How Neglecting Your Repricer Can Be Your Q4 Downfall

Why a Rule-Based Repricer Can Stifle Q4 Pricing Capabilities

Rule-based repricing looks at your competitors’ prices for each SKU in your product mix, and then adjusts your price based on a set of predefined rules. For example, rules can be set to match the lowest price on the market, beat the lowest price by a certain dollar amount, or be in the lowest 20% of all prices. While rule-based repricing can be faster than manual repricing, the method comes with serious drawbacks for retailers.

First, the rules themselves can take a long time to set up. Next, they can become conflicting over time and need to be constantly monitored to ensure that they deliver strong performance in a variety of marketplace scenarios. Last and most importantly, rule-based repricers only take into account the competitors’ prices and ignore all the other seller metrics — a massive problem for any seller that analyzes their business on a holistic basis. You would be forced to disregard Buy Box share and profit margin, and would be unable to find the maximum profit potential. Here are several reasons that operating with a rule-based repricer can suppress your true profitability, particularly during the holiday season:

1. Your profits won’t be optimized. Although you may experience an increase in sales conversions with lower prices, this doesn’t necessarily translate into more profits. With an algorithmic repricer that identifies the comprehensive selling landscape — through real-time market dynamics, other sellers’ prices, and your optimal price — increasing your overall profits is the goal. If that means making fewer sales but at a higher margin until the product is ramped up, then so be it.

Algorithmic repricing harnesses big data and artificial intelligence to take all of your performance metrics into consideration (shipping time, customer response time, the makeup of your portfolio, etc.) and finds the most optimal price for you, according to your business strategies. During a time of frequent returns such as the November to January timeframe, it is important that you are maintaining healthy performance metrics and understanding which specific categories and SKUs may need more attention than others.

2. They price down instead of up. As we mentioned, given that rules-based repricers are bound to strict rules, they focus on driving prices down and ignore all other seller metrics outside of your competitors’ prices. They don’t analyze seller metrics, Buy Box share, MAP, or any other factors that determine how high you can price. This means that the repricer will lower your prices when you don’t need to. With the high demand that comes with Q4, the last thing you want to be doing is lowering your prices when there’s still existing demand for the items at higher prices.

3. The rules can be contradictory. Given that rule-based repricers operate according to a set of predefined rules, these rules often contradict each other. If there are no countermeasures in place to ensure that a product will not be repriced incorrectly, this can make a difference between an average and an above and beyond holiday season.

Historically, rule-based glitches have been known to wreak havoc among sellers’ catalogs during peak times of the year. For example, sellers have experienced certain items getting repriced down to zero (or close to it), causing their inventory to rapidly deplete and running their businesses into the ground during the season that should have been making them the most money.