This blog was updated on March 12, 2024.
Amazon wants to be Earth’s most customer-centric company. This means providing the best customer experience possible. In doing so, Amazon seeks to provide the largest selection of products at the lowest prices. Many sellers underestimate the importance of developing a strong pricing strategy on Amazon, but doing so is an essentials part of inventory and order management.
It takes careful planning to determine a price that will win you the Buy Box. This is the white box on the right side of the Amazon product detail page where customers can add items to their cart. Without the Buy Box, you will not make sales. This article will explain how a strong pricing strategy will help you win (and keep) the Buy Box on Amazon.
How Amazon Determines Featured Offers
Products that have the Buy Box are called Featured Offers. Amazon displays these near the top of a product detail page. Customers can buy the Featured Offer with one click or add them to their shopping carts.
A key feature of Amazon is that many sellers can offer the same product. If more than one eligible seller offers a product, they may compete to become the Featured Offer. To find out if any of your products are eligible for the Featured Offer, login to your Seller Central account. Go to Manage Inventory and click PREFERENCES. Select BUY BOX ELIGIBLE and save changes. The column will display the status for each of your ASINs.
Amazon selects the Featured Offer from the pool of eligible offers on a given product. They look at many factors to identify which offers customers are most likely to buy. This includes availability, delivery speed, and customer service – and most importantly – price.
Understanding Amazon’s Fair Pricing Policy
Amazon wants to offer the lowest prices possible because it builds customer trust. They track the prices of all products sold on Amazon and compare them with other marketplaces. If Amazon sees your product priced lower on another website, they will penalize you. They may remove the Buy Box, remove the offer, or suspend the ship option. In serious or repeated cases, they may end your selling privileges. Pricing practices that harm customer trust can include:
- Setting a reference price on a product or service that misleads customers
- Setting a price on a product or service that is higher than recent prices offered on or off Amazon
- Selling many units of a product for more per unit than that of a single unit of the same product
- Setting an excessive shipping fee
How to Measure Pricing Health on Amazon
Amazon wants you to succeed as a seller. To do so, they help you find ways to improve your pricing. The Pricing Health tab in your Seller Central dashboard provides an overview of your current pricing strategy.
The Featured Offer Tab contains all offers currently ineligible to be a Featured Offer. This could be because they are not priced competitively compared to other retailers outside of Amazon. They might also be priced higher than recent prices observed in Amazon’s store. The Featured Offer Tab also contains offers currently eligible to be the Featured Offer but are not due to uncompetitive pricing.
The Sales conversion tab lists all products with customer views but no sales in the last seven days. You may be able to improve sales conversion by lowering your total price (price + shipping) so that it is below the suggested lower price.
The Inactive Offers tab lists all items currently deactivated due to potential pricing errors. Amazon detects potential pricing errors based on several factors, including its Marketplace Fair Pricing Policy and the Featured Offer price. When Amazon detects potential pricing errors in your listings, they will notify you. In more serious cases, they might deactivate your affected listing.
How to Automate Your Pricing Strategy on Amazon
Selling on Amazon often requires adjusting your pricing. Factors like cost, shipping, and industry changes will impact your pricing strategy. Many brands use a repricing tool to automate the process of adjusting prices on products.
Amazon provides its own repricing tools within Seller Central. Automate Pricing allows you to automatically adjust prices on SKUs in your catalog in response to certain events without having to revisit the SKU every time you want to change your price. To do so, you create a pricing rule, set the rule parameters, and then select the SKUs to which the rule applies. Amazon applies Automated pricing only to the SKUs you designate (not to your entire catalog). You can start and stop automated pricing rules at any time, as well as change your rules or the SKUs to which your rules apply.
You control the prices by defining rule parameters, setting minimum price and maximum price (optional) boundaries, and selecting the SKUs you want to automate. If you do not set a maximum price, Automate Pricing will make sure your offers are not priced significantly higher than recent prices. This will keep your offers eligible to become the Featured Offer.
If you do not want to use Amazon’s Automate Pricing tool, there are many 3rd party repricing software programs and services available.
Channel Key Takeaway
Maintaining your pricing strategy on Amazon can be complex. A big mistake sellers often make is thinking they can “set it and forget it.” It is important to watch your pricing to make sure you are winning the Buy Box. If you are not winning the Buy Box on certain items, check if your pricing is the cause. Sometimes this is not a quick or easy fix. Your pricing strategy will involve many factors and considerations. This article covers the basics, but there is much more to know. The more expansive your catalog, the more challenging it will be to manage your pricing. At the end of the day, your goal is to win the buy box. Understanding how to develop a strong pricing strategy will help increase your success on Amazon.
