How should you react to your Amazon inventory being repeatedly underpriced? Forming a strategic response to low-balling competitors.
Possibly the challenging repricing question of all goes like this:
“How do you deal with aggressive underpricers on Amazon?”
Let’s say you reprice a book, and 10 seconds later you notice you’ve been underpriced by a penny (this happens, a lot). Then you drop your price again. And in seconds or minutes, you’re underpriced – again.
You’ve been hit by an aggressive underpricer. The scourge of the Amazon selling world.
How most sellers respond to underpricers (and why it’s wrong)
Here’s a common scenario:
- You set a price of $20.
- Someone underprices you by one penny, to $19.99.
- You match them (or price at $19.98).
- Repeat until either a sale happens, or an item is unprofitable.
Most sellers respond to every act of underpricing by underpricing right back. Which makes sense – what other response could their possibly be to being underpriced?
Here’s the problem: By following their lead and underpricing right back, the underpricer drags you into a pricing war. One where every competing seller leapfrogs their price downwards. And onward it goes, until all the profit margins are squeezed out and that book is literally unprofitable.
It’s a game that no one wins.
Why does this lunatic-level underpricing happen?
When you get underpriced within seconds, usually by a penny, and repeatedly underpriced no matter how often or to what degree you drop your price, here’s what you should understand:
Don’t assume there’s any intelligent strategy at work with incessant underpricers.
These are sellers who are desperate chasing the next sale. And they don’t care how shortsighted they have to be to get it.
Underpricers are usually megasellers who deal in high volume with low margins. Their model is to get books in and out the door quickly, make a few pennies on each, and make up for the low margins with high volume. This is usually the opposite model of smaller sellers. Megasellers and us are natural born enemies. And the conflict is most pronounced when it comes to pricing.
Why underpricing is a losing strategy
Before I get to how to respond, here’s a few reasons this is bad repricing strategy:
1. Every action triggers a reaction: Aggressive underpricers will always respond to your underpricing by underpricing you back. Forcing you to respond, in a downward spiral straight to the bottom. Which brings us to…
2. Underpricing triggers a race to the bottom. Whether sellers are underpricing each other by 50 cents or 1 cent, it still forces products into unprofitability fast. And the whole thing could have been avoided if each seller had just waited their turn for a sale instead of underpricing.
How to respond to underpricers (four step process)
Bottom line: Don’t play the underpricer’s game. Playing the game of aggressive underpricers means more work for you, and less money.
To which many sellers would respond: “What other choice do I have? Just give up?!” No. Read on…
Step #1: Confirm the underpricers are not going away
Don’t jump to conclusions that you’re up against an incessant underpricer who won’t stop until every item is a penny. Confirm at least three instances in a short time frame to confirm you have an underpricer who isn’t going away.
Step #2: Stop playing their game immediately
Once you confirmed you’re up against an aggressive underpricer, stop competing with them. You’re still going to beat them, but not by underpricing.
Step #3: Beat them by playing a better game
There is an approach to beating underpricers that isn’t giving up, and isn’t underpricing them right back. And to understand it, you have to accept the distinction between being the lowest price, and having a competitive price. They are not the same.
Instead of frantically trying to be the lowest price, your focus should be on staying competitively priced.
Specifically, this means employing strategies like:
- Matching the lowest price
- Staying a percentage or dollar amount above the lowest price
- Repricing to match the 2nd or 3rd lowest price (only one repricer has this capability)
- Repricing to a dollar amount or percentage above or below the 2nd or 3rd lowest price (same as above)
Each of these has slight upsides and downsides (for example, matching the lowest price can still trigger repricing settings that will result in being underpriced yet again), but each of them is better than leapfrogging downward by underpricing your competitor right back.
Step #4: Optimize to win
From there, you can increase your edge through the condition of your offer, or a superior condition description.
That’s the formula for beating underpricers, without joining them.
Defeating the myths that drive underpricing
If you’re finding it challenging to stop underpricing the sellers who underprice you, it gets a lot easier when you debunk the myths that underlie lowball pricing.
For example, it’s a myth that the Buy Box always goes to the lowest price item. The Buy Box frequently goes to an offer that isn’t even close to the cheapest price.
Another example: it’s a myth that customers always choose the cheapest option. Especially when the price difference is just pennies. This alone destroys the most basic premise of underpricing.
Focus on being competitive (not cheapest) and no one gets hurt
Keeping prices competitive simply means: Not letting prices stray too far from a price that a customer will pay, given the current landscape. It’s a mindset shift that can change your business.
The best revenge against underpricers is indifference, and not letting them drag you into their toxic game.