E-commerce marketplaces like Amazon and eBay are the best places to start selling online. You have a readymade platform with abundant traffic. There are millions of daily visitors and you can get started quickly with minimal investment. The only disadvantage is the tough competition that comes with it. Popular marketplaces are crowded with sellers and to make matters worse, they are selling very similar products.
Being competitive comes down to offering the best price:
You have to be one of the top sellers of your products to make any headway in these markets. On Amazon, the seller featured in the buy box usually makes the sale when someone buys a product. On eBay, sellers who manage to get their listings near the top of the search results get most of the orders.
Marketplaces have their own criteria and methods to determine which seller should win the buy box or rank on top, but the most important factor is the price. Other factors like customer ratings, methods of fulfillment, payment options and track record of delivering in time also have a role to play. However, other things being equal, it’s the price that makes all the difference. Unless you have a monopoly over the product, success depends on your ability to offer the best price.
Automated repricing is necessary to maximize your profits:
Offering your lowest price may seem like a good idea as it will most likely result in the highest possible sales. This strategy may also help you gain some initial attention and ratings, but in the long run, your goal should be to maximize your profits. Selling at rock-bottom prices is definitely a bad long-term strategy.
The best option is to set your prices just below the competition, but unfortunately, things aren’t that simple. A few minutes after you set a lower price, other sellers will respond by lowering their prices in order to maintain their seller rankings. They are able to do this because they use marketplace repricing software to adjust their prices automatically in response to the competition.
Unless you are into niche products with no competition or your costs are so low that you can offer rock-bottom prices and still make good profits, making frequent price adjustments is the only way to stay competitive and profitable. If you are selling only a few products, it may be possible to do this manually. If you are like most sellers, you probably have a large portfolio of products and automatic repricing is the best option.
You can use third party repricing tools to do the job. Some marketplaces also offer their own repricing tools. Automatic repricing is widely used. Amazon makes millions of price adjustments every day in response to competition from other sellers and e-commerce sites.
How reprising software works:
Reprising tools differ in terms of features and algorithms, but in general, they all work on the basis of a minimum and maximum price given by you. You set these prices and this is the range that the software has for making adjustments. The purpose of the minimum price is obvious. It prevents the software from setting the price too low. The maximum price is required to keep prices sensible, maximize sales and to stay within the pricing rules of the marketplace. Once set, the software will try to sell your goods at the best possible price and will continually adjust your prices in response to price changes made by your competitors.
Most third party repricing tools offer other benefits as well. Some also provide inventory management and automatic average cost calculations as batches of new stocks are added at different prices. Tough competition among repricing tools has ensured regular efficiency improvements, better price adjustment strategies and more powerful features.
When you are competing against many sellers, marketplace repricing is your best option to stay competitive and profitable on e-commerce sites. Manual repricing is an option only if you are dealing with very few products and you don’t have much competition to worry about. Even then, automatic repricing makes sense as it takes away the headaches of managing your prices manually.