For years the dominant strategy among resellers was to win the Buy Box on all listings as much as possible. After all, studies have shown that more than 80 percent of sales go to the Buy Box winner.
But there are downsides to this strategy. You must often be the lowest price or the lowest priced FBA seller if you are using FBA. While using FBA allows you to reprice higher than FBM sellers, these days with most sellers using FBA this is no longer a clear advantage.
Sellers who are trying to win the Buy Box often find themselves struggling with low margins and getting stuck in price wars. The key to a balanced repricing is to control when and by how much you raise and lower price to maximize profit and sales.
- Plan according to your business model
First, you should consider how winning the Buy Box fits into your business model. For example, many sellers use a high volume/ low profit model. Others use low volume/ high profit model or a combination of the two.
Winning the Buy Box is closer to a high volume/ low profit model. You are sacrificing higher profits in exchange for greater sales velocity through winning the Buy Box. Sellers who focus on maximizing profit are using a lower volume/ higher profit model.
Neither business model is superior. In fact, successful sellers take advantage of both models depending on the situation.
For example, if Q4 is coming up and you want to make a big purchase, lowering prices thereby increasing sales can help you generate some cash.
Or perhaps you are a seller who sources rare collectibles. Rather than burning through your inventory, it may be better to be patient. Wait for competitors to run out of stock, and sell at a higher price to maximize ROI.
- Find opportunities to increase price
A common fear among sellers is that repricing leads to a race to the bottom. However, by raising price there is a way for everyone to walk away with a share of profits.
For example, a clever way to increase profit without hurting your chances of winning the Buy Box is to use a scheduler to reset prices each day. It’s best to do this in the middle of the night when sales are the lowest.
What happens is that other sellers who are also using a repricer will follow suit and raise their price as well. The Buy Box price is increased and your chance of winning the Buy Box is just as good. Far from a race to the bottom, this is a sprint to the top. And the more sellers that use this strategy, the stronger the effect.
- Check demand for your products
One of the weaknesses of trying to win the Buy Box for all listings is that it treats all products the same when they aren’t. For example, there are different levels of demand for each product. You can check by looking at the best sellers rank.
A product with a low demand is less likely to sell even if you are winning the Buy Box 100 percent of the time. Whereas a product with high demand is more likely to sell even if you are just sharing the Buy Box.
In general, you are better off focusing on repricing high demand products where you can maximize profit by being patient and keeping prices high. Though you can balance your inventory with some slower selling products if they are low cost, easy to prep, and still generate enough profit to be worth your time.
- Consider your ROI and profit margins
Sellers have different sourcing, prep, and shipping costs on each product. This will affect how high or low you can sell a product. Seller A may have costs for product A that are $2 lower than you. That means they have more room to lower their price to win the Buy Box.
But sure enough on product B you have costs that are $2 lower. This means that you will have the advantage in winning the Buy Box for product B and should reprice aggressively to drive sales. If product B is a high demand product you can boost your sales even more.
The problem in the real world is that you will not know your competitor’s costs. At least not directly. But by using a repricer you can set Min and Max prices as well as rules that will adjust you to the optimal price for products when you have the cost advantage and when you do not.
- Know the competition
Competition varies from category to category and even from week to week. So, it’s important to stay updated. For example, if you start selling a product early when there isn’t much competition you can expect to sell at a higher price.
Whereas, if you jump on a product late and there are already many competitors, there is a greater chance of getting caught in a price war. It may be best to take what sales you can and move on to another product.
Also, you will want to track whether you are competing against FBA sellers, FBM or Amazon. Do they have strong or weak seller metrics? Do they have a deep inventory or are they running out of stock?
These factors determine your relative strength versus competitors for each listing. And in turn affects which repricing strategy you should use.
- Identify when you make the most sales
This is something that often goes overlooked: the number of buyers online varies day by day and even hour by hour. This can cause problems if you are always winning the Buy Box, but most of that time is during off peak hours or days of the week.
A better approach may be to identify when buyers in your categories are shopping the most and adjusting your repricing to compete aggressively at those times.
For example, you may find that Monday is your busiest shopping day and it steadily declines each day. For others, weekends may be the best. Or some may find that their peak hours are during the day and for others during the evening.
If you concentrate on winning the Buy Box when it has the largest effect, you may be able to achieve better sales and profit than someone who is trying to win the Buy Box 24/7.
Winning the Buy Box is important, but it is one part of a balanced repricing strategy. With a good sourcing, planning, and repricing strategy you can increase your chances to grow profit and sales.
BQool offers premiere software tools for Amazon sellers. In addition to intelligent repricing, we also offer review and feedback management to improve customer satisfaction, and data-driven product research for finding new products. Visit our website www.bqool.com for more information.
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