With large players like Walmart, Target, and Best Buy using tactics like matching the lowest price of any competitor to take market share from smaller competitors (and each other), these big companies’ margins have taken a hit industry-wide.
But for Amazon third-party (3P) sellers, all the traditional sales rules get tossed out the window. That’s because of several sales factors unique to the Amazon Marketplace, including:
These factors impact how Amazon sellers must operate in the competitive landscape to achieve success.
With that in mind, it’s time to talk about developing an Amazon price match strategy so you can compete in even the most saturated market.
Amazon price match refers to the concept of adjusting prices to match or beat competitors on Amazon. While Amazon itself does not offer price matching, the platform’s dynamic pricing system uses algorithms to ensure its prices remain competitive with those of third-party sellers and other retailers.
For sellers, price matching on Amazon involves adjusting their prices to match competitors, including Amazon, to stay competitive and improve their chances of winning the Buy Box. Tools like Informed Repricer help automate this process, allowing sellers to monitor and update their prices efficiently without manual effort.
Although Amazon focuses on offering low, everyday prices, it’s up to sellers to use price matching strategically to maximize visibility and profitability on the platform. For more information on Amazon’s pricing approach, visit Amazon’s pricing policy.
Price matching on Amazon can be a powerful strategy for attracting customers, but it also presents several challenges for sellers:
The need to match or beat competitor prices forces sellers to constantly monitor and adjust their pricing. This ongoing effort can lead to price wars, requiring significant time and resources. As a result, sellers may find themselves focusing more on maintaining competitive pricing than on other essential aspects of their business, such as marketing, customer service, or product development.
Frequent price adjustments often lead to price reductions, which can erode profit margins. As sellers lower prices to stay competitive, they may reach a point where profits from each sale are unsustainable. Without careful planning and cost management, this can jeopardize the financial stability of a business.
The dynamic nature of the Amazon marketplace, where prices fluctuate frequently, creates challenges for sellers trying to establish stable pricing strategies. Sudden price shifts by competitors can disrupt sales forecasts, making it difficult to maintain consistent revenue and profitability. This volatility requires sellers to stay agile and adapt their strategies to remain competitive.
Amazon sellers must keep an open mind to using all different types of pricing strategies to maximize profitability. It may be intuitive to price below competitors. After all, the lowest priced item in a set of identical goods will always be the most attractive offer in a typical retail setting.
Pricing lower may result in more sales, but for every penny by which a seller lowers his price, that’s a penny less in profits. It’s vital to understand that profits, not sales figures, are the most important metric for sellers to measure in terms of their success.
Even on Amazon, having a competitive price is a heavily weighted factor in deciding who wins the Buy Box. The only problem with using a strategy of always underpricing your competitors is that they’re too smart for that. They’ll see what you’re doing and then do the same thing right back to you.
In sales, this dangerous game is called a “race to the bottom,” and it rarely yields any big winners. That’s because it eats away at the profit margins of every seller involved. Smart sellers see this practice as negative for the entire seller ecosystem and avoid it at all costs.
The real key to strategic pricing on Amazon is figuring out your costs at the SKU level. That way, you can figure out your price floors, or the minimum prices at which you can sell your items and profit.
Then, by examining how your competitors price the same goods, you can deduce an optimal price ceiling: the maximum price you believe you can sell an item for without appearing too expensive to potential buyers. Crunching these numbers gives you the optimal price range for each SKU to be profitable.
Once you’re armed with this information, you can begin developing specific pricing strategies per SKU. You may want to price below your competition in some instances, and even price above your competition in others. There are, however, some situations on Amazon when using a price matching strategy may make the most sense for you.
Let's explore key scenarios where price matching proves especially beneficial.
Ask most sellers, and they’ll tell you that they’re terrified of competing with Amazon. Because Amazon enjoys huge economies of scale and is in control of the entire Marketplace, it’s tough to gauge how to set your prices when Amazon is in direct competition.
Unfortunately for 3P sellers, Amazon sells a ton of different products, so the odds of having to compete directly with the biggest dog on the Marketplace are fairly high. So, what should 3P sellers do to win the Buy Box when Amazon is holding it down? Match their price.
Here’s why: If you beat Amazon on price, Amazon will likely undercut you right back because it enjoys more flexibility on price due to its immense buying power. Amazon pays lower prices to manufacturers because it benefits from buying in huge quantities. It also isn’t paying the same fees as you to sell on its own Marketplace.
