Amazon represents a great opportunity today for sellers to increase their turnover thanks to the different tools that the marketplace makes available to them and the great reach it has in the world of E-commerce. However, keep in mind that working with Amazon and taking advantage of its tools entails assuming fees that must be taken into account when developing a pricing strategy for Amazon.
The marketplace has announced that as of May 12 it will apply a new increase in its logistics management fees in the United Kingdom, Germany, France, Italy and Spain due to the increase in fuel prices and inflation. This increase will be 4.3%, which represents an increase of €0.17 on average per logistics management unit.
Why did this rate increase occur?
This increase in logistics fees comes after Amazon announced last March that it had made a series of changes to some of its programs, size categories, and logistics, storage, and return fees. Considering this and the new “temporary” rise of 4.3%, it is more important than ever that sellers keep up with these developments to carry out a good pricing strategy on Amazon and take care of their profit margins.
How to develop a pricing strategy for Amazon?
To carry out a good pricing strategy for Amazon, you must take into account the different types of costs that are related to the management of your business:
- Product cost
- Logistics management fee
- Storage fee
- Costs Derived from Amazon ADS
- The commission of the Marketplace itself, which is 15.45% of the price with VAT of the product
- Discounts and promotions if they are made
Taking all these factors into account, in addition to possible returns or unforeseen events, will allow you to create a cost structure that reflects a real and accurate profit percentage in order to effectively develop a pricing strategy for Amazon.
This will help you carry out sales strategies that will allow you to make the most of your products within Amazon and avoid any loss that may occur if you do not consider the costs of selling on Amazon.
Tools that help us establish our pricing strategy
Amazon Income and Expense Calculator
Establishing a cost structure and determining the price that each of your products should have can be cumbersome and very exhausting, even more so for those accounts with large product catalogues, for which we recommend using tools that make it faster and easier. the information you require, such as the Income and Expense Calculator that Amazon makes available to sellers.
create your own calculator
You can also create your own calculator through an excel document that allows you to have a clearer vision of both the product and the market, because it is important to remember that the rates are different depending on the country in which you are storing your products, for which it is much easier to have your rates recorded in a document for each country in which you are storing.
To make all this information much clearer, we want to show you a practical example that will help you establish your own pricing strategy for Amazon.
First of all, you have to take into account “how much does it cost to sell under Amazon’s FBA model”
Fixed costs associated with selling on Amazon
Monthly fee: €39
Sales commission: 15% according to the category of the product, on the PVP
Costs associated with Fulfillment by Amazon (FBA)
Monthly storage fee
Fee for optional services: Special packaging, labeling
Practical case: Set of two hinges
We leave you a practical case that we have made for this blog and so you can guide yourself in a more visual way
- Retail price: 34€
- Product dimensions: 72.3×11.4×5.6 cm or 0.0007m3
- Packaged product weight: 4.12kg
- Package Type: Standard Package
In this example you will be able to see broken down section by section each of the costs involved in selling within Amazon and the percentage that each of these costs represents from the RRP.
Therefore, it is important to highlight that each product that is going to be integrated into Amazon must have a prior study. Take into account each aspect of it and thus be able to determine what the real cost of that product will be, since all products have different dimensions and weight, which means that your costs can increase or decrease considerably.
The set of 2 hinges includes a final cost of €13.09
Which means that you have €20.91 remaining to cover other direct or indirect costs that are outside of Amazon and thus establish a Profit on what remains.
Having said this, we have to understand that it is important before starting to sell with the marketplace, that it is essential to stop and analyze the products in great detail and make a cost structure that allows us to have a good relationship between PVP, dimensions and weight, since , with this criterion we can ensure that we cover all the costs that it requires to sell on Amazon and all the direct and indirect costs that the product may have.
At Década Studio we help you develop your pricing strategy
We have a team specialized in marketplaces that will help you identify the best pricing strategy for your business. Making sure that this not only helps you to be more profitable but also attractive to your customers and stand out from the competition.