To be successful this holiday season, sellers need to employ pricing strategies that get their products in front of their audience. Whether your goal is to win Amazon’s Buy Box or show up as eBay’s Best Match offer, offering the lowest price will carry the greatest weight when trying to land the most coveted real estate on these marketplaces.
When determining if you can price lower than your competition, you need to take into account a myriad of factors such as setting appropriate price floors and shipping costs. This is key to ensuring your margins are secure, even when you find yourself in a price war.
Product Margin versus Business Profits
Initially you may want to be conservative in pricing your items to preserve margins, but be careful to not be too cautious, otherwise you run the risk of making your listings invisible to consumers.
Countless times we’ve seen sellers attempt to increase profits by using an average of the lowest competitive prices, or price a % over the lowest price, and more often than not these strategies push a seller’s listing off the front page of search results, a death knell for any chance of sale.
Once you set a comfortable price floor to guarantee your desired margin, let your repricing software keep the sales flowing so you can focus on inventory replenishment and order fulfillment.
Some argue that pricing more conservatively brings more profits, but that runs counter to basic economics.
Let’s say the low price offer of an item is usually around $40. If you price your same item for $50 , you might sell one a month at that price and feel good that you’ve pocketed a tidy sum, but if you have a quantity of 100 it will take you years to sell all your stock and your inventory’s value will depreciate over that time, diminishing your potential margin.
If your margin only needs to be $10, artificially inflating your price too high above that mark will only serve to stagnate sales. If you price more aggressively and match the lowest price offer of $40, you could sell 20 a month at that price point and realize significantly more profit than if you stood your ground on the higher price to get a solitary sale.
One best practice employed by our most successful sellers is lowering the price over time, dependent on an item’s selling history. For instance, if an item hasn’t sold in 90 days, you can gradually get more aggressive with pricing and/or lower your price floors to liquidate inventory collecting dust on your shelves. Repricing software like Monsoon Marketplace offer you the tools needed to make this simple and automated.
Separate the Playing Field
Who is the seller?
Matching the lowest price or even pricing below the lowest price can give you the competitive edge to win sales, but you should also consider if your competition is:
- A merchant fulfilling items directly from their own local warehouse
- A merchant using Amazon FBA to manage fulfillment
- Amazon themselves
You also need to price based on these factors related to the products you sell:
- New or Used
- Media or Non-Media
- Item Weight
If you fulfill all of your orders from your own warehouse, you need to be cognizant of your competition and how you can win the Buy Box over listings that hold advantages over your own.
For instance, if you’re selling New condition products, any competitor listing via FBA or Amazon directly selling the same product puts you at a disadvantage when it comes to buyer choice. For Amazon Prime members in particular, these loyal and repeat buyers are incentivized and conditioned to choose a Prime offer over a merchant fulfilled one.
If many of your merchant fulfilled products come up against Amazon or FBA regularly, you should consider pricing a penny below or a % below to overcome the built-in benefits like Free Super Saver Shipping your competitors’ listings have over yours.
Shipping Rates Impact
For sellers of Media items (Books, Music, VHS Videos, DVDs), you’ll also need to think about fixed shipping rates for these categories on Amazon, as well as how you want to price New versus Used condition Media.
Used Media sellers sometimes find that the New condition listing of the same product is actually priced lower than the Used copy, so using a % of the lowest New price as a ceiling in your strategy is an effective way to avoid pricing your Used inventory too high to be desirable to buyers.
Selling via Amazon FBA gives you the option of offering Free Shipping on your Media items, which can give you an edge over merchant fulfilled listings that have a set $3.99 shipping rate.
On eBay you can offer Free Shipping, and using that option can give you better Best Match search results than sellers who don’t offer Free Shipping.
Another important criteria to keep in mind when pricing your inventory is making sure heavier items are treated differently. In Monsoon Marketplace this can be managed in two primary ways, pricing and shipping rules.
In pricing rules you can create weight specific groups, for example all items over 3 pounds get $5 added to the price floor to account for higher shipping costs. In shipping rules for Amazon you can choose to not offer Expedited or International shipping options, while on eBay you can set higher rates for heavier weight items to avoid shipping at a loss.
Now that you’re up to speed on how to optimize your pricing to increase sales and protect margins, it’s time to execute on these strategies and enjoy the abundance of holiday sales!
If you’re a current Monsoon Commerce customer and would like assistance implementing these tips, please reach out to your Account Manager.
To learn how Monsoon Marketplace has made an impact for our customers, check out our success stories from a book store and mobile device accessories company. To learn how your eCommerce business could benefit from a marketplace management system, please contact us anytime.