Season 1, Episode 137

Navigating Price Changes on Amazon with AZSellerKit

In the competitive world of Amazon selling, pricing strategies emerge as a critical factor that can significantly influence a seller’s success. Companies like AZSellerKit are leading the way in offering sophisticated solutions that address these challenges head-on.

In this episode, Chris McCabe & Jason Hasan from AZSellerkit discuss the challenges of pricing in an ever-evolving marketplace, the impact of Amazon’s fees on seller margins, and strategies to stay profitable amidst rising advertising costs.

Show Notes

Transcript

[00:00:00] Chris: Hey everybody. This is Chris McCabe of the Seller Velocity Conference. And I’m here with Jason of AZSellerKit today, one of our wonderful esteemed partners, thank you so much for supporting the conference, of course. And we’re going to talk mostly about pricing. You guys are the pricing experts you have, I don’t know how many clients you have under management now, but I would imagine they’ve got terrific pricing needs in the competitive marketplace that we find ourselves in these days.

[00:00:28] Jason: Yep. Sure. We manage as an agency, we have a company called MMX Distribution. where we manage 16 accounts. That’s where we kind of really handle everything and are all in from inventory management and listing creation advertising.

So we understand that quite well. And then we have our software, which we have a few hundred clients on, which does automated pricing is really hook to kind of get people in the door, it does full business intelligence and reporting. All of those bells and whistles that come with a robust software.

We are lucky enough to end up in conversations with many, many sellers and a lot of them are doing 20, 50 million plus per year and just going over these different ideas of how they’re using pricing and how we’re automating different things specifically for them in order to really just take advantage of the current environment.

[00:01:21] Chris: Does the pricing conversation change from year to year or do the fundamentals stay the same and the tweaks are just what you discuss or is it like nope every time competition goes up you’re changing the conversation?

[00:01:33] Jason: The pricing conversation, you know changes a lot I mean during covid the world was in a place where inventory was not available, So a lot of what we were doing was figuring out how far we can stretch pricing You know how far we could raise pricing when you were running low on inventory and how to deal with that . Covid finished and a lot of people then had tons of overstock.

So everybody ordered like crazy, thinking that the trends would stay the same, world came back to normal. Everybody had tons of inventory and the name of the game was more, how do you price your items down without getting killed. Where can you see margin?

Where can you not sneak margin out? And there were a lot of competitors also that were buying for $5 and ultimately selling for a net of $3 because they had a glut of inventory. And that really affected the market in a major way. And now we’re kind of in an environment, I will say over the last six months where things seem to be normalizing as far as, many people are, are are out of their inventory problems and are now kind of into a normal flow of business where now you’re back to, we don’t want to buy for five and sell for three anymore.

You know, I’m ordering product now I gotta be able to buy for five and sell for seven, sell for eight and try and make sure that we’re making margin and , taking into account the tons of new Amazon fees that Amazon’s throwing in there and trying to understand all of that.

[00:03:01] Chris: Spending more on ads, right? I mean, that’s top of the list in terms of expenditures and costs that, I mean, they weren’t exactly unforeseen. I think people knew they were going to be spending more on ads, but did they know they were going to have to spend this much on ads this year? Yeah, definitely not.

[00:03:18] Jason: So, I mean, Amazon released it a couple weeks ago I think their Q4 ad spend results, and the company, I believe, went up in sales by 20%, I think, or 18% was their sales revenue, but their ad revenue went up by 40%.

Which just by definition is telling you that in order to do. The same sales, you need to almost spend twice as much money on advertising in order to do the same thing. And everybody’s seeing that page one is now 30, 40% more sponsored ads than it was before the cost per clicks are going up but what that does, just kind of wrapping it back to pricing is if you’re not factoring that into your initial decision, you’re going to end up pricing your products lower than you should be because you need to factor that into your margin that maybe two years ago, you can get away with 5% now it might be 10%.

[00:04:12] Chris: So when you’re at Seller Velocity, May 1st and 2nd, by the way, for those of you that don’t have a ticket yet, 2 day New York conference that we do, this is our sixth one, sellervelocityconference. com. When you are there, what questions, what are the top two questions? Let’s say not three, but two top questions you’re expecting people to walk up to you and ask you about first?

[00:04:34] Jason: I mean, everybody is usually asking questions about the new fees. That’s kind of a very sensitive topic of what’s happening with inbound placement fees, what’s happening with all the storage fee changes.

