Amazon is the world’s most competitive marketplace.
To rise above the competition and become a successful Amazon business, most online sellers use automated Amazon repricing tools.
Repricers will instantly adjust the price of your products to ensure the optimum price depending on the competitive environment and the conditions or rules you have set.
This article explains how XSellco Price Manager calculates and assigns the price for your products.
How competitor rules work
Let’s run through a common scenario where a repricer is working to help win you the Buy Box.
For this example, let’s say the product you sell is a Kryptonite bike lock. Your seller score is 97.
As you know your costs and the minimum margin you want to make, you set a minimum price of $16.50. You’re also aware that if the product is too expensive the customer may buy a different type of lock. So you set a maximum price of $30.
You can now set up either a basic rule and/or a series of rules to compete with other sellers of this product. For most products, you will have a series of competitors selling the same product.
Let’s assume in this case you are an FBA (Fulfilled By Amazon) seller and set the following rule: the default repricing rule is price below the competition by 10%, this rule will take effect unless a specific competitor rule is in effect.
You then add the following competitive rules:
- Competitor Rule 1 – Reprice 5% higher than the competition when they are FBM and have seller metrics above 97 (higher than your seller metrics)
- Competitor Rule 2 – Reprice 5 cents above the competition when they are FBA and have seller metrics lower than 97 (lower than your seller metrics)
- Competitor Rule 3 – Reprice 0 cents below the competition when they are FBA and have seller metrics higher than 97 (higher than your seller metrics)
Competitor rules allow your to define variations on your default rule that only take effect when certain competitive conditions are met. There are many other ways competitor rules can be constructed, for our example we only look at the FBA status and the seller feedback rating.
In this scenario you’re up against four other competitors, called A, B, C & D.
- A is FBM and has a seller score of 99 and a landed price of $21.50
- B is FBM but has a seller score of 66 and a landed price of $17.56
- C is FBA and has a seller score of 78 and a landed price of $22.53
- D is FBA and has a seller score of 99 and a landed price of $32.54
A “landed price” means item price plus + shipping price.
How XSellco Price Manager works
First Price Manager will run through every competitor, and for every competitor it will analyze the competitor rules. Once it finds a competitor rule that matches, we will create a “virtual price” against that seller. If we don’t find a competitor rule that matches the competitor, we will use the default rule to create a virtual price.
We will now explain this process in detail below.
Price Manager will look at your first competitor rule. In this case competitor A is an FBM with a score of 99. As the criteria of Competitor Rule 1 has been met, Price Manager will assign a virtual price of 21.53 which is five percent more than Competitor A’s price. As we have found a competitor rule that matches competitor A, Price Manager will now look at Competitor B.
Compare to Competitor B
In this case Competitor B is an FBM seller with a score of 66. As the criteria for Competitor Rule 1 has not been met, Price Manager will move on to Competitor Rule 2. As Competitor Rules 2 and 3 are both for FBA sellers, Price Manager will move on to your default rule.
Price Manager will assign a virtual price of $15.80 which is 10 percent below Competitor B’s price.
Price Manager will now look at Competitor C
Price Manager works through the competitor rule list and matches Competitor C with Competitor Rule 2. In this case the virtual price of $22.48 is applied (five cent lower than Competitor C’s price)
Price Manager will now look at Competitor D
Finally, Price Manager gets to Competitor D and assigns Competitor Rule 3 against this competitor. A virtual price of 32.54 is assigned in this case.
At this point we are left with the following virtual prices against the competition:
- Competitor A – $21.53
- Competitor B – $15.80
- Competitor C – $22.48
- Competitor D – $32.54
Price Manager will then take the smallest value off this list ($15.80) and attempt to set this as the new price.
Before doing this however, Price Manager first checks to see if this price is within the previously defined minimum and maximum bounds for this product of $16.50 and $30.00. Since this price is below the minimum price, Price Manager will change your price to the minimum price of $16.50. This process is practically instant and will recur again every time Price Manager is notified of a price change on this product.
As an aside, if we had chosen the advanced setting, ‘ignore out of bounds sellers’, Competitor B would be excluded and Price Manager would have assigned the next lowest price, $21.53, as the virtual price.
Its important to note that XSellco Price Manager will only ever price between the minimum and maximum price you define. If either of these values are undefined we will not price a product. Price Manager has over 30 internal checks for ensuring safe pricing at all times.
XSellco Price Manager performs this process over eight billion times per month, that is over 3,000 times per second.
Have you tried XSellco Price Manager? Start a free 14-day trial and increase your sales by 145 percent.