Welcome to Basilio Inc. Build. Grow. Exit Big: The Professional’s Guide To Selling On Amazon. If you’re thinking about starting up your own business as an Amazon seller, stick around, because you’ve come to the right place.
Amazon is the world’s largest ecommerce site. As of 2018, Amazon had $233 billion in revenue, and more than 5 million third-party sellers currently operate across Amazon’s 12 worldwide marketplaces. So selling on Amazon represents a huge opportunity—if you know where to start and what to keep in mind as you build your Amazon seller business. In this comprehensive guide, you’ll learn everything you need to know about selling on Amazon. Here’s what to expect as you make your way through it!
Buy Box
The Buy Box holds immense significance when it comes to generating sales on Amazon. To ensure your success as a seller, it is crucial to have a solid understanding of the Buy Box, its workings, and how you can increase your Buy Box share to drive more sales.
In 2013, a staggering $74 billion in revenue flowed through Amazon, with a substantial portion of $61 billion generated through the Buy Box. It is estimated that over 82% of Amazon’s website sales now go through the Buy Box, making it a crucial factor in your success as a seller. This percentage climbs even higher in most non-media categories, exceeding 90%.
Understanding how Amazon determines the winner of the Buy Box is paramount, as it can make or break your business on the platform. In this chapter, we will draw upon our direct interactions with Amazon and insights from industry experts to provide you with a comprehensive understanding of the Buy Box.
By diving into the mechanics of the Buy Box and leveraging the knowledge shared in this chapter, you will gain essential insights and strategies to enhance your Buy Box share, drive more sales, and establish a strong presence on Amazon. This chapter serves as a critical guide for all Amazon sellers, regardless of the products or brands they choose to list and sell.
Competition plays a significant role on Amazon, with two distinct categories of sellers vying for sales:
- Amazon Retail: This refers to Amazon itself, which sells a wide range of products directly to customers. As a retail giant, Amazon has a significant presence and competes with other sellers on the platform.
- Third-party sellers: These are independent sellers, like you, who utilize the Amazon marketplace to sell their products. However, third-party sellers are subject to certain limitations. They must adhere to gated categories for which they have approval, and they are also bound by FBA inventory storage limits for standard and oversize products.
Given the absence of restrictions on the total number of sellers or the quantity of products they can offer, it is common to find multiple sellers offering the same product. This leads to intense competition among sellers as they strive to secure the maximum number of sales.
Understanding the competitive landscape is crucial for third-party sellers to differentiate themselves and stand out among the competition. Throughout this course, we will delve into various strategies and insights to help you navigate this competitive environment effectively. By leveraging these techniques, you can maximize your sales potential and establish a strong foothold on Amazon.
Direct Competition: Buy Box Share
When it comes to selling on Amazon, both third-party sellers and Amazon Retail engage in direct competition with each other. Let’s consider an example using a Lego set:
As a seller, your direct competitors for this product are the other 209 sellers who also have offers on the same ASIN. All of you are vying for the highly coveted Buy Box position.
The Buy Box refers to the section on the Product Detail page where Amazon chooses one seller and displays their information prominently under the “Sold by” section. More importantly, when a customer clicks on the “Add to Cart” button, the sale goes to the seller featured in the Buy Box.
The seller who wins the Buy Box enjoys a significant advantage and tends to capture the majority of sales for that product, often exceeding 90% for new, non-media items.
It’s important to note that the seller in the Buy Box is not fixed permanently. Amazon rotates the Buy Box winner every 15 to 60 minutes, although these rotations are not visible to customers already viewing the page. Amazon uses cookies to ensure each customer sees only one Buy Box winner per hour.
However, if the metrics of the Buy Box winner change—for instance, the product price, available stock, or the overall seller performance based on Seller Performance criteria—Amazon may switch to another seller before the one-hour time period elapses. Visualize this process like a Ferris wheel, where different sellers take turns occupying the Buy Box.
In a hypothetical scenario with ten perfectly equal sellers competing for the same product’s Buy Box, each seller would have their offering displayed in the Buy Box for approximately 10% of each day. However, in reality, the distribution of Buy Box share varies based on seller performance. A high-performing seller may command 70% of the Buy Box, an average seller could have 25%, and a lower-performing seller might have just 5%. Therefore, instead of viewing the Buy Box as a binary win or loss, it’s more accurate to consider it in terms of the seller’s share of the Buy Box.