There’s just a lot of different returns fees are changing in June. So everybody’s confused. So like when you, you know, everyone’s fees focused and Amazon is not making it easy to understand what’s coming.

So for us, that is a very just common refrain of when we’re talking about pricing, you’re obviously talking about margins and then it automatically goes back to fees and it’s always, can you explain to me what the new inbound placement fee is? Can you explain to me, just all of these different fees and what are you doing about the fact that advertising fees are going up? Like, what can we do with all these increased fees?

[00:05:26] Chris: Right. I think the day, the morning that we’re recording this, there’s a fee change today. March 1st.

[00:05:32] Jason: We have a profit calculator that we have on azsellerkit.com. That’s a free tool and we just updated it with inbound placement fees.

But even putting that in there, just discussing with my team, we know that whatever we put in today, once Amazon rolls it out, I’m sure we’re going to change it because I’m sure that the fees that they said were going to be, there’s going to be nuances that make them different where, you know, if they said 21 cents, it might actually be 31 cents.

It might actually be 41 cents or it may not be as bad. Like who knows? You just don’t really know until things roll out, how they’re really going to affect different people in different categories. So they leave a lot to the imagination, unfortunately, which is not, not what it should be.

[00:06:16] Chris: Right. And by the time the conference comes around in May, Prime Day will be roughly two months past that. So how far in advance do people calculate, recalculate, What they plan to do for prime day. Is it two months? Is it a full quarter? Has that changed? And how do you answer prime day questions that are two, three months in advance?

[00:06:39] Jason: Yeah. I mean, it used to be that the 30 day number was the number that you had to prepare for because all of their pricing rules 30 day metrics of lowest price in the last 30 days. And that last year changed. So all of a sudden they now have what’s called their reference price or there was price and how they determine that reference price, which is basically on prime day, you’re going to need to lower, in order to do a deal, you have to make a deal that is 15 percent lower than this reference price, 20 percent lower than this reference price. It used to be much easier to understand what this reference price was going to be now 90 days out you have to start thinking about already What you’re doing with your pricing and is that going to negatively affect some of the deals that you may be running And for us at the 90 day mark that it is now, we are, I’m not going to say throwing in the towel, but to a certain extent, we are not going to let a prime day affect our pricing decisions for 90 days, for 30 days. We used to, for 30 days, we used to hold prices higher.

We used to make sure that we were doing things in order to get to that day and make sure that we were still be able to have margin and high sales for that day. If they’re going to make this window a 90 day look back, then we can’t have our business affected for 90 days waiting for that one day. It’s just too much. It’s a bridge too far.

[00:08:11] Chris: I’m curious just because of what we do with suspensions and reinstatement strategies and everything. Do people ever bring that up when they’re talking pricing in terms of, well, we had an ASIN go down that was a big winner for us. So we’d like to do XYZ on pricing this product. Do people mention these things?

[00:08:29] Jason: I mean, a massive thing. So it’s not taken down like our version of an ASIN being taken down is losing the buy box.

[00:08:37] Chris: Yeah, that’s like a suspension for you.

[00:08:40] Jason: That’s our version of it. And it’s a, it’s a service that if you’re, and again, I’m not so intimate with your services. I know it is suspensions and ASIN suspension, but it is something that if somebody’s not doing it, they should be because opening cases with Amazon to try and get you your buy box back is something that can be done. We spend a lot of time on it. Again, if an item is, you know, cost $10 and now you need to be $9.

Whatever, you know, we don’t, we won’t necessarily spend a lot of time on it, but if an item is $300 and they want it to be $250 for whatever reason, you got to open cases, you got to do what you have to do. And there are ways to speak to Amazon and explain to them that there is no competition. It is not on another site.

Like if they really are just, so this is something where, making sure that they’re not suppressing the buy box is something that is, there is a business there. I would say for you. To, you know, or for anyone, you know, to sort of go after trying to help people get the buy box back.

[00:09:41] Chris: Yeah. I mean the, the recent, so this would have been a February post that was fairly recent that we did about buy box suppression, got ridiculous traffic on LinkedIn and tons of comments. So that’s definitely a hot button issue for 2024. Unfair suppression of the buy box, but is it a bot? Is it a flag? Is it a flag? What are people doing?

[00:10:05] Jason: Amazon is in the middle of a lawsuit with the state of New York, who’s basically went after them for that. And they’re making these competitive pricing, they’re making it less visible. Because they don’t want to necessarily make it as easy for the attorney general of New York to go after them and say that this is anti competitive behavior, but that being said, we are seeing more success over the last couple of weeks of calling Amazon and and screaming and trying to get the right person in the catalog team in order to get an ASIN to have a buy box.

