For a lot of businesses taking orders through Amazon is a key part of everyday trading, with this popular online marketplace also representing the only route to market for many companies. However when it comes to trading on Amazon, these businesses will tell you that having the right price is often the difference between winning and losing a sale. This is because often businesses are up against multiple traders selling the same or similar items to them, creating a highly competitive trading environment where the sale is usually closed by the company offering customers the lowest price. However that is not the only reason why offering the best price on Amazon is so crucial. The other key reason is that the business with the best price is usually the one who ends up in the Amazon Buy Box.
The Amazon Buy Box is for many online traders, the Holy Grail of marketplace trading. This box sits prominently on a product detail page on Amazon and is the place where a customer goes to start the purchase process by adding an item or items to their shopping basket. However this box isn’t exclusively for Amazon themselves, as any sellers offering products in a “new” condition and hit Amazon’s seller performance criteria are eligible to compete for the Buy Box for that product. Amongst the performance criteria evaluated by Amazon when choosing which seller receives the Buy Box privilege are product availability, fulfilment, rates of returns and refunds, as well as customer experience based on seller feedback and responses times to inquiries. Also a big contributing element to the criteria is of course, the product’s price including standard delivery. Although the exact formula as to how these factors are weighted is unknown, there is no denying that price definitely plays a major part.
Are Repricing Tools Worth The Investment?
With this being the case, many Amazon traders will choose to utilise repricing tools in order to stay ahead of their competitors and present consumers with the best price in order to land in the Buy Box for the items they are offering. With Amazon Repricing tools, businesses are able to ensure that their prices are automatically lowered to be cheaper than that of their competitors, removing the need to monitor other traders and manually adjust product prices accordingly. By using one of these automated repricing tools, businesses are able to save time and also increase their chances of landing in the Amazon Buy Box, making them the default purchase option for customers.
But the big question is does getting in the Buy Box really help businesses to win more sales on Amazon? The answer is yes it does.
This month, Northeastern University in Boston Massachusetts USA published a paper offering an empirical analysis of algorithmic pricing on the Amazon Marketplace, which looks into the impact this and getting into the Buy Box has on sales performance. This in-depth study by Northeastern University found that amongst other things that of the data they examined, a huge 82% of all sales on Amazon are in fact from the seller who wins the Buy Box position. This is because once a seller has achieved the Buy Box, the formula starts working in their favour. As the default option for Amazon customers they end up generating higher volumes of sales, which in-turn gives them more feedback and helps them win the Buy Box to gain more sales again in the future.
Maintain Your Profitability & Capitalise On A Global Market With Amazon
However what was most surprising from the study was how getting the Buy Box actually helps the seller to maximise their profits. A common misconception is that sellers think that in order to achieve the Amazon Buy Box they have to sacrifice profitability, however they would be mistaken. The best part of the formula is that once businesses have achieved Buy Box status, they can actually afford to raise their prices. This is because as the paper from Northeastern University reports, the majority of the time products will sell at prices up to 40% higher than what a seller using a repricing tool will have set as their lowest possible rate. And because the seller in the Buy Box is much more likely to win the sale regardless of whether or not they are offering the best price at that time, they can afford to capitalise on this higher profit margin by slightly raising their prices.
What businesses trading on Amazon need to take from this study is that categorically, they need to be looking to use repricing software to their advantage, if for no other reason than to also stay on a level playing field with their competitors who are using these tools too. However there are further benefits than this as Northeastern University state in their own conclusion, “sellers identified as using algorithmic pricing receive more feedback and win the Buy Box more frequently, likely suggesting higher sales volumes and thus more revenue than non-algorithmic sellers”. Therefore if you want to maximise sales opportunities and profitability by landing in the Amazon Buy Box, the only path to get there comes through using an automated repricing tool.
If you wish to read the full Northeastern University on Amazon Algorithmic Pricing, you can do so HERE.
To find out more about OrderWise Amazon Listings including our easy-to-use automated Repricing Tool and functionality to help businesses hit all the required Buy Box criteria, visit this page HERE. For more information on OrderWise Product Creation and Amazon Listings, existing users can contact the client services team.
To discuss your requirements in more detail contact us on 01522 704083.