How Dynamic Repricing Boosts Profitability for Amazon Private Labels

With over 2,000 new sellers joining Amazon every day, it’s clear that competition has heated up in the biggest e-marketplace — and Private Labels (PLs) are feeling the heat. According to Feedvisor’s e-marketplace report, increased competition is yet again the top concern for brands and Private Labels. Coupled with a surge in price-conscious consumers, PLs now face a fresh set of challenges. And while they may own the Buy Box now, holding on to it in this economic landscape will not be so easy. 

Enter dynamic pricing— the secret weapon empowering Private Labels to not only survive but thrive in this new era. With 27% of brands and Private Labels now leveraging technology for pricing, marking an 18% surge since 2023, it's evident that businesses are recognizing the need for strategic Amazon price adjustments that swiftly adapt to market conditions. Dynamic pricing emerges as a pivotal solution, ensuring agility and competitiveness.

We’ll delve into this new pricing strategy reshaping the landscape of profitability for Private Labels and why it's a game-changer you can't afford to ignore.

What is Amazon Dynamic Pricing?

Dynamic Pricing refers to the strategy of adjusting the prices of products in real-time based on various factors such as market demand, competition, inventory levels, and other external conditions. This pricing model aims to maximize profitability and ensure competitiveness in a constantly changing marketplace.

How It Works

• Real-Time Adjustments: Prices are adjusted dynamically based on real-time data, including competitor prices, customer demand, and stock levels. For instance, if a product's demand surges during a promotional period, its price may increase to capitalize on the heightened interest.
• Algorithms and Automation: Amazon uses sophisticated algorithms and automation tools to set and adjust prices. These dynamic pricing tools analyze large volumes of data to determine the optimal price point that balances competitiveness with profitability.‍
• Competitive Pricing: Amazon's dynamic pricing algorithms regularly check competitors' prices and adjust accordingly. If a competing seller lowers their price, Amazon may also reduce its price to stay competitive.

Dynamic pricing is a powerful tool for maintaining profitability and competitiveness on Amazon, allowing you to adapt to market conditions and consumer behavior in real-time.

Navigating Profitability in the Face of Fierce Price Competition: A Challenge for Private Labels

Inflation remains a persistent concern for consumers, prompting PLs to rethink their business strategies. To ease financial anxieties, 79% of consumers are adopting cost-saving measures such as purchasing different quantities or pack sizes, choosing lower-priced retailers, or switching to budget-friendly brands.

Because PLs own the Buy Box, many believe competitive pricing is unnecessary. Yet with competition to offer the lowest price intensifying, the need for a sound pricing strategy is no longer ignorable. 

A surge in demand for lower prices has changed the playing field, forcing PLs to pay closer attention to competition. Consider that 36% of customers stress the importance of researching before making a purchase, and 60% choose to do so on Amazon. Despite owning the Buy Box, customers are likely to still compare your offering to numerous alternatives, especially as they trade down. 

More price-savvy than ever, 77% of customers now highlight price as a crucial factor in their purchasing decisions. With this in mind, Private Labels must now consider: Are shoppers likely to find a better deal elsewhere? 

To stay competitive, Private Labels must enhance their ecommerce pricing strategies, pinpointing the optimal price point that meets customer needs and stands out amongst the competition — without excessively reducing prices and risking profit margins.

The Solution for Private Labels: Dynamic Pricing

Pricing strategies have become crucial in establishing optimal prices and gaining an edge over the competition. However, today’s ecommerce landscape is dynamic — and your pricing strategy must be, too. With consumer demand fluctuating, competitors making constant adjustments, and new reviews surfacing, the optimal price point is ever-shifting.

Unfortunately, manual processes frequently result in errors, averaging about 10 mistakes per 100 steps. This not only consumes time but also undermines sales opportunities for brands. To streamline operations and effectively navigate the changing landscape of prices and market conditions, dynamic pricing strategies have become a cornerstone Private Label strategy.

How to Use Amazon’s Pricing Strategy to Your Advantage

Harnessing dynamic pricing strategies can boost your bottom line as you endeavor to outperform competitors — here’s how. 

Improve Your Best Sellers Rank

A strong Best Sellers Rank (BSR) signals you're outpacing competitors and excelling in your category on Amazon. Amazon’s Best Seller Rank algorithm remains a black box, but it’s known that achieving a high rank requires both selling more products and selling more than your competitors.

Private Labels specifically face three primary competitors: competing, complementary, and substitute products.

• Complementary: A product that enhances or goes well with another product.
• Competing: A similar offering that serves the same or similar purpose as another product. 
• Substitute: An alternative that can fulfill the same consumer need or desire as another product.

