Is an Amazon repricer worth it for online arbitrage?

In this article we’re going to take a comprehensive look at repricing for Amazon arbitrage sellers – why you might want to use a repricing tool, why you might not want to use one, how much you can expect to pay and specifically how useful repricers are for online arbitrage.

Why should you use a repricer?

Many arbitrageurs wouldn’t be without their repricing software – others can take it or leave it. However, there are a specific set of reasons why a repricer is a really good idea, as well as a number of reasons it might not be right for you and your business.

Pros

It gives you a competitive edge

Prices in a competitive and dynamic marketplaces such as Amazon are never fixed, and as an FBA seller you will constantly have to react and respond to pricing changes. A repricer allows you to key in set parameters beforehand to make sure you aren’t selling a loss. Put simply, if you aren’t using a repricer and your competitors are, you are at a disadvantage.

It allows for price changes 24/7, far quicker than you could do manually

Sometimes pricing can change throughout the day – and if you’re doing online arbitrage as a side hustle you simply may not have the time to react constantly to pricing changes. A repricing tool will do this for you without you even having to think about it – think of it as your own pricing and merchandising department, responding to market conditions on the fly.

It allows you to scale

Manual pricing is OK for the hobbyist arbitrageur with one or two items in stock at any given time, but unfortunately as you scale and become more profitable, pricing will take up more and more of your time to the point where you can’t scale any further as you just don’t have enough hours in the day. When you’re trying to aggressively scale your arbitrage business, a repricer takes one more thing off your plate to help you focus on more important things (like sourcing new products to sell.)

It allows you to maximise ROI

A lot of people think repricers are just for reducing prices as and when competitors do, or when another retailer comes onto the scene with a vastly discounted price. This isn’t the case – and a repricer is just as much for increasing prices as it is for discounting them. For example, quite often the market will be in such a position where you can get away with incrementally increasing prices. If competitors are using a repricer, you may find that while you are still selling items, you’re not selling them for as much as you could have done if you had been using a repricer.

It allows for more strategic analysis of your competitors

A lot of the common repricing tools allow for the ability to perform competitor analysis and make strategic decisions from the results of this analysis. For example, you might choose to ignore certain competitors if you think they’re trying to engage in price tanking, or even try to consistently undercut the pricing of certain competitors who are comparable in terms of feedback, fulfilment methods or reviews. For example, – if there’s only one other FBA competitor on your listing, if you can undercut them by 5% and still remain profitable it’s possible you will consistently win the buy box over them.

Cons

Repricers have an ongoing cost

Good repricers aren’t free. Usually repricers are charged on a monthly subscription model, and while this usually isn’t much (certainly less than $100 per month) for sellers who aren’t doing huge volumes or who are operating on very tight margins, this might be quite a big consideration.

It allows for pricing wars

Unfortunately all it takes is for two competitors using a repricer who haven’t configured it properly to engage in a race to the bottom where each seller’s repricer is constantly trying to undercut the other – and this is no fun for anyone involved (except the customer, who gets a bargain.)

While this is kind of unavoidable in some ways (you have no say in whether someone else uses a repricer) you can mitigate it somewhat by making sure that you don’t ever get into one of these pricing wars and selling out your inventory below cost by making sure you set your repricer up properly and ensure you have a minimum price threshold set.

It can lead to over-dependence on the tool

The danger when you relinquish complete control over your pricing strategy to a tool is that if the tool were ever to glitch or experience downtime, you will be out in the cold – with very little idea of how to price your products effectively. While downtime lasting more than a couple of hours is unlikely, it’s something you should be aware of and to ensure you have a backup plan if your repricer were ever to stop working.

It can impact your brand perception

It’s likely to lead to a negative impact on how a customer perceives your brand if they come back to your listing three times in one day and the price is wildly different each time. Now, a repricer won’t amend prices unless there’s good reason to do so, but if the price increases every time the customer looks at it because your repricer thinks it can get away with incremental price increases, this can start to look like price gouging to a customer and they’re likely to look elsewhere.

It can lead to compromises in your data privacy

Whenever you give control of a critical business function like pricing over to any software, there’s always an element of trust required in their security methods. For example,were they ever to get hacked or if a third party was able to gain access to your pricing and sales data, it would be extremely valuable to them and potentially catastrophic for you.

Repricing strategies and how to use them effectively

As with anything, there are innumerable ways of configuring a repricer. You may want prices to change based on how much stock you have, for example – if you have low stock, you might want prices to increase to maximise per-unit profit. You might want prices to change based on competitors – for example, to always be $1 cheaper than the nearest competitor. While this is largely going to be based on the products you are selling and the attitudes of your closest competitors, here are a few repricing strategies you might want to consider.

Algorithmic

Algorithmic repricing is effectively where you use a tool’s algorithm to determine how you should price your products. How these algorithms work exactly is generally not disclosed by the repricing tool, but usually consider competitor prices, sales velocity, stock levels, historical data including sales rank and how likely it is that you will win the buy box if prices are changed.

