Confessions of an Amazon underpricer: I used to drop my prices by 1 cent to get sales. This is why I stopped underpricing other sellers.
Video: Underpricing is evil
War on 1 cent Amazon underpricing
You’re listing a copy of Hedge Funds for Dummies on Amazon. The lowest FBA seller is $14.99. You naturally want to be the next sale. You price your copy 5 cents lower, at $14.95.
I used to be you. Now I’m on the other side of the country, looking at your listing, and cursing you. I’m going to tell you why.
The #1 Commandment of FBA pricing
“Thou shalt not underprice any FBA seller.”
Chant it. Repeat it. Live it.
I think this is so important, I dedicated three pages to declaring it in my first book Amazon Autopilot (now a course). Here are two of them:
I had to write this article because underpricing on Amazon has become rampant. This last textbook season had me feeling hopelessly plagued by shortsighted FBA-one-penny-undercutters.
No one can say these underpricers are just practicing “smart business,” because their practices translate into less money for everyone (as I’ll explain) – not just me.
Lately, I’ve watched book after book get underpriced by 1 or 2 or 5 cents, and found myself constantly yelling to the heavens:
Who are these people?! What are they thinking?!
Truth was, at one time, they were me…
My former life as an FBA underpricer
For the first few years of my Amazon selling journey, I did what a lot of people do when listing books on Amazon: Made sure I held the lowest price. If the lowest FBA offer was $9.99, I made sure I priced mine at $9.97.
And the next day, when I went through and repriced, I found the lowest price was now $9.95. Naturally, I repriced to $9.93. And so on.
And if I happened to revisit my newly-repriced books a few hours later, very often they were already underpriced by 1 or 2 cents. And so I followed suit, leapfrogging towards penny-book-status.
How one bold FBA seller shamed me into sanity
One day I was repricing and underpricing everyone like I always did, and within an hour received an email. It was from one of the Amazon sellers whose books I had underpriced. His email went something like this:
“What is wrong with you?! Pricing your book one penny less than other sellers is insane!!! Sellers like you are ruining Amazon!!! This is insanity!!! Be responsible and match the lowest price! If sellers like you keep acting this way, soon all books will be a penny and no one wins!“
This sounds like an overly-dramatized recreation, but it really was this hostile and riddled with exclamation marks.
Despite the hostile tone, it got to me. He was right. It was totally insane.
So I stopped.
And only when I stopped underpricing other Amazon sellers did I realize just how crazy I had been.
5 reasons you should never underprice another FBA seller
#1: You create a race to the bottom.
You underprice a competitor by a penny. The next guy manually underprices you by a penny. The next guy’s repricing software is set to underprice you by a penny every hour, and so on. Instead of three sellers each waiting their turn and getting $10 for a book, they each get $5.
And by the way: They didn’t get that $5 any more quickly than they would have gotten the $10. They just think they did.
#2: You’re in business to get the most money, not the quickest sale.
And desperately underpricing everyone is in direct odds with this mission.
Bringing us to…
#3: Underpricing is predicated on a false assumption
The assumption is: “The more often I underprice other sellers, the quicker I’ll get the sale.”
As I’ll explain below, this just isn’t true.
#4: You are triggering repricing software that will destroy you.
A lot of sellers have repricing software set to match (or underprice) sellers every hour. And if you or any other seller is doing the same thing, watch the prices plummet…
Sure there are settings to prevent every book from dropping to a penny, but why trigger an accelerated march in that direction?
#5: You’re not a drug addict
No one should be this desperate to get the next sale. You’re (hopefully) not a drug addict. It shouldn’t matter that much.
Remember: You don’t need to be the next sale. You don’t want to be the next sale. You want to be the highest priced sale.
Why you should match the lowest price (not underprice)
Actually, there are many occasions where you should price higher than the lowest competitor’s price. I estimate I price about 25% of my listings on Amazon higher than the lowest FBA price when I think they’re too low, and wait my turn. But this is not meant to be an extensive tutorial on pricing…
When you match the lowest FBA price, you still have a 50/50 chance of getting the top spot.
Amazon has their algorithm that determines which of two equally priced offers get the top spot on the listings. If your feedback is good and the condition of the book is better than your competition, your chances might be better than 50%.
And you didn’t have to sacrifice your dignity to get it. You didn’t have to contribute to the deadly “race to the bottom” to get it. You didn’t have to contribute to making FBA unprofitable for everyone to get it.
But let’s say you matched the lowest price and didn’t get the top spot.
First of all: Who cares? It’s not a race.
That aside, not getting the top spot doesn’t mean not getting the sale. Buyers will see there are two equally-priced FBA offers, and make a decision based on condition, feedback, and the product description.
Does underpricing win you the Amazon Buy Box?
You’re probably wondering about the Buy Box. It’s a common myth that the Buy Box goes to the lowest priced offer. That’s just wrong.
Amazon’s formula for giving offers the Buy Box is kept secret, but we do know a couple things: It usually goes to FBA offers, one. Two, your feedback score factors heavily into it. And so on. Which is why you will very often see offers in the Buy Box that are not the lowest price FBA offer.
Some believe the majority of all Amazon sales come through the Buy Box. (I’m skeptical of these claims when it comes to used items, but let’s assume its true for now). So if underpricing by 1 or 2 or 10 cents won’t get you the Buy Box, what exactly are you trying to achieve?
To recap: There is no reason to think your offer will sell any faster because it’s priced 2 cents lower than the next guy. And there’s no reason to think it won’t sell next because it’s not the lowest.
Underpricing is a lazy and ineffective practice based on a false assumption.
It’s really easy to just match the lowest FBA price
Go to the Manage Pricing page, and under the settings, select “Listings with Same Fulfillment Method.” Then go through and when you don’t see a green check mark, click “Match Price.” Easy.
Are there times I will underprice other FBA sellers?
Don’t get me wrong: There are times when I will underprice my competition.
Basically, if I see a competing FBA offer that is fundamentally at odds with my pricing formula, I won’t hesitate to underprice them.
For example, a book with a really poor Amazon sales rank that is priced significantly above the lowest merchant fulfilled offer. I don’t think that’s an intelligently priced book, and I’ll price as though it didn’t exist.
There are other examples. But in most cases, I won’t do it.
Remembering the Golden FBA Rule
“Do unto other FBA sellers as….”
The #1 reason is to maintain a basic code of FBA decency, so Fulfillment by Amazon remains profitable for all of us into the future.
In the book category on Amazon, merchant fulfilled selling is mostly ruined. The majority of all books on Amazon (in my estimation) are a penny. It’s a wasteland.
And if we don’t all do our part, FBA will be next.
This lengthy editorial is my small part in keeping FBA profitable for everyone.
So… Just match the lowest FBA price and no one gets hurt.