Opt for a Private label strategy that is aligned with competitors to outperform them and enhance your BSR. Leveraging modern repricing software technology simplifies this process by identifying your competitors and determining the optimal competitive price point to drive sales, ultimately leading to a boost in your BSR.

Take, for example, advanced dynamic pricing technology tailored for Private Labels. It not only identifies your competitors based on shifts in sales rank but also adeptly adjusts your product pricing in response. By closely monitoring the impact of these price adjustments on demand, it determines the ideal price point to elevate your sales rank and position you as the premier seller in your category.

Beyond complementary, competing, and substitute products, ASIN hijackers pose a significant threat to your listings, potentially devaluing your brand and causing price instability. Utilize dynamic pricing software, such as Feedvisor’s, to swiftly identify and address any instances of ASIN hijacking.

Drive Sales Margin and Profit

In ecommerce pricing strategies, finding the right balance is crucial: setting prices too low can erode profits, while pricing too high can deter customers. Yet, even the perfect price point can quickly shift due to fast-changing market conditions, such as competitors' stock levels, price adjustments, or accumulating product reviews. When updating prices, consider a competitor's products going out of stock, adjusting prices, or gaining reviews over time.

Manually adjusting prices for thousands of SKUs to keep up with the market is nearly impossible. As a result, many private labels adjust their product prices infrequently—typically monthly or quarterly—causing them to fall behind the market and miss opportunities for increased sales.

Today's dynamic pricing technology provides an effective solution. After establishing a pricing strategy aligned with your business goals, the technology continuously monitors and adjusts your prices, experimenting with various price points and assessing demand to optimize your sales margins, ensuring you avoid leaving money on the table.

When choosing a repricing Amazon tool, avoid those that simply slash prices. Instead, use a tool that finds the optimal price point, not just the lowest, to help you outperform competitors without compromising profitability.

Boost Ad Conversions

For Private Labels, campaigns are essential for elevating brand visibility, particularly considering their less recognized status compared to established brands. However, a new hurdle facing Private Labels this year is the rising cost of advertising, which now ranks at 27% of their concerns—a 6-percentage-point increase from the previous year.

Rather than treating your ecommerce pricing strategies as a silo, think of them as a solution to maximize the effectiveness of ad spending. Align your pricing strategy with your strategic advertising efforts to drive conversions to fuel the flywheel.

Think of it this way – imagine you find an ad for a set of plastic cups. 

Upon clicking the ad, you land on the product detail page. A price that is too high will turn you away, ultimately wasting the brand’s ad spend. But had they optimized their price with dynamic pricing technology, the price would appear attractive to you, the customer, who is now more likely to convert.

Balance Inventory and Mitigate FBA Fees

With numerous FBA fees to juggle, it’s easy for Private Labels to lose track of their inventory health, risking a dip in their IPI score. Consequences include pricey storage fees, potential account suspension, and feature restrictions. 

Because inventory constantly shifts, traditional rules-based competitor price tracking tools fall short in helping. Today's dynamic repricing solutions step in where rules-based systems falter, providing effective assistance in navigating inventory fluctuations.

Take Feedvisor’s AI repricer, which adopts a proactive stance, predicting inventory issues and empowering sellers to address them in advance. Feedvisor's dynamic technology adapts to market changes and inventory fluctuations precisely, facilitating real-time, intelligent price adjustments that prevent over or under-stocking based on live inventory data.

Use Pricing KPI Ecommerce Insights

In ecommerce, pricing is a critical Key Performance Indicator (KPI) that significantly impacts various aspects of business performance. As a KPI, pricing influences sales volume, profitability, customer acquisition, and competitive positioning.

Here’s how you can use pricing KPI insights in your Amazon business.

• Benchmarking: Compare your pricing performance with industry benchmarks and competitors to gauge your market position and identify areas for improvement.
• Price Optimization: Use insights from data analytics tools like D8aDriven by Carbon6 to adjust pricing strategies dynamically.
• Customer Segmentation: Analyze how different customer segments respond to pricing. This can help in developing targeted pricing strategies that cater to various segments, such as offering discounts for loyal customers or premium pricing for exclusive products.
• Forecasting and Planning: Leverage pricing data to forecast future sales trends and plan inventory levels accordingly. Understanding how pricing impacts demand helps in making informed decisions about stock levels and procurement.

Effectively managing pricing as a KPI allows you to optimize your pricing strategies, enhance profitability, and stay competitive on Amazon. Regularly reviewing and analyzing pricing performance helps in making informed decisions that align with business objectives and market conditions.

Monitor Competitors

Regularly check competitor pricing and adjust your prices accordingly. Use competitive pricing strategies and competitor price tracking tools like AMZ Alert by Carbon6 to ensure your products are competitively priced without sacrificing profitability.