If, again, if you’re selling it on another marketplace, it’s not going to work. If you’re on Walmart for $20 and you’re trying to be on Amazon for $30, it’s not going to happen. But we do run into a lot of companies that aren’t on any other marketplaces and they had sold it for $20 on some sort of a deal and they tried to raise it back to 30 and Amazon has stuck at $20 and you got to get on the phone, you got to work your angles, get to the right catalog team and do your thing, but you can get those things turned over. And it’s a big deal and there is a lot of buy box suppression that people need help with for sure.

[00:11:12] Chris: Useful skills to have. Not to force you to predict the future, but what other trends do you see unfolding? Or if they haven’t been handled properly now will be worse and become a big problem by May by the time we meet in New York

[00:11:26] Jason: Honestly, if you had to guess, I think that going forward, the things are going to stabilize , would be my opinion on kind of what’s going on. I think that Amazon is getting more in tune with what’s going on.

I think that these lawsuits are actually kind of helpful where they’re going to have to make things a little bit more sensical. And I feel like the business community in general is kind of up in arms and Amazon seems to be listening. They seem to be listening more than they have in the past.

So I think that as time goes by, I think it is actually going to get better, not worse. So again, I could be proven wrong, but. That would be my prediction is that it’s going to get better.

[00:12:08] Chris: I completely agree. I just did an interview yesterday with someone about is Amazon being more receptive, responsive, maybe not communicative enough, but better in terms of seller needs, pain points, frustrations.

And I think the answer is yes. It’s a definite yes for versus say 2021 or 2022 could have improved of course, but I think things might be trending in the right direction. not just sellers. I think also with service providers, consultants, if they think you’re educating sellers, you’ve got core knowledge for your area of expertise. You’re playing by the rules. You’re a legitimate player in this system, then why should there be a lack of communication or a lack of embrace for your presence in, as a stakeholder in this whole ecosystem?

[00:13:03] Jason: People might disagree with this, but I really believe they are trying and I speak to a lot of higher level people up at Amazon that it really is the best way to describe it. It really is. It’s its own government. And there are people inside that bureaucracy that really do want to help but at the end of the day It’s a bureaucracy and it takes time but the people that are on the inside Like the higher up you get the the better they are and the more they care which is actually a good sign, I feel like sometimes the higher up you get the less sometimes people care.

[00:13:42] Chris: And yeah, that’s interesting I never thought of it that way.

[00:13:45] Jason: Yeah, they so You know, and even like what, you know, what you do, you know, as you’re, you’re effectively, you’re a lawyer, you know, you may not be a lawyer for the state of, you know, New York, but you are, you’re an Amazon lawyer because they have a government and you know how to speak to the Amazon government.

You know what I mean? And there’s a lot of people that are inside that government that want change and they’re trying. So, but again, it’s a big thing and it’s a big organization, but the more we talk to people, the more we see that they are, you know, they’re trying to work with us as opposed to against us.

And I’m happy to hear that. And I can say that, like you said, 2021, 2022, the further up the chain we got the less helpful everybody was, now it seems like they really understand that.

[00:14:35] Chris: No, I completely agree. And Yeah, sometimes I feel a little bit more like a lobbyist than a lawyer. Exactly, you know a lobbyist to the amazon government, but it’s like i’m a lobbyist without all the you know fancy meals at washington dc restaurants and Pricey lounge drinks and all that, but I do the lobbying anyway. This government is a lot less fun.

I know that couldn’t, that’s an excellent point to end on.

Couldn’t have put it better myself. All right, Jason, thanks for joining us. Thanks for supporting and sponsoring the Seller Velocity Conference, of course. AZSellerKit, you’ll be meeting with people in New York, May 1st and 2nd, interacting with them. We have multiple networking opportunities.

Again, one last time, if you are listening to this and you’re not a ticket holder already, SellerVelocityConference. com. We have several sponsors, several speakers. I want you to just take a few moments and review our content this year, because it’s certainly not the same every year. We’re looking for high level strategy for established and developing brands.

And we’re going to be answering a lot of questions over the course of two days. So I’m looking forward to seeing you in New York.

[00:15:46] Jason: All right. Thank you, Chris. I appreciate your time.

Hosts & Guests

Leah McHugh

Jason Hasan

 

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