It’s worth noting that Buy Box rotations do not always occur, and their frequency can depend on factors such as the product, competition, and time of day. Understanding the dynamics of the Buy Box and how it affects your sales is crucial for achieving success on Amazon. Throughout this course, we will explore strategies and insights to help you enhance your Buy Box share and maximize your sales potential.
Indirect Competition: Sessions
Now, let’s delve into the concept of indirect competition. While direct competition focuses on Buy Box share, indirect competition revolves around sessions—the number of customer visits to an Amazon.com page. Understanding how sessions work is crucial to navigating the competitive landscape on Amazon.
Amazon defines a session as a customer visit that lasts for 24 hours. Within this timeframe, even if a customer views multiple pages or visits the same page repeatedly, it will be considered as a single session. On the other hand, page views refer to the number of times a customer visits a specific page. Consequently, a single session can encompass multiple page views. This distinction explains why your reports may show more page views than sessions.
Consider a scenario where 10 million customers visit the Amazon site in a day. In this context, every ASIN on the site competes for sessions from these visitors.
Here’s what this competition entails:
- Categories and subcategories on the site vie for visitors, as customers navigate through different sections.
- Other sellers’ products compete for viewership alongside your own products, particularly when they are similar items within the same category.
- Even your own products can become competitors, especially when you have similar items within the same category.
- Competitors’ sponsored ads and your own sponsored ads contend for placement and clicks, aiming to capture customers’ attention.
To achieve success in this competitive landscape, it’s crucial to recognize that both Amazon Retail and every other seller on the platform can be your competitors, either directly or indirectly. By understanding the dynamics of sessions and the broader competition for customer attention, you can develop effective strategies to stand out and drive more traffic to your product listings. In the subsequent chapters, we will explore techniques to optimize your visibility and increase your chances of capturing valuable sessions.
How the Buy Box Works
The Buy Box on Amazon is not typically assigned to a single seller; instead, it is shared among multiple sellers based on various variables. But why does Amazon employ this approach? What is the purpose of the Buy Box?
Amazon’s primary goal is to provide customers with the best possible shopping experience. To achieve this, they require sellers to meet performance-based requirements in order to be eligible to compete for Buy Box placement.
In essence, the Buy Box serves as a mechanism for Amazon to compare multiple offers on the same ASIN (Amazon Standard Identification Number) and determine which product offer will deliver the best experience to the customer. It aims to offer customers the best possible value for their money.
The Buy Box algorithm takes into account several variables to assess which product offering strikes the right balance between high seller performance and low cost for the consumer. By considering factors such as seller metrics, pricing competitiveness, fulfillment methods, customer feedback, and more, the algorithm determines the most optimal offer to showcase in the Buy Box.
Sellers who meet the performance requirements and offer competitive prices, excellent customer service, and efficient fulfillment methods stand a higher chance of winning a share of the Buy Box. This coveted placement can significantly impact a seller’s sales and visibility on the platform.
Understanding how the Buy Box works and the factors involved is crucial for sellers to compete effectively and maximize their sales potential on Amazon. In the upcoming chapters, we will delve deeper into the strategies and techniques you can employ to improve your Buy Box share and increase your chances of winning this influential placement.
Understanding the Buy Box Algorithm
The Buy Box on Amazon is determined by an algorithm that considers various factors to determine which sellers’ offers will win a share of the Buy Box. While the exact workings of the algorithm are not publicly disclosed by Amazon, we can discuss some key aspects based on observations and insights from industry experts.
The Buy Box algorithm follows a two-step process to determine the winning offer:
Meeting Minimum Requirements: The algorithm first identifies which of the competing offers meet the necessary minimum requirements. These requirements typically include factors such as product availability, seller account health, fulfillment methods, and more. Only offers that meet these baseline criteria are eligible to compete for the Buy Box.
Evaluating Variable Factors: Once the eligible offers are identified, the algorithm assesses several variable factors for each offering. The goal is to determine which offer provides the best overall value to the customer. These variable factors may include seller metrics (such as seller rating and order defect rate), pricing competitiveness, shipping options, customer feedback, and fulfillment performance.
The relative importance of each variable can vary depending on the specific product or category. Therefore, while one seller may be losing to a competitor on one product, they could be beating that same competitor on another unrelated product. The algorithm takes into account the unique characteristics and dynamics of each product category to determine the best offering for the Buy Box.
