FBA Pricing

How to Price items on Amazon when selling via Amazon FBA? – Part 1

May 13th, 2014

Today’s post will be about Amazon FBA pricing, a topic that was suggested a little over a month ago in the comments of a past blog post.  The specific question I received was “How do I determine how to price items that I am selling via FBA?”

This is a very good question, and probably something that I should have addressed sooner on the blog as it’s a very important aspect of being successful on amazon.  I have many different FBA pricing strategies depending on what the current “landscape” looks like for a given item, and won’t be able to cover all of these in today’s post.  Today’s post will be specifically about how I price items when I am competing with amazon as a seller.  It is important to note that these are my FBA pricing strategies, which are different from my strategies for merchant fulfilled items.

We’ll be taking a look at 2 different items in today’s post.  It’s important to note that the prices will almost certainly have changed by the time you are reading this (screenshots were taken on 5/12 between 7-8PM CT on 5/12/2014), so take a look at the screenshots I have included herein for the pricing information I am basing the pricing decisions on.  In addition, none of these items are items that I am currently selling or have sold in the past, they are being used for illustrative purposes only.  I might sell them in the future if the deal is right 🙂 Another item to note, this strategy discussion assumes I only have 5 or less of each item I am listing for sale, my strategies may change slightly if I have a large quantity available.

The first product will be a copy of Monopoly Nintendo that has amazon as a competitor.  HERE is a link to the product page if you want to take a look, and below is the screenshot (click to enlarge):

Source: www.amazon.com

Source: www.amazon.com

The 3 main factors I look at when pricing an item on amazon FBA are:

  1. Competition
  2. Sales Rank
  3. Price history (using camelcamelcamel or the keepa chrome add in)

So for competition on this item, I am only looking at the prime offers as those are my most direct competition.   As you can see amazon themselves is a seller of this item.  I prefer not to compete with amazon when possible, but if the margins are right I will still be a buyer.  So in this case there are 46 total offers, and amazon is one of them, so competition is relatively high.  The sales rank is about 8K in toys and games which is a very good rank for this category.  After taking a look at the price history for the past 3 months I see that $32.65 is the highest amazon has been priced at, and that 3rd party new offers tend to be a bit lower than the amazon price.

In this case, I would price my item for $32.65.  I would exactly match amazon’s price for a few reasons.  I find that I will still get placed in the buy box occasionally when I am priced the same as amazon, and that my item is likely to sell pretty quickly.  I don’t want to price below amazon in this case as often amazon will lower their price to beat or match your price.  Amazon can afford to be much more aggressive than me when pricing items, and I don’t want to get in pricing wars with amazon.  Just matching allows me a good chance of my item selling quickly without a significant risk of amazon lowering their price as a result of the way I priced my item.  If the rank was a little bit better, say under 2,500 in toys & games, I would likely price differently.  Let’s take a look at another item to illustrate.

The item is a VTech walker toy, HERE is a link if you want to take a look and here is the screenshot (click to enlarge):

Source: www.amazon.com

Source: www.amazon.com

There are 67 total sellers, the sales rank is 1,458 in toys & games, and the low price appears to be pretty consistent with the current amazon offering.  This item may look very similar competition wise to the item above, but I would price it a bit differently. In this case the sales rank of the item is a bit better and appears to consistently stay with a rank around 1,000 in toys. There are a few FBA sellers of this item, but they are all a good amount above the current amazon offering.  There are some merchant fulfilled sellers as well, but I am usually not concerned with them when listing an item that I will be selling via FBA.

Ranks with this low of a number tend to have a lot more items selling on a daily basis and dramatically increase the odds of amazon selling out of a product.  When this happens, prime customers will usually turn to items sold by FBA sellers as opposed to buying from a merchant fulfilled seller or waiting for amazon to restock the product.  This creates on opportunity to sell the product via FBA at a price a good amount higher than the listings that are currently available, amazon’s current price in particular.

