Repricing Tools: 5 Ways to Grow Your Bottom Line
by Liz Adamson, on October 11, 2016
I get a lot of questions from Amazon resellers regarding automated repricing tools. Sellers wonder if they should be using an Amazon repricing tool, but are skeptical, believing they only enable a race to the bottom. Used incorrectly, these tools may lead to that result. You can easily drive a price much lower than you should.
However, used correctly, they can actually help you maximize your profits. I encourage any reseller who competes with multiple third-party sellers to consider using a repricing tool.
Here are five ways that repricers can make you money.
1. Use your repricer to increase your price and margin
Repricing tools should not be used only to lower your price. You should be setting rules so that once competitors run out of stock, your price goes back up. You'll have to do some testing and research to determine the maximum price you can charge without killing sales. But remember that scarcity can drive demand. If you are the last seller of a high-demand item, chances are you can make a great margin if you are repricing correctly.
2. Choose who you are competing with on price
One common mistake I see sellers making with repricing tools is not choosing which sellers they will compete with. For example, an FBA seller can price higher than an FBM seller and still win the Buy Box. The Buy Box takes into account more than just price. Fulfillment method—whether a seller uses FBA or ships orders themselves—is another big factor. If you are an FBA seller, you do not want to be setting rules that will drive your price down to the lowest FBM offer. When shopping for a repricing tool, be sure you are using one that will take into account whether your competition consists of FBA or FBM sellers.
3. Don't set it and forget it
Another mistake I see sellers making is ignoring their repricer once they have set it up. There is valuable data that can be gleaned from a good repricing tool, and you should be using a repricer that will allow you to pull reports and analyze how your products are doing in relation to other sellers. If the competition is frequently above your maximum price, demand may be increasing, and you would do best to increase your maximum price. If the Buy Box price is frequently below your minimum price, demand may be decreasing for the product and you may want to consider lowering your minimum and clearing out some inventory.
4. Checking prices daily may not be enough
One reason sellers tell me they don't need a repricer is that they don't have many products and they can easily check in once a day and adjust prices as needed. During periods of slower sales this may be enough, but during times of peak demand you will need to be checking in multiple times per day to ensure your pricing is reacting quickly as competitors stock out. Not reacting in a timely manner can lose you valuable margin on fast-moving products, so find a repricer that will check prices multiple times per day. Some will check every 30 to 60 minutes.
5. Take more than cost into account when you set your minimum price
Factor in more than just the cost of your product when setting your minimum price. Consider your shipping costs, Amazon referral fees, storage costs and FBA fees, and pad in enough margin to cover your overhead. You can read more regarding pricing in my article on profitability.
In addition to costs, you should also consider how quickly you would like your inventory to move. Do you expect low-priced competitors to sell out quickly? If so, keep your minimum price a little higher, allow them to sell out at the lower price and when they do, you'll be positioned to take the Buy Box at a higher margin. Consider the opposite scenario as well. Is there more supply than demand? Do you need to sell through your inventory quickly for any reason? If that's the case, consider what you are willing to lose in margin to meet those goals and set your minimum price a little lower.
Repricing tools can be a valuable part of your Amazon strategy. With smart pricing rules set up that take into account the competitive landscape and the goals specific to your business, you can maximize your sales and profits and avoid the race to the bottom.
Looking for a Repricing Tool? Learn about SmartPrice.