Pricing “unreasonably high”: Holiday pricing for FBA sellers

As we approach some of the biggest online shopping days of the year, a few notes on repricing your Fulfillment by Amazon offers for the holidays.

Repricing Fulfillment by Amazon (FBA) offers for the holidays is a little different. And in this article, I’m going to explain how, what you should be doing, and what you should not.

This sounds boring. Why pricing?

There are a ton of articles out in the last month, telling you to double down on your sourcing and “stock up for Q4.” I’m not going to do that.

I’m really not a fan of this. For those practicing the “single sourcing” model (assessing items & purchasing them individually, vs. wholesale sourcing), I can’t see the sense in launching a tornado-style Amazon sourcing operation to prepare for Christmas.

If there is inventory to be had, you should be out there getting your hands on it always – no matter the season. It’s no different than saying: “It’s November, so run outside and pick up bags of money in the street at twice the normal rate”. You can spend money all year round, so you should be out there getting getting it all year round.

Naturally, if you’re selling new inventory on Amazon that you purchase wholesale, are doing retail or online arbitrage, or any model that involves selling multiple quantities of the same SKU, then by all means double down on your inventory purchases before Christmas.

Most of my sourcing is done with a different approach. As such, I do very little myself to prepare my Amazon inventory for Christmas. In fact, I change just one thing: My pricing.

A note on what exactly are people buying on Amazon during Christmas

If you think the answer is “everything,” you’re (mostly) wrong.

While it’s true that everything sees a spike in Amazon sales, one category sees a spike far and above the rest: New items. People on Amazon are buying just about anything new.

I don’t have an exact figure, but by far the majority of my FBA inventory is used. And as such, I’m very aware that I will not be experiencing an Amazon feeding-frenzy on the majority of my inventory. People want the new stuff. That’s pretty much it. People give new items as gift, not tattered textbooks.

Think about it: Have you ever purchased a used book on Amazon as a gift? Or DVD? Possibly, but you probably didn’t like that person very much. Giving someone a used item is generally considered bad form, and few people do it.

The exceptions are out of print collectible items for which there is either no “new” option, or when the new offers are priced outrageously high on Amazon. In these instances, it is socially acceptable to give a used item as a gift. This will not be a significant driver of Amazon sales this month, and your attention should go to the rest.

My Holiday Amazon repricing formula

You guessed it.

The day before cyber-Monday, when sales really start to surge, I go through my entire FBA inventory and reprice the new items. Only the new items. I ignore the rest.

If you have a ton of new inventory that hasn’t moved for you up to this point, there’s a good chance it’s going to sell on Amazon in the next 3 weeks. And you have to optimize your FBA pricing to ensure two things:

1. The item sells.
2. You get the most money you can for it.

Fulfillment by Amazon sellers cash-in during the holidays

Remember a major reason your Fulfillment by Amazon offers can command a much higher price than non-FBA offers: The free second-day shipping. And never is this more of a selling point than during the holidays.

There is a frantic, unreasonable demand for Amazon Prime offers this month. There’s two things at work here.

The first is that people need the guarantee an item will arrive when it’s supposed to, even if they order on Amazon well in advance of Christmas. Ordering from Amazon‘s “Merchant Fulfilled” sellers is a wildcard. There are no promises they will ship on time, and media mail (if they’re ordering a media item) is brutally slow and unpredictable.

The second force at work is that people order presents on Amazon last-minute. The second-day shipping isn’t just urgently needed for people ordering on the 22nd. A lot of presents are exchanged early, everywhere from Christmas parties to outside-the-family gatherings. And a lot of people have presents shipped to them, then re-ship them to the giftee. So people need their order, fast.

Don’t feel bad about capitalizing on people’s desperation. Just price accordingly and reap the rewards.

All of this means you can command – and receive – exorbitant prices for your FBA offers right now. Far and above that of other sellers. And far and above what you can receive the rest of the year.

But you can’t receive prices on Amazon that you don’t ask for. That’s why you have to reprice. Like, right now.

The intuitive formula for pricing “slightly unreasonably high”

“Slightly unreasonably high” is a price point arrived at intuitively, vs. via a hard formula. It’s above what you’d price your FBA offer at the rest of the year, as you attempt to hit the highest point someone might pay when they really need the benefits of FBA. Such as when there’s a Christmas present riding on it. Sales Rank is the largest factor in knowing how much higher to price. Like I said, this is not a science. I just know the price when I see it after years of trial-and-error.

(Of course, you will never want to go over Amazon‘s price. Amazon‘s price is always the ceiling.)

One way you learn this type of pricing – and all pricing – is observation and experimentation. Specifically, you want to set your FBA prices when you ship inventory in to Amazon, then watch and see what sells, and how much higher it is than the lowest merchant fulfilled price. Then increasing your FBA pricing until you find you’re sitting on items for six months or more. Then decreasing slightly. You’ll learn this balance over time.

Now, you don’t have time to experiment in the four weeks before Christmas. But it is my belief that any missed sales from pricing too high are more than offset by the increased revenue from your highly-priced offers that do sell.

If you’re not a believer in this formula

…then I have two things to tell you.

First is: Try it.

The second is: You can always lower a price later. But you can’t go back and retrieve lost revenue from a customer later when you realize I’m right.

The important points, revisited

1. Identify all new FBA items in your inventory.
2. Reprice them “slightly unreasonably high.”

Happy holidays.