When searching for the right Amazon repricer, there’s one term you’ll inevitably stumble upon again and again: “algorithmic repricing.” Sellers today are beginning to understand the many advantages of algorithmic repricing to get the optimal price for their products every time.
Repricing companies are catching on, and many are marketing themselves as algorithmic — whether or not they actually use advanced machine learning to make optimized pricing decisions.
But how can you, as an Amazon entrepreneur, distinguish algorithmic repricing as a buzzword from the real deal?
In this post, we’ll provide you with a couple of questions to ask when considering whether you’ve found a genuine algorithmic repricer, or an imitator without the technology to back it up.
[To learn the science behind algorithmic repricing, download our free eBook, “From Big Data to Big Profit.”]
Does the repricer collect a wide range of data?
A true algorithmic repricer uses a large variety of big data to help online sellers meet their strategic goals. This ensures the greatest levels of pricing accuracy in a dynamic and complex competitive environment.
Start by asking yourself whether the repricer takes into account different marketplace variables: your prices and your competitors’ prices, shipping method and speed, and ratings. This will help you quantify your competitive state, and see if you have an edge. If you do, how much is that competitive edge worth?
For example, if Seller A boasts near-perfect feedback scores and uses FBA, and Seller B (who’s selling the same product) has inferior metrics, Seller A can afford to raise prices without sacrificing profit or Buy Box share. A good algorithmic repricer is context-driven, picking the price point that will get you the ideal Buy Box share every time.
Does the repricer consider more than just price?
As we’ve seen based on analysis, rule-based repricers work by adjusting your prices according to that of your competitors, while ignoring all other seller and market metrics. This frequently works fine for smaller, entry-level businesses. However, larger sellers managing a big portfolio care most about their long-term growth. For them, profitability is king. And a true algorithmic repricer knows how to proactively identify if there is an opportunity to optimize for profits. In addition, it can determine if market conditions are such that a more aggressive approach should be taken in terms of optimizing for more sales, at the expense of margins.
Does the repricer adapt to changing market conditions?
An algorithmic repricer should be dynamic, responding to current market conditions in real time. Unlike static rule-based repricers, it adapts to give you the advantage based on what’s going on in the moment. For example, if a weaker seller suddenly enters the competition, you can likely afford to increase your prices while maintaining or increasing your Buy Box share.
Does the repricer allow you to survive price wars?
Selling on Amazon with a rule-based repricer is much like fighting a war without a shield — a price war, that is. When your goal is to undercut your competitor at any cost, and their goal is the same, you end up driving each other down to floor price. A good algorithmic repricer allows you to set your business goals, and if you prioritize maintaining or increasing profit margins, then it will prioritize profit margins as well. This reduces the likelihood of getting entangled into unwanted price wars that kill your profit (and your business).
Does the repricer have self-learning capabilities?
A genuine algorithmic repricer is self-learning; that is, it improves over time. As Feedvisor’s algorithm gets more data about new products you sell, it learns the competitors’ behavior and their floor prices, and identifies the optimal price point for you at that moment. It can receive initial input (i.e. floor and ceiling price), and determine through accumulated data how to achieve your goals.
Many of the purported “algorithmic” repricers are actually just a bunch of rules bundled together. When shopping for a repricer, ask yourself the above questions as a starting point for your search. If you’re just beginning your Amazon journey, a rule-based repricer may be sufficient. But the bigger your business gets, the more you need a repricer that can make smart decisions by itself without being told how to behave.