What Sellers Should Know About the Sold By Amazon Program
To be profitable selling on the Amazon marketplace, one of the most important challenges is getting your pricing right. Too high and you’ll never win the buy box. Too low and you won’t make a profit. Amazon.com, Inc. (“Amazon”) doesn’t care about your profit margins as much as they care about keeping customers coming back by delivering items at the best possible price.
That leaves it to you to get the balance right when determining pricing. But that may be changing with the announcement of a new program: Sold by Amazon.
What is Sold by Amazon (SBA)?
Sold by Amazon is a new feature sellers can opt into, in which you hand the pricing process over to Amazon. For products that are enrolled, Amazon sets the prices automatically. Once a product sells, they purchase it from the seller and fulfill the order.
Technically, they’ll be the seller on record and cover all required taxes. But since they’re buying the product from you in order to fulfill it, you still reap profits from the sale.
How Sold By Amazon Pricing Works
Participating in the Sold By Amazon program is free for eligible sellers. To be eligible, you must:
- Be enrolled in Fulfilled by Amazon
- Have a professional selling account
- Sell products as part of Amazon’s Brand Registry
If you decide to join the program, you can select which products to enroll. You’ll then be able to establish a Minimum Gross Proceed (MGP), the amount you need in order to make a profit on your goods.
Amazon commits to paying you at least the amount of the MGP, even if their system prices a product below that amount to make a sale. Any time the product sells at a higher price than the MGP, you get the full profit of the higher sales price.
The guaranteed payout protects your business from ever taking more of a hit than you can handle on the pricing, while also giving Amazon the opportunity to sell products at the lowest possible price to entice more buyers.
Should You Let Amazon Price Your Products?
The SBA program is designed to minimize risk to sellers. Between the MGP and guaranteed payouts, it can seem like there’s little downside.
But when setting your pricing on Amazon’s marketplace, you don’t want to find yourself in a race to the bottom. If Amazon’s priority is making their platform attractive to shoppers, rather than what’s best or your brand or bottom line, participating in SBA could ultimately end up driving your prices down.
On the one hand, you’ll get the guaranteed payout at the agreed-upon rate, no matter what the customer spends. On the other, it influences customer perception of your inventory’s value if they can suddenly buy an item for a price that is unprofitable for you. This could be a case where short-term gains end up hurting you in the long run.
SBA Isn’t Your Only Automated Pricing Option
Selling on Amazon requires a lot of work and skill. Offloading the pricing part of the process to Amazon can be tempting. It saves you time, while still guaranteeing some level of profits.
And in fact, using an automated repricing tool can be extremely valuable to Amazon sellers. Technology can track fluctuations in the pricing for competitive products at a scale humans can’t, across dozens or even hundreds of sellers. In a marketplace as competitive as Amazon’s, the ability to respond to pricing changes within seconds makes a difference in profitability. And no human managing an account manually can be as fast and flexible as technology designed for the purpose.
But Amazon isn’t the only player in the automated repricing game. You can optimize your pricing to maximize your profits without handing the reins over to Amazon.
A third-party automated repricing software, like SmartPrice, takes the work of pricing out of your hands. But it lets you keep control over how you price your products, and maintain more of your autonomy as a brand. For merchants that want an easier and more effective way of managing Amazon pricing, SBA is only one option. Consider if you’re better off with a tool that lets you keep more control over the process.
Originally published on September 6, 2019, updated September 6, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.