing strategies that offer frequent price changes.

Let’s look at Amazon’s pricing strategy in detail, and then we will explain some tips that can guide you to compete in the e-commerce marathon. 

Amazon Pricing Strategy

Amazon has been known as a consumer-centric marketplace from day one. This consumer-centric mindset has shifted Amazon to create an Amazon Prime membership for online shoppers. With this service, Prime members have access to special deals.

For retailers to get Prime members into their stores, they must offer attractive prices. And after providing competitive and dynamic prices, retailers can grab customers’ attention more than usual and increase their sales. It is not only for their profit margins but also one of the best ways to do it is to win the Amazon Buy Box, which asks for offering effective pricing strategies and getting good customer reviews. But Amazon states that pricing is one of the significant factors in winning the Buy Box, which is why Amazon pricing strategy is essential for sellers.

Now, we will explain pricing strategies you can adopt on Amazon.

Dynamic Pricing Strategy

Dynamic pricing is viral on Amazon, and in e-commerce, most of the sellers love it! The difference is that Amazon sellers can use Amazon tools to price their products. Even though it has many limitations, some sellers might benefit from it.

Since dynamic pricing is a strategy where you always reprice your products, it is the same for Amazon too. You can set up pricing rules only on SKU levels, you have limited customization rules, it doesn’t increase your prices, and most importantly, once you win the Buy Box, you cannot do repricing. These limitations might allow you to price your products differently than you wish. Therefore, working with third-party automatic pricing tools can be an effective strategy. You can create any rule you want and wouldn’t have to be limited to any level.

Rule-based Repricing Strategy on Amazon

Repricing is one of the most common pricing strategies for Amazon sellers, and retailers can apply repricing manually or with automatic pricing solutions. Since there are rapid price changes on Amazon, it can be time-consuming and a waste of effort for online sellers, and that’s why automated pricing tools are a great way to reprice products.

Online sellers can reprice their products by comparing competitors’ prices. For example, they can create a rule such as, “Price my product $5 lower than my highest competitor.” or “Price my product $10 higher than average price.” While creating these repricing rules, retailers can see their competitors’ prices from the dashboard if they work with competitor price-tracking solutions. These tools can give retailers the ability to control their price positioning in the marketplace they are selling. This strategy can help retailers win the Buy Box, which is essential for Amazon sellers. 

Algorithmic Repricing Strategy

Algorithmic repricing is about pricing your products with a program that considers several factors by percentage to determine the best price. It is considered to be one of the best practices for Amazon pricing. But pricing your products with a whole bunch of numbers can confuse many sellers on Amazon.

This Amazon pricing strategy can be tricky because your pricing should also be consistent with your brand image. That’s why creating some upper and lower limits for your price can be a good strategy if you want to apply algorithmic repricing.  

Takeaways

Amazon has been a consumer-centric marketplace from day one, and this continues to become its primary focus. That is the main reason why Amazon pricing strategy is essential. Amazon wants online shoppers to be satisfied with prices while shopping. At that point, online sellers can learn and adopt new pricing strategies to meet their customer’s needs. If you want to find out major pricing strategies on Amazon, follow the tips explained above in the article while explaining each method. You will offer the best price for your customers and get the most out of every sale!