It’s important to note that the algorithm considers the seller’s offering in relation to their competitors’ offerings. In other words, your performance metrics are compared to those of other sellers vying for the Buy Box. For example, if all other factors are equal, a seller with a higher Seller Rating of 98% would have a greater proportion of Buy Box share compared to a seller with a rating of 95%. Similarly, a seller with a rating of 95% would have an advantage over a seller with a rating of 90%.
While these insights provide a general understanding of the Buy Box algorithm, it’s worth mentioning that Amazon continually refines and updates the algorithm to improve the customer experience and drive fair competition among sellers. As we delve deeper into the topic, we will explore strategies to optimize your performance metrics and enhance your chances of winning a share of the Buy Box.
Understanding the Dynamics of the Buy Box
When it comes to the Buy Box on Amazon, there are certain factors and scenarios that sellers often question. Let’s explore some of these concerns and shed light on why Amazon seems to have an advantage in winning the Buy Box.
Amazon Retail’s Advantage: It’s true that Amazon Retail often dominates the Buy Box when they have an offer. This can lead sellers to wonder if it’s possible to beat Amazon in this competition. While the odds may not be in your favor when competing against Amazon, the Buy Box doesn’t guarantee automatic victory for Amazon Retail.
The Buy Box algorithm treats Amazon Retail’s offers as if they come from a seller with perfect customer experience metrics. If you, as a seller, have exceptional performance metrics or offer a significantly lower price than Amazon, you may have a chance to share the Buy Box rotation with them or even win a larger share.
Amazon’s Reactive Repricing: Amazon reprices its products reactively based on the competition. If you lower your price, Amazon may lower its price to match or slightly exceed yours. This is because Amazon recognizes the value of its perfect seller performance metrics and aims to maintain its share of the Buy Box.
Media Sellers and Amazon’s Dominance: For media sellers, Amazon generally wins the Buy Box if they have the product in stock. This may seem unfair, but it’s important to understand that this is the nature of the game on Amazon’s platform. Instead of dwelling on this aspect, it’s crucial to strategically choose the products where you have a higher chance of winning the Buy Box and avoid competing directly with Amazon on items where your chances are slim.
Why There’s No Buy Box Winner
There are two situations where no seller will win the Buy Box.
Minimum Requirements and Seller Metrics: When no seller meets the minimum requirements for the Buy Box, or when all sellers who meet the requirements have substandard seller metrics, the Buy Box will not be assigned to any seller. In this case, the Buy Box section will display a “See All Buying Options” button, allowing buyers to explore other merchants selling the product.
Higher Offer Price: If the sellers’ offer price is higher than the list price, there will be no Buy Box winner. The Buy Box section will again show the “See All Buying Options” button.
In certain unusual cases, if an item has no Buy Box winner and is no longer available for wholesale from the manufacturer (e.g., a collectible toy), the Amazon catalog may still display a list price for the item. If you can demonstrate that the item is no longer manufactured, you can contact Seller Support to request the removal of the list price. This will eliminate the issue of sellers’ prices being considered too high above the list price, allowing Buy Box-winning sellers to appear again.
Understanding these dynamics of the Buy Box will help you make informed decisions about your product selection, pricing strategies, and competition with Amazon Retail. While winning the Buy Box is a goal for many sellers, it’s essential to focus on maximizing your overall sales and profitability on the platform.
Qualifying for the Buy Box
To compete for the Buy Box, sellers need to meet specific requirements. Let’s explore the four criteria that sellers must fulfill:
Professional Seller Account: Only Professional Seller accounts are eligible to compete for the Buy Box. Individual Seller accounts cannot participate in the Buy Box competition.
Buy Box Eligibility: Formerly known as Featured Merchant Status, Buy Box Eligibility is crucial for winning the Buy Box. This status is no longer visible to anyone except the seller within their Seller Central Account. Amazon evaluates several factors to determine Buy Box Eligibility, including:
- Time on the marketplace (typically 2 to 6 months)
- Consistent seller performance
- Order Defect Rate (ODR), which comprises customer feedback, A-to-Z Guarantee claims, and chargebacks
- Fulfillment method: Whether the item is fulfilled by the merchant or by Amazon
Buy Box eligibility can change based on seller performance metrics, and specific targets may vary by category.
Note that eligibility in one category doesn’t guarantee eligibility in another.
