For new and experienced Amazon sellers alike, the subject of whether or not to use repricing software to increase your sales will surely come up from time to time. Judging from forums and online discussions, there are sellers who absolutely swear by them and others who remain unconvinced, citing common myths about ‘a race to the bottom’ or ‘cost-effectiveness’ to name but a few.
I think much of the misconception arises from the fear of automated technology and its ability to continually lower prices to compete solely on that level. It’s a shame when sellers view repricing software in those terms as its potential as a tool to increase sales and protect your profit margins is unquestionable.
Many years ago when I was a student, I worked in a local supermarket as a sign-writer (yes, long before computers). I had to work in a small office with two ladies who handled the accounts. Every Tuesday and Thursday they would get their coats on, grab a pen and notebook and disappear for the afternoon.
After a few weeks I decided to ask them what was taking them out of the office on such a regular basis—”We’re doing the rounds on the other three main supermarkets, checking their prices across the main sellers and seeing what promotions they’re using to get people through the door.”
And this wasn’t an undercover operation, as each supermarket acknowledged it was something they all did so the ladies didn’t even have to hide their uniforms when walking around the competitor stores.
And what did they do with pricing the information? Well, the manager, some checkout staff and the finance ladies would regularly review the competitors’ prices and decide which of theirs it was going to lower to compete, which items were going to remain the same, which it would increase and what promotions it would run to entice shoppers into the store. They didn’t decide to lower every price to be the lowest, but they did make assessments of the competition and tailor their own pricing to suit their goals in the context of a competitive environment.
I remember one of the ladies telling the manager that supermarket x’s price on baked beans was stupidly low and that they shouldn’t try to compete. He agreed, saying that they would only probably run that for a week to bring new customers in and then ‘jack the price’ back up higher to compensate for the promotion.
Wow, a real live repricing operation, aka 1980s style!!
So what’s so different now? Well, not a lot really, apart from scale and frequency of price checking. But why is the necessary activity of reviewing competitors’ prices viewed as a ‘race to the bottom’? Quite simply, because some sellers believe that the very cheapest price always wins—and that’s not the case. Of course, lower prices and more competition do impact profit margins but they will firmly remain on a marketplace that is known for its competitive pricing—it’s deciding where you fit into this ever-changing jigsaw.
If you’re selling on Amazon, you need to price check against your competition frequently to remain competitive at any given time, but you don’t have to always be the cheapest to win the Buy Box and retain a profitable business. View your inventory as a complete supermarket if it helps—don’t view the sale of one single item as key, but the overall sales during a certain period that your business is comfortable with, and spend time determining what your business and pricing strategy is.
Unlike my manager in the supermarket, you can have your pricing rules adjusting automatically within your predetermined floor and ceiling prices 24/7—not just on a Tuesday and Thursday afternoon!!
By the way, we still sold a lot of baked beans that week—at a profit.