Amazon Pricing Wars: The Downfall of Amazon Sellers

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Amazon has recently seen an influx in private label sellers, which has led to an increase in competition. This increase in competition has led to an increase in sellers lowering their sales prices to compete with other sellers (what we, at Splitly, like to call “Price Wars”).

 

In addition, Chinese manufacturers have started to sell directly to Amazon, also increasing competitive pricing.

 

Instead of constantly entering into price wars with other sellers, which will cause a race to the bottom, you should test different prices and selling strategies to find your optimal selling price and strategy.

 

Splitly will help you test your prices and selling strategies so that you can win the price wars.

The Secret Is Out: Amazon Is the New Gold Rush

 

The secret is out. People know they can make money on Amazon, and they are coming in flocks. So what can you do to stay ahead of this new competition?

 

This weekend I was looking through Amazon categories and checking out some keywords to help me find new private label products to sell. While doing this research I could not help but notice how many listings were from Amazing Selling Machine (ASM) private label sellers.

 

ASM is an informational product that helps train people how to sell private label goods on Amazon. It is often credited with making private label selling on Amazon popular among the masses, and causing this gold rush.

 

These sellers’ listings are easy to spot with their long keyword stuffed titles and bullet points,  well written copy, high quality images, use of ebook giveaways, and utilization of special characters.

 

Seeing ASM listings is nothing new. However, what was new to me was the amount of ASM listings I noticed on the first page of my search. Some searches would bring back 6-7 ASM listings on the first page alone.

 

Most of these listings were well done. They had their money keywords ranking. They had good bullet points, great images, and detailed product descriptions. Most also had a over 100 reviews, which included video reviews, reviews with pictures and reviews with disclaimers about receiving the product for free or at a discounted price.

 

After my admiration for their quality work subsided, I became a little worried, and started to think, how can I compete with this competition?

 

So, with more and more niches becoming over saturated, how can we, as private label sellers, stay ahead of the competition?

Many Sellers Are Getting Into Price Wars and No One Is Winning

 

To compete with this influx in competition, you may have resorted to lowering your listing prices.

 

You assume that by lowering your price, you will regain any sales and rank you may have lost from your competition.

 

You assume that by lowering your price you will beat your competition.

 

However, the real problem is your competition is operating under the same assumptions. Once they see they are losing ground to you, they will quickly lower their price to regain their sales and rank. This cycle will continue until both of you hit rock bottom.

 

As you are well aware, lowering your listing price lowers your profit, so when you enter into a price war, everyone loses.

 

In theory, if both of you keep lowering your prices, eventually you and your competition will be selling your products at cost, or at a loss, and what’s the point of that?

There Is Another Problem: Chinese Manufacturers Are Starting to Sell Directly on Amazon

 

To make matters worse, a number of Chinese manufacturers have started selling directly on Amazon. By selling on Amazon, these manufacturers have cut out the middleman, which is you.

 

In addition, your very own manufacturer might take your product idea, and start competing with you directly. You already did all the heavy lifting, and now these manufacturers see how well this product is selling and want to get into the game.

 

What’s to stop these Chinese manufacturers from selling the very product you are asking them to manufacture? Not only can they copy your idea, they can even copy your listing information, and in some extreme cases, the images you paid good money for!

 

And the sad part is, you cannot win a price war with these sellers. They have effectively cut out the middleman, which is again, you, so their break even price is much lower than yours.

 

If you enter into a price war with these sellers, they could effectively flood the market with a much cheaper version of your good, causing you to lose money on every sale.

Don’t Enter Into a Price War Until You Test Your Listing Price

 

So should you enter into a price war to try to compete with this influx in competition? Our suggestion is to not enter into a price war without testing your price first.

 

You should always be testing any changes you make to your listing.

 

You can’t assume that you need to lower your prices to compete in a price war.

 

The fact is, you don’t know what price will increase your sessions and conversions until you test it. You may feel the need to lower your prices, but perhaps lowering your prices solely to increase your conversions and sessions might actually do the opposite.

 

The pricing sweet spot might be somewhere in the middle between the price you have now and  your break even price. Until you test to see which price is the optimal selling price, you won’t know.

 

Don’t Assume You Have to Lower Your Price to Beat Your Competition

 

You can’t just assume that by lowering your prices you will increase your sessions and conversions. The truth is, you don’t know what the effect of lowering your prices will do to your listings until you test it.

 

Why?

 

Because lower pricing does not always mean an increase in sales. Some buyers might be suspicious of an ultra cheap price when they see that the other prices for the same product are much higher.

 

Is there something wrong with that product? Why is it so cheap?

 

Also, there may be several reasons why one seller is selling more of a particular product than you are selling. Maybe the seller has better pictures. Maybe the seller has better written content. Maybe he has more reviews or better reviews. Maybe he has less negative reviews.

 

Don’t get me wrong, price likely plays a part, but it is not the only part. Don’t assume that by lowering your price to where your competition is, you will sell like your competition.

 

There are many factors that you can change in your listing to increase in without having to decrease your price. Most of these factors can, and should, be tested on a regular basis.

 

In addition, if you change your marketing strategy and start selling your product as a luxury or high-end version of your product, you may not need to lower your prices at all.

 

Luxury or high-end versions of products sell very well. If you can differentiate your product from the competition, and justify your higher price, you might be able to keep your higher price or even increase your price, while maintaining sales.

 

You might also want to add or stress certain features that would add perceived value to your product, and would justify a higher price.

Don’t Enter Into a Price War Without the Right Weapons

 

Our software, Splitly, helps you split test prices so you know exactly which price is your optimal selling price.

 

You could pick two prices within a reasonable range and test which one increase your sessions and conversions. You will get the results relatively fast, and once you see which price won, you can then test prices above and below the winner to see which one of those prices is optimal. You can keep testing this way until you find a winning price.

 

With Splitly, you can also test several specific prices at a time to see which one increases your sessions, conversions, and profit. If you feel the need to lower your price to help you increase your sessions and conversions, you can test several lower prices so you can find the one that sells the best.

 

Splitly can also help you test marketing your product as a high-end or luxury version, while maintaining your current listing. You can tweak and then test your images, product features, and description to appeal to the high-end retail buyer.

 

You can see if this new “luxury” version leads to an increase in sessions and conversions. If it does, you can try increasing your product’s listing price by testing several higher prices until you find the optimal price.

 

This is an extremely powerful test that may take a lot of time to set up, but your return could be huge!

 

You can also try to highlight different features of your product to increase perceived product value, which will allow you to increase your listing price.

 

Remember, the lower price might not always be the price that increases your sessions and conversions the most. If you can find a price that increases your conversions and sessions, while preserving a decent profit margin, you can win the profit wars.

 

So, while your competition will be blindly lowering their prices in hopes to boost their sales, you will be strategically altering your prices to reflect your optimal selling price.

 

By using Splitly test and being strategic about your pricing, you can win the price wars.

 

Conclusion

 

An increase in competition has led many sellers to enter into a price war. Entering into a price war is a zero sum game that will lead sellers into a race to the bottom.

 

In addition, Chinese manufacturers are starting to directly sell on Amazon. Because they have cut out the middleman, which is you, they can now sell their items at an insanely cheap price.

 

Because you are the middleman, you cannot sell your products at the price these manufacturers can without losing a lot of money.

If you blindly enter into a price war, you will see your profits diminish, with no guarantee that you will increase your sessions and conversions.

However, Splitly will help you win the price war.
With Splitly you can test different prices and different selling strategies, so that you can find the optimal selling price and optimal selling strategy, without joining other sellers in a race to the bottom.

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