To check your Buy Box Eligibility:
- Hover over the “Inventory” tab and click on “Manage Inventory”
- Click on the Preferences Button in the top right corner
- Check the box next to “Buy Box Eligible” and click Save
- The “Manage Inventory” page will display “Yes” if you are Buy Box eligible for that product.
New Condition: The item being sold must be new to be featured in the regular Buy Box. Used items have their own Buy Box in certain categories, known as the Buy Used Box. The Buy Used Box operates similarly to the Buy Box for new items, and sellers must meet similar criteria, such as having a Professional Seller account and Buy Box Eligibility. Examples of Buy Used Boxes can be found on used book or DVD listings. It’s important to note that the Buy Used Box and the regular Buy Box operate independently and do not affect each other.
Availability of Stock: There must be available stock of the item to win the Buy Box. If the item is out of stock, the seller cannot secure the Buy Box position. The Buy Box will rotate to another seller instead of displaying an “out of stock” message. However, there is an exception for back-ordered items. Most products listed through the Fulfillment by Merchant service can be designated as “back-ordered.” This means that sellers accept orders for items that are currently out of stock but will be shipped at a later date. Customers are informed of the restock date when placing the order. Back-ordered items can be featured in the Buy Box, but only if they will be back in stock within 2 days. This back-order condition typically arises when Amazon transfers FBA inventory between fulfillment centers.
Expediting Buy Box Eligibility
If you’re a new seller, it’s essential to start selling immediately rather than waiting two to six months to compete for Buy Box share.
Here are some strategies to expedite Buy Box Eligibility:
Utilize FBA for New Sellers: New sellers can gain Buy Box Eligibility right away for specific items by enrolling them in Amazon’s Fulfillment by Amazon (FBA) program. FBA offers several advantages, including faster shipping and Amazon’s reliable customer service. By leveraging FBA, you can enhance your chances of winning the Buy Box from the beginning.
Compete with Competitive Pricing: Merchant-fulfilled sellers can adopt a tactic of pricing popular products competitively to attract sales. Generating a few sales for these items can help you achieve overall Buy Box Eligible status for that specific category of products. Offering competitive prices is a strategic way to increase your visibility and sales potential.
Category-Specific Eligibility: Remember that Buy Box eligibility is earned on a category-by-category basis and not across all categories simultaneously. If you believe you have met all the necessary criteria for a particular category but haven’t been awarded Buy Box Eligible status, reach out to Amazon Seller Support. Requesting a review of your eligibility status can help expedite the process.
The Offer Listing Page and Winning the Buy Box
Winning the Buy Box is crucial for maximizing sales on Amazon. However, when you don’t secure the Buy Box, your offer is featured on the Offer Listing Page. You can find the Offer Listing Page by clicking on the “Other Sellers on Amazon” link.
For example, here’s the Offer Listing Page for the LEGO Creator Treehouse:
[http://www.amazon.com/LEGO-Creator-Treehouse-Interlocking-Building/dp/B00C9X591Q]
On the Offer Listing page, customers can find all the available sales listings for a particular product, regardless of whether the sellers qualify for the Buy Box or not.
The listings on the Offer Listing page are organized based on the Landed Price, which includes the price of the product along with shipping costs. Customers can easily compare the different offers based on their total cost.
In addition to the price, customers can view other information about the sellers, such as their customer feedback ratings, shipping rates, rebate policies, and special offers. However, it’s important to note that these variables do not impact the order in which sellers are presented on the Offer Listing page.
While winning the Buy Box remains the ideal goal, having your offer displayed on the Offer Listing page still provides visibility and the opportunity to attract customers who may be seeking alternatives. It’s important to optimize your product listing and provide competitive pricing and excellent customer service to stand out among other sellers on the Offer Listing page.
Amazon Mobile Buy Box: Enhancing the Mobile Shopping Experience
With more than 50% of Amazon customers shopping via mobile devices, it’s crucial to understand the Amazon Mobile Buy Box and its impact on the mobile shopping experience. The Amazon app is widely available for free on most mobile devices, offering a user-friendly interface similar to the main website.
When using a desktop, laptop, or tablet, all the product information is typically displayed on a single page. Buyers can easily access the Buy Box, select a seller from the “Other Sellers on Amazon” box, or click on a link to explore all sellers’ offerings on the Offer Listing Page.
