For most product categories (outside of used goods such as books), the percentage of people who choose to purchase from Sellers without Buy Box status is so tiny that it’s barely worth considering. In most cases, shoppers just click “add to cart.” The average shopper buys from the default Seller.
Since the lowest price determines to a significant degree who wins the largest portion of the Buy Box — especially if all the Sellers of the same product offer Prime shipping through Amazon FBA (Fulfillment By Amazon) — failing to match the lowest price with a Seller who has significant supplies of the product in question is a recipe for losing money. You can’t expect to win if you don’t compete.
Importance of Having a Price Matching Strategy
It’s important to develop a price matching strategy that works with the unit economics of your Amazon business. A few tips:
- Know the minimum price that you can afford to give up for each SKU that you stock. Whether you use a dynamic repricer, Amazon’s own repricing solution, or manual repricing through Seller Central, knowing the numbers enables you to make smarter decisions about price matching.
- Know your competition. On the Amazon Marketplace, third party Sellers of the same products compete with one another for attention from Amazon shoppers. If only a single Seller could always get the Buy Box, it would encourage Sellers to undercut each other continuously until all the profit disappeared.
How Amazon Assigns Buy Box Status
The Buy Box gets the lion’s share of revenue on any given product page. So how does Amazon assign Buy Box status? These are the key factors:
- Whether or not the Seller offers Prime shipping through Amazon FBA or Merchant Fulfilled Prime (Prime offers almost always win the Buy Box if there are no other Prime offers)
- The feedback history of the Seller and average feedback rating
- How long the Seller’s account has remained active and in good standing
- The Seller’s most recent feedback history
- Order defect and cancellation rates
- On time delivery
The precise weights that Amazon assigns each Seller is secret, but the company provides guidance on what the most important factors involved in winning the Buy Box are.
What this means is that Sellers have a built-in incentive to provide a bit of price stability to the products that they sell, even if they’re competing with another Seller. Price matching at a value that works for both the competing sellers involved and the customers results in a stable and profitable price.
Why Wouldn’t A Third Party Amazon Seller Price Match?
Price matching can get you a bigger Buy Box share and more sales. But an Amazon Seller shouldn’t price match with the lowest price offer if any of the following are true:
- The lowest price doesn’t have Prime shipping
- The competing Seller is likely to run out of stock soon
- Matching the lowest price would cause you to run an unsustainable loss
When you’re competing with an offer that doesn’t have Prime shipping, you don’t have to beat their price to get the Buy Box. In most cases, a Prime offer within the general price range of a non-Prime offer will get the Buy Box. Many shoppers who have a Prime membership will be happy to pay a premium on an offer that provides Prime shipping.
In the case of a new Seller popping in on a listing at a much lower price than yours, depending on your catalog, you may want to hold off on dropping your price to match theirs. Observe how long they’re able to maintain the listing before you drastically reduce your price below the minimum that you’re willing to match. There’s a good chance that the new Seller only has limited inventory. In that case, it may be better to take a wait-and-see approach before adjusting the price.
There’s an alternative to liquidating inventory at a loss if you run into a competitor who comes in with prices that you can’t beat for a prolonged period of time: you can just recall your inventory and sell the product outside the Amazon Marketplace.
Another alternative is to recall the product into cheaper warehouse storage until another opportunity to sell the product profitably emerges again on Amazon.
How Payability Helps Amazon Sellers Execute Profitable Price Matching Strategies
Many Amazon Sellers are forced to liquidate inventory quicker than necessary to maintain adequate cash flow.
This doesn’t have to be the case.
Payability is a finance company that lets Amazon sellers get their Amazon sales paid faster — either the next day or weekly. Instead of waiting up to 14 days for Amazon to pay you, we can provide accelerated Amazon payments. Check out our custom Amazon Seller invoice payment options:
Call us at (646) 494-8675 or email email@example.com if you’d like to learn more about how you can get paid faster.
This is part 1 of 3 in the series “Winning the Amazon Buy Box.” Read the other parts below:
- Part 1: Price Matching for Amazon Sellers (current)
- Part 2: Customer Service & Feedback
- Part 3: Coming soon!