When you are a third party seller on Amazon, there is one thing that matters above all else – maintaining buy box positioning at a profit.
There is a lot of research that goes into understanding how the buy box works with other sellers. Repricing, stock, and feedback are all factors, but how does this come into effect when Amazon is a seller?
Does Amazon follow the same buy box rules or do they have a competitive advantage? Do they reprice? Is it worth trying to compete on the listing to share the buy box?
All of these were questions we had when first starting out on the platform.
Since then we have learned a lot about Amazon’s influence, and want to share this info with you! It would have helped us out a long time ago!
Disclaimer: Everything talked about is from observation over years of selling across hundreds of listings. Since Amazon has not publicly released information on their effect on the buy box, this information cannot be verified.
Does Amazon have a competitive advantage?
To start our journey of speculation on whether Amazon’s influence matters, let’s think about what their presence means.
For a third party seller to sell on a listing, they must first have some form of authorization from the supplier to buy and sell their product.
Does that mean Amazon has the same relationship?
Sort of.
Amazon’s supplier relationship is much different from your own, since it’s on their terms and under a Vendor Central account.
Amazon reaches out to brands that are earning several millions of dollars in annual revenue and structure a partnership deal.
For a while, Vendor Central was commonplace with smaller brands as well. However, over time, Vendor Central has evolved to be more for larger brands, while smaller brands are recommended to use Seller Central.
Typically, Amazon will submit very large purchase orders with the brand so that they can fulfill the demand on the platform.
It sounds very similar to what you would do, however, their price breaks are much more significant due to order volume.
For larger brands, this can make a lot of sense.
It actually makes things easier if Amazon has an exclusive agreement where only they can sell individual products, but bundle products are often fair game for other sellers.
It’s when suppliers allow both Amazon and 3P sellers to compete on the same listing where problems start.
Since the prices Amazon gets are typically much better than a traditional seller can obtain, it makes competing on price very difficult.
Sometimes, it seems impossible to even go on a listing, because the price Amazon competes at dips your margins into the negatives.
If you need to quickly check what the fees are like at the current price point of a listing, you can use a free fee calculator such as this one to do a quick calculation.
We have no idea what Amazon’s margins are, since we don’t know the wholesale price they are getting.
Do they have a competitive advantage? Yes.
Does that make it unfair? Not necessarily, you should always do your own calculation to see if it is even profitable before you try to jump on the listing in the first place.
What if the listing is profitable at the price Amazon is at?
This question leads to the next big mystery, which is wondering if matching Amazon’s buy box price will lead to a share in sales. From our experience, we really don’t think so.
Matching Amazon at the same price does not show a consistent share of sales on most listings.
In fact, the only reason why we felt like we got any sales at the same price was from a consumer deciding to choose us as a seller instead.
Outside of a few random purchases, we got little to no sales at the same price.
We even tried repricing against Amazon.
Smart move? Unfortunately Amazon is just as competitive to hold onto the buy box as much as you are.
The only way to beat Amazon at the buy box is to beat their price.
Keep in mind however, they have the same wholesale pricing as you do if not better. So the second you go lower, they will probably join.
Competing with Amazon is like competing with the ultimate seller. They have the fastest repricing, the best wholesale pricing, and the best insight into what sells well.
If Amazon is the ultimate seller, should I even bother trying to compete?
So, is that it? Can anyone learn ?how to compete with Amazon on a product listing
Should we just give up whenever we see Amazon on a listing?
Is the competitive advantage too strong?
We’d tell you 95% of the time, yes. It’s that other 5%, however, where the following strategy can make a ton of sense.
And that little slice of chance can bring a lot of good reward if capitalized on quickly.
We have been on a handful of listings where Amazon is present, but were nowhere near the buy box price. Instead, we were still competing alongside other FBA sellers.
This is a rare occurrence, but even Amazon can have a hard time keeping track of all their listings.
Maybe the price lists they have are old, when newer pricing has gotten better allowing other sellers a better opportunity or their contracts with the brand have expired and they have some excess stock.
Maybe their vendors are offering to sell to them via Vendor Central, but at a much higher price.
The reason behind Amazon not being competitive on some listings is a complete mystery, but if you are up for the risk, it is possible to find and compete well against them.
The Lower Price Strategy
As mentioned above, this strategy involves pricing lower than Amazon on a listing where they’ve historically never had the buy box.
This strategy is very effective – essentially, Amazon may just not want to sell the product that low. If you can source it lower, it’s a free market. Just make sure you’re not violating MAP from your vendor.
The Rotation Strategy
This strategy is a bit more complex.
It involves going into the historical data of the listing.
Watch a listing for a few days. Take a look and see – is the buy box rotating with Amazon and 3P sellers?
You may have found a unicorn. It’s worth testing a small quantity.
The Backordered Strategy
The last area of effectiveness is measuring stock levels.
Historically, how often has Amazon been in stock on this listing?
Not too much? Always backordered? Lots of stock-outs?
If so, you may have found another listing that could prove to be an excellent opportunity.
Our Thoughts
The truth is, you might be shooting yourself in the foot if you try to compete on a listing with Amazon presence.
That’s fine if it happens sometimes. Just try to avoid taking huge risks too frequently.
There are hundreds of millions of listings and Amazon can’t be on every single one.
We filter out Amazon entirely when choosing to buy a product to avoid any headaches down the road. This allows us to ensure we’re only competing with other third-party vendors, and not competing against potentially a brand directly selling via Vendor Central.
The more experience you have on Amazon, the more likely they would have been a seller you have completed with anyway.
Make your own judgements and use that to your advantage when selling in the future! It’s all about learning how to compete with Amazon on a product listing!
And keep in mind, eCommerce is still booming. We’ve got a huge future ahead of us. Those who take advantage now will be the big sellers of tomorrow.
Happy selling!
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