If you're a regular Amazon shopper, you've probably already noticed that prices of certain products on Amazon could change very frequently.
Amazon's mission is to provide the lowest possible prices. If Best Buy, for example, drops the price of a popular video game one day, you can almost guarantee that Amazon will match it within the next 24 hours. But Amazon doesn't just compete with the big guys.
Amazon itself is also a marketplace, where third-party sellers (which could be big businesses or just individuals) can sell their own private label products without competition, compete with other sellers, and even compete with Amazon itself.
The Amazon marketplace makes it very easy for individuals sell their products as the site gets millions of visitors per day. I've sold stuff on Amazon myself, such as old books and video games, both used and new. It was quite neat to see how fast you can sell the items if you price them right (or low) and Amazon makes the process very easy. They take a cut, of course.
One of the reasons selling on the Amazon marketplace is so effective is due to the way the product pages are organized: there's only 1 product page for each unique product.
For example, if you're selling a black Moto-E GSM 2nd generation smartphone with 16GB of RAM, there will only be one product page for it and it's assigned a unique Amazon Standard Identification Number (ASIN). So all sellers selling the same product with that ASIN, will be on that product page. The page will have links to pages that list all the sellers selling that item by condition.
On that single product page, the most important element for Amazon sellers is the box known as the "Buy Box."
The "Buy Box" is simply that box usually on the top right hand side which contains the "Add to Cart" or "Buy Now" button. This box is not just reserved for Amazon, 3rd-party sellers can "win" this spot as well.
As you can already guess, being the seller who holds this spot would normally lead to increased sales. There are different factors that come into play to win this spot. While no one outside of Amazon knows for sure what the exact algorithm is (which could also be constantly changing), the biggest factor appears to be the price. The lower your price, the higher your chances of getting it. Other factors such as fulfillment method (if the seller is using Fulfillment by Amazon (FBA) it's a big plus) and the seller's ratings are quite important as well. The "Buy Box" may also be rotated among different sellers.
Since the "Buy Box" is so important for many sellers and pricing is a big factor, automated repricing apps have popped up to help sellers manage their product's prices and remain competitive.
As you can imagine, if you're a seller with thousands of products/ASINs, manually updating your prices to remain competitive would be a very time consuming process.
Amazon provides Application Programming Interfaces (APIs) to help automate this process. The set of APIs designed specifically for Amazon sellers is the Amazon Marketplace Web Services (Amazon MWS) APIs. These APIs will allow you to programmatically manage your orders, prices, inventory, etc. This is the set of APIs that most automated repricing services out there use. I've actually built one myself and have worked with Amazon sellers on using it so I'm quite familiar with it.
There are companies who provide them as subscription-based services (SaaS) where you pay a monthly fee to use them. Others have built them in-house, designed specifically for their businesses. And just recently, Amazon even started rolling out their own service called "Amazon Automate Pricing" (currently still in beta).
Here are some of the most common use cases these repricing programs allow you to automate:
You can see how these rules could get dangerous as it could drag your prices all the way down where you actually lose money. This is why many repricers also provide an option to set a Min and Max price. Glitches can also occur, and there was actually a case back in December 2014 where sellers using a popular repricing software suddenly found their products being sold for 1 penny.
These automated repricing apps also tend to lead to "price wars" among sellers and Amazon itself in order to get that precious Buy Box spot.
A phrase you would commonly see when you visit Amazon seller forums is the "race to the bottom."
Often times, if a seller has good ratings and using FBA, simply outbidding the current Buy Box owner by 0.01 is enough to steal the Buy Box. With even just two competing sellers both using automated repricers, you can see how this "race to the bottom" could really speed up. Of course, for Amazon this is usually good (especially if they're not selling that product) as their goal is to offer the lowest prices and may even be the reason Amazon finally started offering their own repricing service. They also get a cut for each product sold, so selling more of an item could be more profitable for them if their site does provide the lowest price out there as a competing site could make those sales instead by having lower prices than them.
Another thing that's interesting is, for those products Amazon is also selling, Amazon is actually willing to give up the Buy Box and have a 3rd-party seller take the spot. I've personally seen the Buy Box get taken from Amazon by an FBA seller outbidding them by 0.01. Amazon can of course respond to this by also lowering their prices further.
I've actually posted this deal on Reddit a few days ago and noticed in the price history that every few minutes the price goes down 1-2 cents. It kept going for the next 2-3 days and looking at the list of sellers, it was obvious it was a price war between Amazon and a 3rd-party seller as shown in the screenshot below.
It definitely feels weird selling a product on a platform and competing with the owner of that platform. I've read posts on seller forums who are skeptical of using Amazon's own repricer as this would basically reveal their own selling strategies to Amazon, which could be their competitor. For the consumers, though, these price wars are a good thing.