CNBC lately reported that retailers still chose Amazon when it comes to retail pricing policy. Why? The global marketplace provides the retailers with more spacious room to use their own price for the products. Of course, Amazon requires all brands to offer the most competitive price for all products they sell on the marketplace. In addition, it does not allow its partner brands to sell their products at lower prices than those offered on Amazon. What does this mean for brands?
What Does Retail Pricing Policy on Amazon Mean?
Besides the two policies mentioned above, Amazon applies certain regulations for its partners. For instance:
- Brands are not allowed to run pay-per-click ads for the products. In fact, PPC ads may account for huge sales driver in many brands.
- It penalizes brands that do not offer the best prices for products sold on Amazon. In this case, Amazon may discount the price as a penalty.
Of course, some retailers find this longstanding regulation a source of problem. According to unnamed source, as cited on Forbes by Kiri Masters, this pricing policy can deny the retailers from surviving on the marketplace. Why? They may find other channels more profitable.
Why Is Retail Pricing Policy on Amazon Disadvantageous
If Amazon insists in requiring the brands to offer the most competitive prices, retailers may find other channels, which are more profitable. In addition, some brands may limit products or services to sell on Amazon. Meanwhile, they sell most products on other channels, based on their profitability.
Customer Data Ownership
When brands shift sales from Amazon to their own website or e-commerce platforms, they benefit in many ways. For instance, brands can decide price tags for better margins. In addition, they can have direct contact with the customers. When the transaction happens through Amazon, the customers deal with Amazon more than they do with the seller.
Direct relationship with the customers means that the sellers can have the customer data and use it for decision-making process. They can identify the customers’ buying habits and preferences. They can find out what the customers expect from the products or the brand. This way, the sellers can make necessary improvements in their product or retail pricing policy.
Control over the Pricing
When sellers or brands sell their products through global marketplace like Amazon, Alibaba, or Walmart, they can hardly have opportunity to control over the pricing strategy. They have to follow the regulations implemented by the marketplace. As a result, the profit margin may not be advantageous.
Nonetheless, the brands are able to implement their own pricing and marketing strategies when they sell through their own e-commerce. For instance, they can promote the products through social media ads, display ads, or email marketing. In other words, they are free to apply marketing strategies or pricing policy to get better margins.
The longstanding requirement of retail pricing strategy on Amazon certainly needs reviewing. Otherwise, sellers will lose interest in the e-commerce. Of course, Amazon has some advantages, such as wider marketing scope and competitive prices. However, sellers should not be disadvantaged from the pricing policy.