When it comes to selling a product on Amazon, there are a number of variables that go into how a product should be priced—production costs, shipping, Amazon FBA storage fees, Amazon marketplace seller fees, etc. Defining a strong Amazon pricing strategy is key to both sales and profit success on the marketplace. After all, a high margin can only generate profits if the consumer is actually willing to purchase the product.
So what is an Amazon pricing strategy? At its core, it’s the same as any other pricing strategy that a business develops, with a few exceptions. An Amazon pricing strategy also accounts for the additional fees that come with selling products on Amazon. In addition to charging for each product sold on its platform, Amazon fees can vary depending on the category that a product falls in, as well as its size and weight. Either way, Amazon is guaranteed to take a chunk out of your profit margin—making competition for Amazon’s Buy Box all the more challenging. For some expert tips on navigating these fees and other seller strategies to get you started selling on Amazon, check out our Amazon Seller Requirements resource.
Whether you’re an Amazon wholesale seller, engage in retail arbitrage, or manage your own private label brand, it’s important to price your products to hit the sweet-spot between profitable margins and sales velocity—and knowing that Amazon’s algorithms factor in pricing when determining which seller wins the Buy Box only further complicates things. In addition to staying competitive on the marketplace, without an optimized Amazon marketing strategy, customers might not even see your product in the first place.
Defining an Amazon pricing strategy can seem daunting, that’s why our team of experts has put together this article to walk you through everything an Amazon wholesale seller needs to know to increase their chances of winning the Buy Box while maximizing profits per product sold.
If you are struggling to figure out how to price a product for retail, the good news is that you can change your product's pricing anytime you want. Prices that are automatically updated based on market conditions have been a big part of the Amazon business model, and it is estimated that Amazon makes up to 2.5 million changes per day to its catalog.
This strategy of continually adjusting the prices of products based on market conditions is known as Amazon dynamic pricing, and an Amazon dynamic pricing strategy is a great way to increase Amazon sales. Making use of a dynamic pricing model allows you to adjust the price of your products based on a variety of factors in order to ensure that your product pricing is always optimized for current market conditions. Dynamic pricing also makes it easier to win the Buy Box for a product since it allows you to undercut any new competitor who starts offering a lower price for your product.
However, executing a dynamic pricing strategy can be a time-consuming task. Amazon is able to automatically adjust the pricing of its own product using dynamic pricing algorithms, but the company does not offer these same algorithms to individual Amazon sellers. Without the ability to create an automated dynamic pricing strategy, sellers are forced to manually monitor market conditions and update prices to take advantage of the dynamic pricing model.
Thankfully, there are third-party software solutions that allow sellers to create automated dynamic pricing strategies for their Amazon products. Working with an Amazon seller consultant is another great way to eliminate the burden of having to implement an Amazon dynamic pricing strategy on your own. However you go about it, though, continually updating your product pricing based on market conditions such as supply, demand, and competition is a great way to continually optimize the price of your Amazon products.
Amazon gives its sellers freedom to define how much to sell their products for, however the platform does have a set of guidelines, called Amazon Marketplace Fair Pricing Policy, that are intended to prevent “pricing practices on a marketplace offer that harms customer trust.” Each Amazon seller must adhere to these rules and refrain from:
Instances of manipulating pricing to deceive or take advantage of Amazon customers are regulated by the marketplace—sellers who repeatedly break Amazon’s Fair Pricing Policy risk listing and account suspensions. At the end of the day, Amazon doesn’t monitor how sellers choose to price their products, but the platform does ensure those products are priced in a way that won’t damage the consumer’s trust in the Amazon brand.
Protecting your products from rogue sellers is important. Minimum Advertised Price (MAP) policies allow you to set the lowest price that you’ll allow your products to be advertised for by third-party sellers on Amazon.
It’s important to note that an item can potentially be sold for less than the MAP, but the product cannot be advertised as such. That’s why you should only partner with third-party sellers that are trustworthy. MAP pricing policies are legal documents, so be sure to consult with a lawyer to make sure your policy is backed up by the law, and learn how to enforce your MAP policies.
An effective MAP pricing strategy prevents third-party sellers from selling your products below your minimum prices and protects your brand value.
There are a variety of pricing strategies that a retailer can implement when selling their products on the marketplace. Some of the most popular examples these strategies include:
These pricing strategies are just a few examples of successful Amazon retailer pricing strategies, however, each business has unique goals and should perform a thorough research and pricing analysis before defining their Amazon pricing strategy—and remember to adapt to marketplace and consumer trends.
SupplyKick is an Amazon Agency and Amazon Wholesale partner that can support you on your road to success. We’ve helped over 100 partners optimize and maximize their Amazon presence, helping many double their Amazon revenue YoY.
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