In this case, I would price my item for sale at $44.19.  The reason for pricing at this level is to take advantage of amazon selling out of their stock of this product.  I would be pricing at $44.19 as I can see that the seller selling at $37.49 via FBA only has 4 in stock, and if I am banking on an amazon selling out I am assuming this seller’s would be the next 4 to sell.  This would leave me and the other FBA sellers at 44.19 with the low FBA price and quite likely to get sales.  $44.19 is the level at which I am starting to see some “resistance” in price as there are several sellers grouped in the $44-$45 range.  It’s also important to note that I would match the $44.19 as opposed to pricing below them, so as not to encourage the other seller to lower their price to beat mine.  I will very rarely price my item below that of another FBA seller or amazon. I prefer to match or price slightly above to avoid a never ending price lowering war (often called “the race to the bottom”).

I like to price this way as it gives my item a chance to sell at a significantly higher price compared to just matching the current low amazon price.  Getting sales when pricing this way when amazon is a seller is far from a sure thing, but I do find that amazon will sell out fairly often on some products opening up a window to sell at a higher price. When using this strategy I will normally hold my price (in this case at $44.19)  for 1-2 months to see if amazon will sell out in this time.  If I am still holding the item after 1-2 months, then I will likely price my item to match amazon’s offering, or slightly above amazon’s price.

An important note in regards to this strategy is that I am basing my purchasing decision off of the amazon price at the time of purchase.  So, I would have to be ok with the margins selling at $28.49 when buying the item.  So, if it sells at $28.49 then I will still have my desired profit, but if it sells at $44.19 then my return on investment is significantly increased.

That was 2 examples of how I would price an item for sale when competing against amazon.  In a future post, I will address how I price items that have some different characteristics where I use different pricing strategies.

What are your strategies when competing with amazon?  Would you have priced these items differently than I have recommended?

Please let me know in the comments below, and make sure to subscribe using the button below so you don’t miss out on any future posts!

 

 

Read More

46 responses to “How to Price items on Amazon when selling via Amazon FBA? – Part 1”

  1. Seamus says:

    Great article but I have 1 quick question:

    How did you know that the seller offering the VTech Walker at $37.49 via FBA had only 4 in stock?

    I couldn’t see stock levels in the screenshot.

    • Ryan Grant says:

      Hi Seamus,

      Good question. In order to tell how many items an FBA seller has in stock, add the item to your shopping cart and it will usually display the number they have in stock in red letters. In this case it would say “only 4 left in stock,” but if it didn’t say this, then you can add one to your cart and update the quantity to 999 and it will update to the number a seller has in stock.

      Let me know if that helps.

      Best Regards,
      Ryan

  2. Lei says:

    Ryan,

    Thanks for taking the time to share your thought process in pricing. As always, it’s very helpful. Look forward to the next post on this topic.

    On a different note, I guess you’ve seen/read about Amazon making Grocery, Health, Personal Care and Beauty “gated” or “restricted” categories as of yesterday (?). Looking at a glass half full, it may help weed out the faint-hearted and making it less competitive for the rest of us.

    • Ryan Grant says:

      Hi Lei,

      Glad to hear you find it helpful!

      I did see this about the new restricted/gated categories. It appears from what I have heard/seen so far that if you are already selling in these categories then you will be approved, but new sellers come in will have to obtain the approval. It is very possible that it could lessen the competition a bit as not everyone can sell in these categories, we’ll just have to wait and see what the long term effects are. I will be sure to share any updates I have on the blog, or on the facebook page.

      Best Regards,
      Ryan

  3. Lei says:

    Ryan,

    I did get confirmation from the “horse’s mouth” (got a call from Amazon Seller Support this morning) that you were right. For those who are selling in these categories, they/we will be grandfathered in. No need to apply for approval.

    Have a wonderful week!

    Lei

  4. sally says:

    hey ryan

    when you price against amazon sellers is your thought process the same as when you were pricing against amazon (the info given above?)

