Some of the biggest blunders made by internet retailers today are related to Amazon repricing. Whether it's adjusting prices manually, using a stand-alone repricer, or not considering all the complexities of a multi-channel fulfillment model - there are several mistakes even the most seasoned veterans make with Amazon repricing. To help you protect your margins and win the repricing war, we've compiled a list of the five most common Amazon repricing mistakes so you can avoid making them yourself.
Mistake 1: Adjusting Prices Manually
Many merchants adjust their prices on a daily, weekly, or monthly basis - but they do it manually! This is a bad idea for two reasons. First, adjusting prices manually takes up way too much time - time that could and should be spent on growth-related tasks like adding new products, sales channels, and suppliers.
Second, it becomes almost impossible to compete for the Amazon Buy Box because no merchant can manually adjust their prices as frequently as prices actually change. In some industries prices change minute by minute! If merchants don't respond accordingly, potential sales will be lost and profits will fall.
Mistake 2: Using a Stand-Alone Repricer
The integrity of any Amazon repricer is based on it having real-time visibility into the real costs required to create the pricing formulas. It must know item cost, fulfillment/shipping costs, sales channel commissions, overhead cost - and it must know as soon as any of these internal costs change so it can automatically adjust prices immediately - or the merchant's margins will be at risk.
However, many merchants rely on repricers that don't have real-time visiblity into item cost, fulfillment/shipping costs, sales channel commission, and overhead cost. We like to call them 'stand-alone' repricers because they're not fully integrated with the merchant's other systems and key areas of operations. As a result, they can't automatically adjust prices when internal costs change. Instead, stand-alone repricers are dependent on the merchant to manually set and update these costs. This tedious and time-consuming process restricts growth and scalability. Plus, it continually leaves the merchant's margins exposed since stand-alone repricers don't know exactly when internal costs change unless the merchant is diligent enough to update their floor and ceiling values whenever those costs change.
Mistake 3: Ignoring Multi-Channel Fulfillment Complexities
When repricing on Amazon, merchants rarely take into consideration all the complexities of a multi-channel fulfillment model. For example, there are five different fulfillment methods we see regularly: drop shipping, cross-docking, shipping from stock, Fulfillment By Amazon (FBA), and using a Third-Party Logistics Provider (3PL). Each method has its own unique cost structure. To further complicate matters, item cost - another significant variable in the repricing formula - is actually determined by the fulfillment method. If merchants ship from stock, average item cost must be pulled from their inventory management system and used during the repricing process. But if merchants drop ship or cross-dock, item cost must be pulled from the latest supplier feed. A stand-alone repricer which just pulls item cost from what the merchant initially uploaded doesn't account for any of this. Sure, it might work if the merchant is using only one fulfillment method. However, this isn't scalable and would still require quite a bit of human intervention to keep costs up-to-date.
Mistake 4: Not Repricing When Costs Change
When your cost components change - whether it's item costs, fulfillment/shipping costs, sales channel commissions, or overhead cost - a repricing event must occur immediately or merchants risk either losing money on ensuing sales or simply missing out on sales they could have made. For example, if merchants ship from stock and they receive a new batch of inventory, a repricing event must occur because the average item cost has changed. If merchants drop ship or cross-dock and their supplier updates its feed, a repricing event must occur because supplier cost has changed. Most merchants who manually update their stand-alone repricers aren't doing this as often as it needs to be done.
Mistake 5: Making Worst-Case Scenario Estimates
Believe it or not, some merchants estimate when creating repricing formulas. For example, if they don't know what the sales channel commission is going to be they assume worst-case scenario instead of looking up the item on Amazon to determine the appropriate commission level. Merchants often assume 15% because that's the highest possible commission level on Amazon. This becomes a problem when publishing SKU to multiple ASINs in different categories with different commission levels. One category might be 15% while the other category is 8%. That's a 7% difference if a 15% commission level is assumed for both ASINs. Merchants who do this miss out on a lot of business because the item in the 8% category is essentially marked up 7% more than it needs to be, which is more than enough to cause the merchant to miss out on winning the Amazon Buy Box and the resulting sales.
Bottom Line: To be as successful as you can be, you need an integrated repricer with visiblity into all key cost components, to allow you to effectively build in your margin on top of these components. That way, you'll be protected at all times. You'll make money or you won't make the sale. And you're better off not making the sale than losing money. Move away from using point solutions that aren't integrated with each other. Implement the Etail Solutions Multi-Channel Management Platform with a built-in competitive repricer and watch your business - and profits - grow!