However, on mobile devices, the customer experience differs slightly. To view all the product information, users need to scroll down the page. The Buy Box appears directly below the product image and price, making it prominently visible. If customers are satisfied with what they see in the Buy Box, they can proceed to click “Buy now” without further scrolling. This means they may not even see the link to explore other offerings on the Offer Listing page.
Here’s an example of how the mobile Buy Box appears in a web browser on an iPhone:
[Include an image or a clear description of the mobile Buy Box]
It’s important to note that Amazon Mobile does not feature an “Other Sellers on Amazon” box, which limits the visibility of sellers to only the one who has won the Buy Box. This means that potential buyers may only see the name of the Buy Box winner without being aware of other available options.
As a seller, it’s crucial to optimize your product listings for mobile devices. Since the Buy Box is prominently displayed, ensuring your offer wins the Buy Box increases the likelihood of immediate purchases by mobile shoppers. Focus on providing competitive pricing, excellent customer service, and compelling product information to attract and engage mobile users.
Understanding the mobile shopping experience and adapting your selling strategies accordingly will help you capitalize on the growing number of customers who prefer to shop on Amazon via mobile devices.
Factors Influencing Buy Box Share
Winning the Buy Box on Amazon is crucial for maximizing sales, and various factors affect your Buy Box share. Based on extensive testing and analysis, Feedvisor has identified the key variables that influence Buy Box share.
Fulfillment Method: The primary determinant for Amazon is whether the item is fulfilled by the merchant or by Amazon’s own fulfillment service, Fulfillment by Amazon (FBA). Amazon highly prioritizes FBA, considering it superior to merchant-fulfilled options. If you are the only seller with an FBA offer for a specific ASIN, other merchant-fulfilled offers would need to significantly undercut your price and have exceptional performance metrics to compete.
Utilizing FBA is strongly recommended to improve your chances of winning the Buy Box. Not only does FBA increase your Buy Box share, but it also boosts overall sales for the item. In some cases, sales volume can even double or triple when an item is sold through FBA.
It’s worth highlighting the power of FBA for Amazon Prime customers. Prime offers unlimited free 2-day shipping on eligible items, including Amazon Retail and FBA products. When a Prime customer is signed in, Amazon prioritizes displaying FBA offers over lower-priced non-FBA offers. This means that even if an FBA offer is significantly more expensive, it can still win the Buy Box for Prime customers. The combination of FBA and the growing base of Prime customers contributes to its significant impact on Buy Box success.
By leveraging FBA and catering to Prime customers, you can enhance your Buy Box share and tap into the expanding customer base of loyal Prime members.
Understanding these influential factors will enable you to optimize your selling strategy, increase your Buy Box share, and ultimately drive greater sales on the Amazon platform.
Landed Price: Impact on Buy Box Share
The landed price refers to the total amount at which a product is sold on Amazon, including shipping costs within the US, and shipping and VAT in the UK and Europe. The landed price plays a significant role in determining a seller’s Buy Box share. Generally, a lower landed price will increase the likelihood of winning the Buy Box.
The landed price is a variable that sellers have direct control over and can manipulate to some extent. It is tempting to continually lower the price in an attempt to secure the Buy Box. However, it’s crucial to strike a balance between competitiveness and profitability. Continuously lowering the price to extreme levels solely for Buy Box acquisition may negatively impact your overall profitability.
It’s important to consider other factors alongside the landed price, such as fulfillment method and seller performance metrics, to maintain a healthy and sustainable business. Aim to find the optimal pricing strategy that aligns with your profitability goals while remaining competitive in the marketplace.
By analyzing the impact of landed price on your Buy Box share and making informed pricing decisions, you can enhance your competitiveness and drive sales without compromising your long-term profitability.
Seller Rating: The overall score of customer experience when purchasing products from a seller. A high Seller Rating is crucial as it has a significant impact on the Buy Box. Positive customer feedback and a track record of exceptional service contribute to a higher Seller Rating.
Shipping Time: The promised time it takes for the seller to ship the item to the customer. For time-sensitive products and categories, such as birthday cards and perishable goods, the impact of shipping time on the Buy Box is even more pronounced. Utilizing FBA (Fulfillment by Amazon) automatically meets exceptional shipping standards, enhancing your chances of winning the Buy Box.