    • Ryan Grant says:

      Hi Sally,

      It’s a bit different than competing against amazon. The main thing I will say is that I will almost never price below other FBA sellers and usually price a little bit higher than them. I will be covering in more detail in a future blog post.

      Best Regards,
      Ryan

  5. Iqbal says:

    Hi Ryan,

    I’m a recent follower of your blog and absolutely love it.

    I”m from the UK, so trying to port your ideas across to here.

    How do you use the Keepa chrome plugin? I’ve installed it but it doesn’t do anything and I can’t seem to find any info about it.

    Thanks

  6. Alex says:

    Hello Ryan,
    I just joined your list of subscribers and find your blog excellent.
    I would not go below other FBA sellers if Amazon stock runs out,but I would keep my price the same as Amazon or slightly above it as keeping an eye on the customer habits of buying for less after the credibility of Amazon is no longer at play when there stock is finished and the next best thing is the AMAZON FBA Sellers.What do you think on my take?

    Remain Awesome

    Alex

    • Ryan Grant says:

      Hey Alex,

      Great to hear you are enjoying the blog and thank you for the kind words! I think the strategy you mention would be very likely to get you the sale as soon as amazon runs out of stock. It is possible you would even get the sale before amazon sells out if you are priced relatively close to them. I think the strategy you mentioned is very viable, it’s just a matter of how aggressive you want to be on pricing and how long you are willing to wait for a sale.

      Best Regards,
      Ryan

  7. Alex says:

    Hello Ryan,

    I forgot to ask you in my earlier post how I can see up to 5000 Amazon Best Sellers Rank and not just 100 that I am able to see? Any tools or tips?

    Thanks

    Alex

    • Ryan Grant says:

      That is an excellent question and I don’t currently know if there is a way to do this. I will do some research and if I am able to figure it out I will be sure to let you know. If anyone else reading this knows how to do this please chime in!

      Best Regards,
      Ryan

    • Sukh says:

      Alex

      Here is video that shows how to do this on UK site. I am sure with some tweaks you can use it for other Amazon sites.

      http://youtu.be/YwrZ8Bm7l3U

  8. sally says:

    ryan do you use a repricer

    • Ryan Grant says:

      Hi Sally,

      Currently I am not using a repricer. It’s something I am looking into trying in the very near future.

      Best Regards,
      Ryan

  9. sally says:

    also ryan do you have a maximum per item you buy? for example sometimes I see sellers with 20 in stock but that makes me nervous incase amazon comes into the product any suggestions?

    • Ryan Grant says:

      Hi Sally,

      If the deal is right I will buy a large quantity. So far the largest of a single item I have purchased at one time is 240. They were about $1.30 each so it wasn’t like it was $50 an item, and honestly it’s looking like I bought quite a few too many.

      My normal practice is to not buy more than about 15 of an item at any given time.

      Best Regards,
      Ryan

  10. Lauren says:

    Do you have a rule of typically how many sellers selling an item is too many? Thanks!

    • Ryan Grant says:

      Hi Lauren,

      I do not have any hard and fast rules about this. I have sold items on listings that have over 200 sellers. If a listing has over 100 sellers I do start to look at the sales rank and make sure that it should be a quick seller, but I don’t avoid items completely just because there are a lot of sellers, but I do factor it into my evaluation.

      Best Regards,
      Ryan

  11. Anita says:

    Ryan,
    I just read about you on Jessica’s page. I would like to connect with you, because I have some questions I don’t want to put in comment. I don’t know if you offer your time to others, but I am also from the Mpls area and I just need some focus. I am willing to pay for your time, if that is required. I filled in my email address above, just in case. Hope to hear form you! Thanks!

  12. woody says:

    how do you handle your FBA sales tax liabilities? do you use taxjar? something else?

    • Ryan Grant says:

      Hi Woody,

      I don’t currently use tax jar. I run reports directly from amazon that let me know which states sales are coming from.

      Best Regards,
      Ryan

  13. Q L says:

    Thank you for building this blog! I am a newbee and i have been trying to find something helpful online about selling on amazon but always get disappointed Till today i found your blog! Thank yoou so much !

