Price matters on Amazon.
But when Amazon sellers manage hundreds or thousands of SKUs, it’s a daunting task to manage the prices on those SKUs while also monitoring their competitors’ SKUs as well. And with prices changing dozens of times per day on Amazon, retailers would be remiss to try and control everything manually.
Swanson Health Products, for example, faces intense price competition on roughly 16,000 of its 20,000 SKUs (about 4,000 of its SKUs are private-label products). To ensure it doesn’t miss out on prospective sales, it needs to be vigilant about its prices–especially on online marketplaces, which account for about 10% of its online sales–says Patrick Yatskis, the nutrition supplements retailer’s senior digital marketing manager.
For about a year, the retailer used a rules-based repricing system from an undisclosed pricing vendor that required it to spend a few hours each week to evaluate prices on Amazon, he says. Because prices fluctuate, Swanson had to regularly adjust the rules in its software about price ceilings and floors, based on what competitors were doing and how sales performed. It only had time to analyze its best-selling products, Yatskis says.
“It was a race to [the] bottom,” he says. “We saw a lot of shrinking margins in the pricing.”
The “race to the bottom” is a common problem on marketplaces, where many shoppers–and sellers–are focused on price. Better prices was the top reason, at 66%, that consumers stated why they decide to make a purchase from a marketplace versus going directly to a retailer, according to an Internet Retailer/Bizrate Insights survey of 1,108 online shoppers conducted in April.
And when Amazon is the first destination shoppers visit for an online purchase, retailers better be sure they are catering to them. According to a different Internet Retailer/Bizrate Insight survey that was conducted in July 2018, 54.3% of consumers go to Amazon first for shopping online, ahead of Google at 14.5% and Walmart at 5.5%.
This presents a problem for retailers if they want to maximize their margins. 71% of retailers are concerned about being outpriced by Amazon, according to a study of more than 500 senior pricing decision makers at retailers with at least 100 employees conducted May 21-June 2 by pricing optimization vendor ActiveViam. A number of sellers are turning to dynamic pricing strategies to help manage both their prices and overall marketplace costs, such as how much to spend on advertising or if they should use Fulfillment by Amazon. 67% of retailers had a price optimization system that allows them to manage internal pricing and track competitor pricing, according to the ActiveViam survey. While some tools can be focused on being the lowest-priced product, retailers are increasingly looking for tools that don’t just automatically lower prices–but also raise them–to protect their profit margin.
To read the rest of this article, which includes more results from Swanson Health and interviews with executives from NorthShore Care Supply, Gartner Inc., CommerceIQ and Goodbaby International’s Evenflo please sign in or sign up for a free membership below.