Order Defect Rate (ODR): The ODR is a combination of three metrics—Negative Feedback Rate, A-to-Z Guarantee Claim Rate, and Service Chargeback Rate. The lower the ODR, the higher the likelihood of winning the Buy Box. Maintaining excellent customer service, minimizing issues, and resolving any disputes promptly contribute to a lower ODR.
Feedback Score: The collective feedback received from customers, which is grouped by the last 30 days, 90 days, and 365 days. The most recent feedback holds the greatest weight in the Buy Box algorithm. Positive feedback from satisfied customers improves your chances of securing the Buy Box.
Delivery Time & Rate: The Buy Box considers three elements related to delivery, each grouped based on the last 7 days, 30 days, and 90 days—On-time delivery, Late shipment rate, and Tracked delivery rate. Timely and reliable delivery performance positively impacts your Buy Box share.
Customer Response Time: Amazon evaluates the average response time to customer messages in the last 7, 30, and 90 days, comparing it to competing sellers. Additionally, it categorizes messages based on reply times: within 12 hours, within 24 hours, after 24 hours, and unanswered. Maintaining a quick and responsive customer support system is crucial to increase your chances of winning the Buy Box.
It’s important to note that the Buy Box algorithm considers these factors in combination, and their relative importance may vary based on specific product categories. By prioritizing customer satisfaction, maintaining prompt communication, and delivering exceptional service, you can improve your Buy Box share and increase your chances of driving sales on Amazon.
Feedback Count: The total number of buyers who have provided feedback to the seller. Feedback Count is now considered a significant metric on its own, and sellers with a high score are more likely to win the Buy Box, assuming other metrics are equal. Amazon also expects the feedback count to represent a proportionate percentage (around 2 to 5%) of the seller’s total orders. This means that both large and small sellers should strive for a substantial feedback count relative to their order volume.
Inventory: Amazon prefers to award the Buy Box to sellers who consistently maintain sufficient inventory to meet the increased demand generated by winning the Buy Box. Sellers with larger current inventory, consistent sales, and a strong stock history are more likely to secure a greater Buy Box share.
Order Cancellation Rate: This metric considers the number of orders cancelled by the seller before fulfillment and the number of orders refunded to the customer after fulfillment. While a positive score does not strongly impact Buy Box share, a pre-fulfillment Cancellation Rate exceeding 2.5% will significantly decrease the chances of winning the Buy Box. Utilizing FBA provides an advantage here, as FBA orders are less likely to be cancelled since Amazon ensures that FBA inventory is available for sale.
Balancing Tradeoffs to Optimize Buy Box Metrics: The ultimate goal is to improve performance on every seller metric without compromising other areas of your business. However, allocating endless resources to customer service or continuously lowering prices is not sustainable. The key is to identify which changes will have the greatest impact on Buy Box share while considering the business costs in terms of time, money, and effort.
A practical strategy, especially with limited resources, involves prioritizing metrics with high impact and sacrificing additional time and effort on metrics with lower impact. For example, instead of aiming for extremely fast response times to customer inquiries, you may focus on meeting the minimum requirement of responding within 24 hours, allowing you to allocate more time towards improving your Seller Rating, which carries greater weight in the Buy Box algorithm. This way, you can optimize your efforts for maximum results and enhance your chances of winning the Buy Box.
Increasing Your Buy Box Share Through Repricing
To enhance your Buy Box share, one of the most popular methods is repricing. Adjusting the price of your offer is a quick and straightforward way to influence your position in the Buy Box. If your seller performance metrics are equal to or better than your competitors’, a lower price significantly increases your chances of winning the Buy Box.
However, it’s important to be aware of two major drawbacks associated with repricing:
Decreased profit margin: Many sellers mistakenly believe that they need to match or undercut their lowest-priced competitor to win the Buy Box. In reality, if your customer performance metrics surpass those of your lowest-priced competitor, you can maintain a higher price and still secure the same Buy Box share. It’s possible to sell your product at a significantly higher price while maintaining a competitive advantage.
Price wars: Repricing based solely on undercutting competitors can lead to a cycle of continuous price drops as sellers try to outdo each other. This can erode profit margins and result in selling products at cost or even a loss.
When repricing to win the Buy Box, it’s crucial to strike a balance between Buy Box share and your product’s profit margin. Proactive planning can help you avoid reactive price drops and move excess inventory. By forecasting the appropriate amount of product to purchase based on its sales rank and factoring in anticipated Buy Box share based on competition, you can find a price point that offers a better profit margin while still maintaining a satisfactory Buy Box share.