    I have a very basic question to ask . I see all the videos and pictures online, everyone puts same product in one box. To use FBA , can i put different products (with bar code) in one box and send to amazon fulfilment centre , for example, a bear plush , a toy water gun , a toy robot?

  14. Carol says:

    Hey Ryan,

    My first shipment to Amazon was received without any issues and all of my products are now listed.

    They have been up for a week now, but haven’t made any sale. I find that other sellers are constantly lowering their prices for a couple of the products that I am selling.I don’t want to make a loss on my very first shipment and I am planning to wait a month. How long is it prudent to hold on to my price? Should I keep checking the price multiple times a day and adjust mine or is that not really necessary? How do you usually handle it when other FBA sellers keep lowering their prices? Your thoughts are much appreciated.

    Carol

    • Carol says:

      Just wanted to add that the other FBA sellers have the product in stock to the tune of hundreds (50-217), while I have 5! Do I just wait for all of them to run out of stock?! What if they re-stock immediately? I would love to find out what you would do in a similar situation.

    • Ryan Grant says:

      Hi Carol,

      Personally, I would hold my price for at least a month before I lower my price. I wouldn’t bother checking the price very often, I would set it at what you want to get for the product and then leave it alone for awhile. I am planning on doing some more posts about pricing and the strategies I use in the future, so keep an eye out for those.

      Best Regards,
      Ryan

  15. QL says:

    Hi Ryan
    is there anyway you know can increase comments on your products?

    🙂 thank you

    • Ryan Grant says:

      Hi QL,

      I plan on releasing some more information on the products I sell and my methods for finding them in the near future.

      Best Regards,
      Ryan

  16. Amanda says:

    Hi Ryan! Great insight here. One thing I have been running into is the competition changing so much from the time I use my scouting app to decide on purchasing inventory to when the item gets shipped in and listed as available. Some of my items have expiration dates so just waiting it out isnt always possible. Do you have any buying criteria to help you avoid pop up fba seller competition? Or is it just the luck of the draw knowing when you will get more people offering your item? Thanks!

    • Ryan Grant says:

      Hey Amanda,

      I notice this on some of my items as well. I don’t really have any way to avoid “pop up” fba competition, but I just know that whenever I am sourcing at a store that many have access to, to consider that the price could drop with more sellers. For example, if I am buying an item on clearance at Target, I know there is a chance this is a nationwide clearance deal and it is somewhat likely that many FBA sellers will come in on the item. I do plan on sharing the buying guidelines I am currently using in an upcoming post as well.

      Best Regards,
      Ryan

  17. Vlad says:

    Hello,

    Great blog and useful information. I have some questions as well about how the FBA sales taxes work. I am a non-US company and would like to begin selling on Amazon but I don’t want to register in all states Amazon has warehouses for a tax number. Is it possible to ship my items only in 1 Amazon warehouse so I could have only 1 nexus?
    Thank you.

    • Ryan Grant says:

      Hi Vlad,

      Thank you. Unfortunately you are not able to pick where your items are sent, and the locations can change over time. So, currently I am not aware of a way to send items to only 1 US warehouse.

      Best Regards,
      Ryan

  18. Eugene says:

    Is there How to Price items on Amazon when selling via Amazon FBA? – Part 2?

  19. Lauren says:

    Thanks for all your helpful posts! I’m just wondering what your strategy would be if Amazon is selling the product for a certain price and there are FBA sellers selling it for lower than Amazon. Would you match the Amazon price? FBA price? Completely different?

  20. […] that I sell on amazon, but there are going to be one off instances where these are not used.  This post I did last year covers a couple of specific examples of how I price items when amazon is a […]

  21. […] find that I will still get sales at that price. You can read a couple other posts I did on pricing HERE and […]

Leave a Reply

Your email address will not be published. Required fields are marked *

CONTROL YOUR TIME AND HAVE FREEDOM SELLING ON AMAZON
(I’LL SHOW YOU HOW!)