Since you’re paying Amazon fees just for the right to sell on its Marketplace in the first place, plus any FBA and storage fees, you’re at a major disadvantage. So don’t poke the beast by beating it on price.
Instead of that, try using a price matching strategy against them. It’s known that the Buy Box rotates between sellers – even Amazon itself. That means if you offer a product for the same price as Amazon, there’s a chance you’ll be able to snag a share of the Buy Box rotation without provoking Amazon into a price war.
For some product categories, Amazon will fight harder to retain the Buy Box, so you may find that matching its price on some products won’t make a difference. But, there are instances where price matching Amazon will result in landing you in the Buy Box– at least for part of its rotation.
Sellers with Buy Box dreams who are concerned they’ll never beat Amazon on price should then try a price matching strategy against Amazon as a test. If you wind up sharing time in the Buy Box with Amazon, you’ll know that you don’t have to undercut them and sacrifice profits in the process.
If you don’t win the Buy Box by price matching Amazon, then it’s time to tweak your pricing strategy. You can start by pricing a little bit lower than Amazon– say 2% less– and testing to see if you win the Buy Box then. If that doesn’t work, try slowly increasing the amount by which you undercut Amazon until you win the Buy Box, making sure that you stay above your pre-calculated price floor for each SKU.
If you win the Buy Box using this tactic, you’ll have a price matching strategy to thank as your starting point. But if you don’t win the Buy Box and feel your margins are becoming too tiny, then re-evaluate if you even want to keep selling that item.
Price matching strategy also works against other 3P sellers who seem unbeatable on price. Hey, if you can’t beat them, join them! By mirroring your toughest competitors’ prices, you’ll gain the same visibility as them. Plus, you’ll guarantee at least a share of the Buy Box, pending your other Amazon metrics are equally competitive.
And, if you want to avoid competing with Amazon on price altogether, you can do that too. Just use an automated repricing tool that allows sellers to exclude Amazon from competition completely.
Sometimes you’ll source products that you think will be big hits, only to find that they wind up collecting dust. When you’re stuck with lemons in your inventory for months longer than expected, you don’t just lose out on revenue – you may also get hit with storage fees from Amazon.
To avoid FBA inventory storage fees, you may want to set up a price matching strategy with your lowest-priced competitors in order to drive sales while minimally impacting margins.
Make sure you’re aware of Amazon’s FBA long-term storage fees and inventory cleanup dates (February 15th and August 15th) and keep track of how long each of your products has been in storage so you know which ones need to be moved fast, lest you get hit with bottom-line-brutalizing fees. Also, note that Amazon updates its fees regularly, and it will be making its next change on October 1st, 2016.
For Amazon sellers who rely on sales of meltable products, there’s a potential pitfall for profits every May through September. That’s because Amazon’s rules for date- and temperature-sensitive products state that:
"Any unsold meltable inventory still present after April 30 in our fulfillment centers will not be available for sale. Hence, such inventory may be determined to be unfulfillable and disposed of."
On top of that, Amazon considers any meltable products sent to FBA between May 1st and September 30th unfulfillable. What’s worse, Amazon will likely dispose of these products entirely, so don’t ever make that mistake.
Sellers who find themselves in a position of holding meltable products (or items with sell-by or best-by dates) in FBA storage close to the April 30th cutoff date may want to use a price matching strategy to liquidate this part of their inventory to avoid losses.
Even if your lowest priced competitors are below your price floor, matching them might still make sense in this situation. That’s because the alternative is a total loss on your meltable inventory.
Price drops and lower price notifications are crucial aspects of the Amazon marketplace, impacting both buyers and sellers.
Sellers often face these price drops and lower price notifications for many reasons, including changes in competitors' pricing, shifts in consumer demand, or clearance sales aimed at moving inventory quickly. Another trigger can be Amazon's algorithm, which continuously monitors and suggests pricing adjustments to ensure competitiveness.
Sellers might even receive another competitor's lower price notifications when competing offers enter the market at a discounted rate. As a seller, staying informed about these triggers allows you to anticipate and react to price changes effectively.
Price drops and lower price alerts can greatly impact a seller's profits and sales approach. When prices drop, it can lead to reduced profit margins and encourage competitors to lower their prices, too, spreading the effect through the market.
