By Lauren Carter
Competing against Amazon: David vs. Goliath
One of the most difficult aspects of selling on Amazon is the fact that you have to compete with Amazon itself. Amazon is an international giant and can source stock at extremely low prices in huge quantities. This makes Amazon a formidable competitor for a small business owner just getting started selling on the Amazon marketplace.
Many third party sellers will avoid selling products which Amazon stock for this reason but in many cases there is still money to be made. Because Amazon can expand its stock at any time and you may find Amazon joining your listings at any time, it is unlikely you will be able to avoid competing entirely so it’s important you know the best way to go about this, whatever your stance on the issue is.
Winning the Buy Box
We’ve discussed the importance of winning the Buy Box in a previous blog post, check it out if you haven’t done so already. Some estimates suggest as many as 90% of sales are made through the buy box. This means you really want to be winning it as often as possible. Nobody apart from Amazon can say for definite how the Buy Box winner is decided. We do know that sales history, customer service and price all play a part which obviously puts Amazon in an advantageous position. While Amazon is certainly the toughest competitor for the Buy Box it is possible to win it from them. In many cases if you price your offer at the same price as Amazon, or just below where possible, Amazon will share the Buy Box with you.
It is well known that the Buy Box will rotate where there are a number of sellers with similar pricing and similar performance. This is true even when Amazon is one of those sellers. Amazon may hold the Buy Box for longer periods than other sellers but if you are selling through FBA and have great customer metrics and a high amount of positive feedback there is every chance you will win the Buy Box from time to time and will win some sales.
If you choose to drastically undercut Amazon it is likely your price will be quickly matched or even undercut. This is a risky game and more often than not will cause a “race to the bottom”. It is likely that Amazon will be able to offer the product at a much lower price than you and get buy on much smaller individual profit margins. Ideally you want to keep prices high on the listing to maintain profit margins so avoid starting a price war where possible!
Although winning the buy box is very important it is not necessarily the be all and end all. If you cannot win the buy box on a product this doesn’t mean you will never make any sales. Say a product sells 100 times a day, if we assume that 90% of the sales do go through the buy box then that is still 10 sales a day up for grabs. Obviously this is only useful for very fast selling products; if you can be the best offering for these sorts of products outside of the buy box then you should still see a moderate number of sales.
Fill in the Gaps
For some products Amazon seems to have an endless supply of some products but for others it seems to find itself out of stock frequently. You can find out what Amazon’s supply of a product is like using a browser extension called Keepa . Once you have installed the Keepa add on you will see historical information graphs displayed within all Amazon listings. On the Keepa graph (see below) you can see the price of the product over time. The orange line shows Amazon’s price for the product, if you take a look at the example graph below you will see frequent breaks in the orange line. These are times when Amazon has been out of stock.
If you find a product where Amazon has been frequently out of stock in the past then you can generally feel safe assuming this trend will continue. If you are unable to beat Amazon to the buy box while stock is available then you need to make sure you are in position to win the buy box as soon as Amazon become out of stock. For a fast selling product you can make a good number of sales in these periods and if there is not much competition for the buy box you can control the price.
Check Stock Levels
If you’ve found a product and Amazon seems to have had inconsistently in the past but has in stock now, there is one final check you can do to find out how many they have currently.
- Add the product to your basket
- Click the grey “Edit your Basket” button.
- Click on the “1” under quantity and from the drop down click on “10+”.
- You will now be able to input any quantity, change the quantity to 999 and press update.
- You will now see a message telling you how many Amazon has in stock – it’s that simple.
You can use this to gauge how long it will be until they are out of stock again.
Competing against Amazon can seem like an impossible task but in reality there are always ways for you to make sales. As long as you do your research and have reasonable expectations about the number of sales you will be able to make competing against Amazon doesn’t need to be quite so intimidating. Every product ProfitSourcery sources is displayed alongside all the data you need to make informed buying decisions including competition information.
Researching all the information you need to decide whether a product is right for you can be a tedious task but ProfitSourcery makes it easier by putting all the data in one place. Sign up for a free trial now to see how it works.