We often get asked questions from our customers relating to their retail price on Amazon and fees that they pay Amazon V’s the price that they sell to wholesale customers.
I.e. Amazon’s fees are high, how can I make more money?
The simple answer to this (assuming the listing is fully optimised and all PPC is profitable) is to simply increase the retail price on Amazon.
Some sellers can be hesitant to do this as they may have agreement in place with their wholesale customers (see below) or just hesitant to do this in general as they think that perhaps the market might not withstand an increase.
If you’d like to get better returns on Amazon, one of the things that we’d usually recommend is making a slight price increase (or a series of incremental price increases) to slowly increase your margins. We often find that even if this makes the price point slightly higher than you would initially like (and in some cases higher than your high street distributors may be selling for) it may still be worth trying as people will often pay a slightly higher price than they can purchase the same item for in the high street simply for the convenience, and speed of delivery achieved by shopping on Amazon.
We’re aware that this can often be a complicated subject, and there are many different scenarios, so these are just general rules of thumb, but please let us know if you'd like some more specific details relating to your circumstances.
What if I can’t increase prices?
We’re aware that sometimes our customers have distribution contracts in please with large highstreet retail chains (Boots for example) and they are unable to increase their prices, or sometimes the Amazon algorithm will actively prevent you from increasing the price as it knows that “Boots” (or another retailer) is selling the product for a lower price anywhere online.
There are other things that you can do in this scenario:
i.e. Many sellers update their retail wholesale contracts, that specifically prohibit any of their customers from selling on Amazon, with this contract you can then approach Amazon to ask if they could remove any unauthorised sellers on their listings, meaning that increasing the prices slightly won’t lose the “Buy Box” to another seller. (this isn’t always guaranteed but it’s definitely worth trying)
What if I don’t want to upset my own wholesale customers by stopping them from selling on Amazon?
Another solution to this is for you (the brand owner) to introduce a whole new set of “Amazon Exclusive” SKU’s (with unique EAN’s) that are never sold to any other distributors, that could also perhaps offer more value to the customer on Amazon (and often more margins for you the brand owner) this could (for example) be something as simple as a “Bumper Pack” that offers slightly more product for a slight higher retail price, that represents a “Saving” for the shopper, but is ultimately still at a higher price point gives you the seller and brand owner more margin.
Again this is a complicated subject, and there are many different scenarios, so these are just general rules of thumb, but please let us know if you'd like some more specific details relating to your circumstances.
Size & Weight?
One final tip, is that it is alway worth checking the size and weight of your retail packaged item if you’re selling via FBA i.e. Are these details correct in the backend of your Amazon listings? And if so, is there any way that you could reduce the size and/or the weight of your final retail package? Amazon has many different charges but one of the major ones comes from the size and weight of the items that you are asking Amazon to store, pick, pack and deliver for you. If you can decrease all of the above this can sometimes mean significant savings to seller fees.
What if after all this, I still only break even on Amazon:
Selling on Amazon is expensive, the fees are high and for some sellers it can be hard to make money directly on the platform, however due to the shere high sale velocity potential achievable on the platform there are many sellers that use the Amazon platform as a “Customer Acquisition” channel.
I.e. You may not make any money on your first sale to a customer though the Amazon platform, but by adding “Call To Action” details to your retail packages (such as a warranty card or a flyer for a discount code on your own website) you can direct the customer to your own ecommerce platform (such as Shoify or Wordpress) where you can add them to your mailing list, and then entice them to buy direct, meaning that you make your margins after the initial customer acquisition. (technically speaking taking the customer away from Amazon is against Amazon’s terms and conditions, but this is a tried and tested method)