Three things you need to know about Amazon's price strategy

 
April 21, 2014

By Jenn Markey

VP of marketing for 360pi

The retail world has been abuzz with news of Amazon's price dynamism. So, what do retailers really need to know about Amazon's pricing?

1. Amazon does make millions of price changes daily.

In March 2014, Amazon changed prices on an average of 15-18 percent of its assortment every day — and this number is growing. Many retailers today are struggling to emulate, or even react to, this level of price dynamism.

Amazon daily price changes

2. Price dynamism varies by season.

All retailers who aim to compete with Amazon should be prepared to set their competitive price intelligence on "max" during active shopping seasons, such as Thanksgiving and Christmas. In November 2013, Amazon ramped up to 3 million+ price changes per day, by our conservative estimate, including changing prices on one third of its sampled assortment on Black Friday 2013. Next holiday season, we expect that retailers will need visibility into a level of 6-10 million price changes per day by Amazon alone.

360pi has found that in the October-December 2013 timeframe, Amazon made more daily price changes, on average, than at any other time of the year. The chart below shows what percentage of Amazon's assortment changed price on a given day, with a noticeable spike on Black Friday (November 29). Notice that the 30-day moving average (trend line) dipped after the holidays to "regular" level, but this level also increases with time.

Amazon daily price changes over time

3. Some categories are more price-dynamic than others.

So, as a retailer, where do you start? 360pi discovered that Amazon's price dynamism varies between categories, as seen in the chart below, containing price changes in several sample categories in March 2013. The chart below shows the percentage of Amazon's assortment in each category that changes in price every 1-2 days, every 3-5 days, every 6-14 days, and every 15+ days.

For instance, over 15 percent of tablet prices changed every 1-2 days, making it the most price-volatile of the sampled categories. At the same time, only about 2 percent of television prices changed at this frequency. Using this information, retailers can aim to understand the competitive landscape and pick the categories (or even individual SKUs) where they can win against the likes of Amazon.

How frequently does Amazon change prices


Topics: Marketing , Online Retailing


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