Alerts for lower prices inform customers about better deals, increasing product attention and sales but often with lower profit margins. Amazon sellers need to stay flexible by keeping a close eye on these changes and updating their pricing quickly. By responding swiftly to market shifts, sellers can maintain visibility and protect their profit margins.
Amazon's lower price notifications help both shoppers and sellers. Shoppers get updates when prices drop on products they are interested in, allowing them to make informed purchasing decisions and maximize savings by buying at the best price. For sellers, these notifications indicate when it's time to adjust prices based on the platform's data to stay competitive.
Using price tracking tools, shoppers can set alerts for different products, such as electronics, books, and household items, so they're aware of any price changes to claim significant savings. These alerts are especially useful during major sales events like Black Friday or Prime Day, helping shoppers take advantage of discounts while giving sellers valuable insights to keep their prices competitive.
These simple practices can help you get the most out of Amazon’s price matching:
High-margin products generate more profit per unit sold, which allows for greater returns on investment, increased revenue, and improved overall business sustainability.
Conduct a thorough analysis of your product catalog to identify high-margin products. Calculate profit margins for each SKU, considering all associated costs (sourcing, shipping, fulfillment, advertising, etc.), and prioritize those with the highest profit margins.
You should set clear price boundaries to protect your profit margins and prevent excessive price drops. Minimum prices should be set based on costs (including product cost, shipping, and Amazon fees) to ensure profitability. Maximum prices should be set based on market demand and competitor pricing to avoid pricing yourself out of the market.
Focus on factors beyond just price, such as order fulfillment speed, customer reviews, and return policies, to increase your chances of winning the Buy Box. By offering excellent customer service and a positive buying experience, you can differentiate yourself from competitors, boost customer satisfaction, and attract more buyers, even at a higher price.
Experiment with different pricing strategies, such as dynamic pricing, minimum advertised price (MAP) policies, and competitive pricing, to determine the most effective approach for your specific products and market.
Dynamic pricing involves adjusting the price of a product based on market demand and other factors. MAP policies dictate the minimum price a retailer can charge for a certain product. Competitive pricing is setting a product’s price at or below its competitors’ prices. The approach that works best will depend on your products, target market, and competition.
Keeping your finger on the pulse of competitor pricing and demand fluctuations is critical to respond quickly to market changes.
Continuously track competitor pricing behaviors, sales velocity, and inventory levels to identify opportunities proactively. This can help you anticipate a significant price difference between your products and those of other retailers to adjust your own pricing strategies accordingly.
In addition to being responsive, your pricing decisions should also be strategically aligned with your goals for market penetration, revenue generation, brand awareness, and profit maximization.
Use automated repricing software like Informed Repricer to adjust prices in real time based on competitor pricing, demand, and inventory levels. These tools can analyze market data, identify optimal price points, and automatically adjust prices to maintain competitiveness while protecting profit margins.
Price matching may not be something you rely on every day. But when it comes to your Amazon dominance, it’s a strategy you want to have on lock. Use it to test how competitive Amazon is willing to get for the Buy Box, or use it to get slow-movers out of your inventory.
If you deal with chocolates or other temperature-sensitive products, price-match your lowest competitors to avoid Amazon deeming those products “unfulfillable,” rendering a total loss.
You may even want to price match regularly to keep the selling environment better (read: higher profits) for everyone overall.
Informed Repricer can help you automate these strategies and many more. Our powerful repricing engine continuously monitors your competition and adjusts your prices in real time to:
Don't let price wars undercut your profits. Try Informed Repricer today and experience the power of automated pricing.
Price matching involves adjusting your product prices to match or compete with the lowest price offered by competitors. This strategy helps sellers stay competitive and potentially win the Buy Box on Amazon. Automated repricing tools can simplify the process, ensuring sellers maintain profitability while staying aligned with market trends.
Amazon does not offer a price match policy. Instead, Amazon dynamically adjusts its prices using algorithms to stay competitive, focusing on providing low prices every day.
Amazon's pricing policy emphasizes maintaining low, competitive prices by analyzing market trends and competitor pricing. The platform ensures customers receive value without offering a price-matching program. For more details, visit Amazon’s pricing policy.
Informed Repricer helps professional sellers on Amazon and Walmart increase their sales and profits by keeping their prices competitive 24/7.
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