Here’s a practical example using the Lego set mentioned earlier:
Let’s assume you’ve obtained the Lego set at a low cost, allowing you to outprice your competition and win 80% of the Buy Box share. With a profit margin of $3.50 per sale and approximately 30 sales per day, your gross daily profit amounts to $105. However, you calculate that by increasing the offer price by just a few dollars, you can raise your profit margin to $5.00 while your Buy Box share drops to around 55%. This would result in 20 or 21 sales per day and a gross daily profit of approximately $103. By finding this price point, you can achieve a 43% increase in profit margin over the product’s lifetime while still generating the same daily gross profit.
Now, let’s discuss different repricing methods, which can be classified into three categories
Manual repricing: This involves manually adjusting prices based on your analysis of the competition and market conditions. It offers the most control but can be time-consuming.
Rule-based repricing: With this approach, you set predefined rules or conditions for repricing. For example, you can specify that your price should always be 5% lower than the lowest competitor. It provides automation and flexibility.
Algorithmic repricing: This method utilizes advanced algorithms to dynamically adjust prices based on real-time market data, competitor analysis, and predefined strategies. It offers the highest level of automation and optimization.
Choosing the right repricing method depends on your business needs, available resources, and desired level of control. Consider your unique circumstances and determine which approach aligns best with your goals.
By effectively repricing your products, you can increase your Buy Box share and achieve a balance between profitability and market competitiveness.
Manual Repricing
Manual repricing involves manipulating prices directly in Seller Central and provides the highest level of control and visibility. However, it is a time-consuming and labor-intensive method, making it impractical for sellers with a large number of products. Unless you have a small number of products or unique offerings with no competition, manual repricing may not be the most efficient approach.
Manual repricing can be suitable for merchants selling
- A limited quantity of high-value items
- Unique or handmade products
- Products with no competition on Amazon
Advantages of manual repricing
- Transparency: You have full visibility into the pricing decisions.
- No direct cost: Unlike some other repricing methods, manual repricing doesn’t incur additional expenses.
Significant disadvantages of manual repricing
- Daily attention required for competitive products.
- Time-consuming for sellers with large databases of products.
- Slow reaction time in adjusting to competitors’ price changes.
Rule-Based Repricing
An alternative to manual repricing is rule-based repricing. With this method, prices are adjusted based on a set of user-defined rules that consider competitors’ prices. Rules can be established to match the lowest market price, beat it by a specific dollar amount, or aim to be within the lowest 10% of all prices.
Rule-based repricing is suitable for
- Merchants selling books, films, and other media products.
- Merchants who are not Buy Box Eligible.
- Merchants selling low-profit items, including drop shippers, as rule-based repricers are typically cost-effective and have a fixed cost structure that minimally impacts profit margins.
Advantages of rule-based repricing
- Faster and easier compared to manual repricing.
- Instant reaction to competitive price changes, often in near real-time.
- Typically inexpensive to implement.
Disadvantages of rule-based repricing
- Potential for conflicting rules, necessitating additional management.
- Focuses solely on prices and overlooks other seller metrics.
- May disregard Buy Box share and profit margin, making it challenging to optimize for maximum potential profit.
When implementing rule-based repricing, it’s essential to consider the trade-off between speed and efficiency. Finding the right balance is crucial to achieve optimal results for your business.
Algorithmic Repricing
The second alternative repricing method is algorithmic repricing, which involves utilizing software to monitor all the variables used to determine the Buy Box and set an optimal price for each individual product that balances Buy Box share and profit margin.
Algorithmic repricing is suitable for merchants selling
- Products with higher profit margins, as this service typically incurs a variable cost.
- A large inventory of unique products.
- A diverse range of products and product lines.
Advantages of algorithmic repricing
- Quicker and easier setup compared to rule-based repricing.
- Instant reaction to competitive price changes in near real time.
- Considers all Buy Box factors, allowing for profit optimization.
Disadvantages of algorithmic repricing
- Can be more expensive than rule-based repricing, as most companies charge a percentage of sales for this type of software.
- The cost may be prohibitive for smaller merchants or those with low-profit margins per product.
Algorithmic repricing offers a high potential return on investment with minimal effort, as much of the process is automated. However, it is important to note that this repricing method tends to be more expensive. Therefore, it may not be suitable for all sellers, particularly those with limited resources or small profit margins.