Algorithmic repricing tools are usually powered by machine learning, meaning they are designed to use your data to get more accurate over time – and will learn based on what worked and what didn’t. For the beginner, algorithmic pricing might be all you need – all you need to do is input a minimum price threshold so you’re never selling items below cost and the tool will do the work for you.

Rule-based

Rule-based is simpler to understand than algorithmic pricing as you effectively give the tool a set of rules to abide by. For example, you might decide that you want to undercut a competitor by $5. You would simply give this instruction to your tool and your price would always be $5 below your chosen competitor. If your competitor’s price changes, your price changes. You could also put in a rule to always match or undercut the Buy Box price, to give you more of a chance of winning the Buy Box.

With rule-based pricing it’s also important to establish your minimum price – if you don’t do this, you may find that your repricer changes the price of your listing so that you’re actually selling at a loss. This is crucial because the investment into stock, a sourcing tool and a repricing tool will be a complete waste of time and money if you are losing money on the items you sell.

Stock-based

Stock-based repricing is where the tool will look at your inventory and price based on this. For example, if you are well-stocked and you aren’t moving stock as quickly as you might like, you might want to lower prices to encourage sales and avoid an overstock situation. Conversely if you are low in stock but your item is selling quickly, you may want to increase prices to slow the rate of sale and maximise your per-item profit.

Profit-focused

Profit-focused repricing is where the repricing tool takes into consideration a number of costs – Amazon fees, shipping and any other overheads as well as a desired profit margin that you give it to ensure maximum profit on each sale. There will always be a compromise between selling items at your desired margin and actually selling items – 10 sales at 20% margin is better than 3 at 40% margin, so you need to ensure you pick a tool that understands this and will price accordingly.

Is an Amazon repricer necessary for online arbitrage?

The answer to this is that it depends.

If you’re a big-time seller with a large number of listings in a number of competitive categories along with a full-time job to contend with, a repricer makes perfect sense, as it allows you to focus on other, more interesting things that are going to move the needle in your business. However, if you’ve got two listings in niches that really don’t require frequent changes, a repricer will be a waste of money.

You should also remember that Amazon has its own “automate pricing” tool which allows you to do a lot of the things we’ve mentioned in this article without you having to pay anything extra, and this would definitely be worth testing out before you commit to signing up for a tool. If you turn this on and find that you are missing out on opportunities because it just isn’t powerful enough – for example, you think a more complex set of rules will help you win the Buy Box more often, then a third party repricer might be the solution. If you turn it on and it doesn’t do anything, you can be pretty sure that a third party repricer probably isn’t going to help you.

What’s particularly relevant for online arbitrageurs is the fact that arbitrage inventory changes far more often than wholesale or private label inventory. You might, for example, see a really good deal on some hand cream, but you’ve only got twelve units. After those twelve units have sold, you might then spot a great deal on some TVs, and you buy three units. The point is that there are other sellers who will have been selling the same items for months, maybe years – but your disadvantage is that you still have to set up your repricer for each different line. A good arbitrageur might go through hundreds of lines per year – and with that comes hours and hours of setup time. If you’ve only got a small amount of inventory on an item that’s scarce or you know will sell well, a repricer might just be a waste of time.

One thing that every online arbitrageur should have, however, is a sourcing tool – like SourceMogul. SourceMogul constantly scans hundreds of retailers for thousands of products in order to find you the best online arbitrage opportunities. We’re offering a free 7 day trial of SourceMogul which you can access using the link below.

Conclusion

To conclude – repricers are right for some and not right for others. While there are many sellers who say that repricers are what keeps them competitive, for smaller arbitrageurs, they may be just unnecessary. We’d encourage you to try out Amazon’s “automate pricing” tool before you go spending any money on third party repricers, as you may even find Amazon’s native functionality does everything you need it to.

Frequently asked questions about Amazon repricing tools

Does using a repricer guarantee I’ll win the buy box?

No. It can help improve your chances, particularly if you’re using FBA. Amazon doesn’t always give the Buy Box to the cheapest seller, but if you are going head to head with another FBA seller who has a similar seller profile, you may find that just slightly undercutting them is enough to win the buy box from them. A repricer is no guarantee of this, however.

Do I lose complete control over my pricing with a repricer?

Absolutely not – a repricer is designed to work within the constraints you give it. A repricer is not going to run away with your pricing and have you selling things at a loss unless you don’t set it up properly and give it the parameters it needs to operate successfully. At a minimum you should be giving it your minimum profitable price.

Can repricing tools handle large inventories?

Repricing tools can easily handle large inventories – in fact, they are most appropriate for sellers with large inventories, as these sellers will see the greatest benefit from using a repricer from not having to reprice a catalog of hundreds of items. If you only have a handful of items, however, a repricer might still be beneficial to you but you won’t realise anywhere near the time savings that a larger seller would.

Can repricing tools handle rapidly changing inventories?

They can, but you should be aware that a repricer works better when given access to historical sales data over a long period of time. However, a repricer isn’t useless for an arbitrageur who changes their inventory all the time – far from it. Repricers can use whatever data is available to them including competitor data (mainly their prices) to make real-time pricing decisions, as well as having the ability to respond immediately to the market environment. If nothing else, repricers can use rules and parameters you give them, without requiring months and months of historical sales data.