Amazon Pricing Policy

How Does Amazon Dynamic Pricing Work?

The Amazon Pricing Policy is a set of guidelines provided to the seller by Amazon that dictates the parameters of the prices being set in the Amazon Marketplace. Anyone holding an Amazon Seller Account is obligated to adhere to these pricing guidelines as per the terms agreed to by the seller within the Participation Agreement that was signed upon opening an account.

Pricing Guidelines

Essential guidelines that a seller must follow when drawing up prices for his products being listed within the Amazon Marketplace include:

  • Fair pricing. Any single product or multiple products packages must have a price that is equal to or lower than the price of the same item being sold by the seller on other sites or virtual marketplaces. This applies to both the individual product price as well as the collective price that the item or items are being sold for.
  • Price limitations. A seller holding an Individual Seller Account is limited in the amount that he can list an item for. The maximum value of any individual item on one of these accounts is $10,000. However, sellers listing under the Collectible Books category can ignore this limitation. Professional Seller Account holders are also not subject to these limitations.

The seller can choose the listing price so long as it complies with the above-mentioned regulations.

Note: The item price does not include shipping, gift-wrapping, or handling. The combination of all charges to the buyer is known as the total price. This can include sales that the seller is running either continuously or seasonally.

Setting an Item’s Price

When the seller sets an item’s price, several things should be taken into consideration. These include:

  • Shipping. Shipping methods and services will vary, therefore, making the cost of shipping and delivery fluctuate for the seller. The range of charges that the seller will have to cover should be calculated into the item cost.
  • Handling. The seller should also calculate any handling costs, as well as the amount of time it will take him to package and process the order, and include this within the product price.
  • Low Price Comparison. The seller can use the Amazon feature known as a Low Price Comparison filter to assess the current standings of similar items such as the one being listed across the Amazon Marketplace. This affords the seller the ability to create a competitive price based on the other prices within the market. This filter can focus on listing conditions, fulfillment method, and other criteria set by the seller. The Low Price Comparison settings can be found and altered within the Manage Inventory area of the seller’s account.
  • Discounts. The seller is entitled to offer any sales, discounts, promotions, or rebates he chooses, though, it should be noted that these deductions will be at the expense of the seller and not on the side of Amazon.

Note: Amazon reserves the right to disallow a sale or promotion from their services purely at the discretion of the site.

What Is Dynamic Pricing?

Dynamic pricing is a blanket term for any shopping experience where the price of an item fluctuates based on current market conditions. On Amazon, as well as multiple other marketplaces, e-commerce stores, and sales-related businesses, dynamic pricing is utilized by retailers to optimize product prices.

Dynamic repricing creates flexible prices depending on many different variables. A retailer might change the price of an item based on consumer demand, price fluctuations at a competing retailer, or even the time of day and weather conditions.

Although dynamic pricing was utilized before the Internet, most notably within the realm of airline tickets, it was e-commerce that made it much more widespread. The Internet broke down doors in comparison shopping by allowing consumers to compare prices easily, which in turn drove prices down.

Advantages of Dynamic Pricing

The advantage of dynamic pricing is that it keeps the competition fair for everyone. The customer benefits because they can easily price match between sites, as well as take advantage of dips in the market when they can purchase the item they want for a cheaper price.

The seller benefits because they can learn to adjust prices to maximize profits. Due to complex algorithms and machine-learning pricing solutions, a retailer can know exactly how much to increase revenue by in both high demand and low demand situations.

Amazon Dynamic Pricing for the Buyer

Dynamic pricing works in exactly the same way on Amazon. A buyer who is searching for an item in the morning may see a different price from the price he sees when he searches in the evening. In addition, if he places the item in his shopping cart in the morning, and then that seller changes his price during the day, the price in the buyer’s cart will also change to match the seller’s new price. Amazon has a policy of refunding buyers for certain items if their price has changed within seven days of purchase.

If there is something a buyer particular wants, and he does not mind when he gets it, he might be better off purchasing it during an “off-peak” season. He might find, for example, that purchasing sunglasses during the winter will save him money, or a toy for his favorite nephew might be more affordable during the months further from Christmas. Moreover, buyers can use external websites that will send them alerts when their selected item’s price on Amazon goes down or hits a certain low threshold.

Amazon Dynamic Pricing for the Seller

The Amazon seller too should take advantage of dynamic pricing. If he does not take into account seasonal changes, consumer demand, seasonality, and so forth, he could end up missing out on profits.

While many sellers opt to constantly assess the market themselves and then change their prices manually, many other sellers (especially high-volume ones), decide to employ the services of algorithmic pricing technology to do this for them.

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