For a list of recommended repricing tools, refer to Chapter ??.
Increase Your Buy Box Share through Enhanced Seller Performance
Improving Seller Performance should be the initial focus for sellers aiming to increase their Buy Box share. Before diving into repricing strategies, take a close look at your Seller Rating, Shipping Time, and Customer Response Time metrics. By targeting these areas, you can have a significant impact with minimal effort.
It is crucial to understand the red zones that greatly diminish the chances of winning the Buy Box
- Seller Rating Below 70%
- On-Time Delivery Below 97%
- Tracked Orders Below 98%
- Late Shipment Rate Above 4%
- Cancellation Rate Above 2.5%
- Shipping Time More than 14 days
- Customer Response Time More than 10% of messages over 24 hours
If any of these metrics fall below the specified levels, it becomes exceedingly difficult to secure the Buy Box. Competitors with higher landed prices may surpass you in winning the Buy Box, highlighting the importance of maintaining strong performance.
Prioritizing avoidance of these red zones should take precedence over pricing concerns. However, it is important to strike a balance as excessively high prices can hinder sales, impeding your ability to improve the crucial performance metrics, most of which rely on order volume.
For detailed information and insights into Seller Rating, Shipping Time, and Customer Response Time brackets, refer to the bonus chapter “Advanced Buy Box Considerations.” Understanding these brackets can unlock valuable quick wins and yield significant improvements in your Buy Box share.
Buy Box FAQs & Best Practices
Find answers to frequently asked questions about the Buy Box and discover essential best practices for sellers.
Why is FBA such a significant boost to Buy Box eligibility for sellers?
Fulfillment by Amazon (FBA) plays a critical role for most sellers on Amazon. It not only allows sellers to compete more effectively with others on the same listings but also offers several advantages that increase the chances of winning the Buy Box.
Here’s why FBA provides such a boost
- Better on-time delivery: FBA ensures faster and more reliable shipping, resulting in improved delivery times.
- Tracking numbers: All FBA orders come with tracking numbers, enhancing transparency and customer satisfaction.
- Reduced late shipment rate: FBA minimizes the risk of late shipments, a crucial metric for Buy Box eligibility.
- Fewer canceled orders: FBA orders experience fewer cancellations, boosting overall performance.
- Consistent on-time shipping: FBA sellers consistently meet Amazon’s high standards for on-time shipping.
Why does Buy Box eligibility matter so much to every seller?
Buy Box eligibility is essential for maximizing sales and reaching Amazon’s most profitable customer segment, Prime customers.
Here’s why it matters
- Increased sales likelihood: Without Buy Box eligibility, a seller’s chances of making a sale significantly decrease.
- Exposure to Prime customers: Buy Box-eligible offers are more likely to be shown to Prime customers, who generate substantial revenue.
- Competitive advantage: Simply having the lowest landed price does not guarantee sales. Buy Box eligibility provides high visibility and a competitive edge.
- Sign of a solid business: Buy Box eligibility reflects a well-rounded and successful business. It signifies that key processes are in place, leading to improved visibility and increased sales opportunities.
Best Practices to Maximize Your Chances of Winning the Buy Box
To improve your chances of winning the Buy Box on your listings, follow these best practices:
Consider FBA for key items: Fulfillment by Amazon (FBA) can significantly enhance your Buy Box eligibility by providing better on-time delivery, 100% tracked orders, and minimizing issues with late shipments, cancellations, and shipping time.
Implement a feedback requesting process: Establish a system, either in-house or through a third-party software provider, to proactively request feedback from customers. Positive feedback contributes to a higher Seller Rating and increases your Buy Box share.
Utilize a repricer: If you sell products with competing offers and have a substantial inventory, consider using a repricing tool. This software can automatically adjust your prices to stay competitive and improve your chances of winning the Buy Box.
Prioritize prompt customer response: Have a system in place to respond to customer inquiries within 24 hours, 7 days a week. If necessary, utilize a third-party software provider to manage messages during weekends or when you don’t have in-house support available.
Leverage third-party inventory management and shipping platforms: For products and orders fulfilled from your warehouse, consider using a reliable third-party inventory management and shipping platform. This will help optimize your shipping time, delivery rate, and inventory depth, positively impacting your Buy Box performance.
Meet the Author
