All ecommerces, big and small, they fight every day with the North American giant Amazon, that seems not to find a competition that can overshadow it. , a Spanish pricing company, has been making comparisons between the main online stores operating in Spain for years, and in many of the studies it has been concluded that Amazon has really competitive prices. How is it possible? What is your secret?
Amazon pricing strategy: the formula for success?
After an exhaustive analysis, these Murcian entrepreneurs have determined how Amazon’s pricing strategy is ahead of that of its competitors. As explained “The formula for success Amazon is like Coca-Cola, coveted by all and at the same time indecipherable or difficult to match. That is why we have carried out an analysis of its pricing strategy, the cornerstone of its success, which until now had not been done by anyone”.
The goal of this Minderest study is to discover how Amazon reacts in real time to price changes from its competitors. To do this, the price monitoring tool has analyzed the price changes of 132 products in online stores for 48 hours Amazon.es, MediaMarkt.es, Fnac.es, .es and ElCorteIngles.es. In total, Minderest has made an average of 30 price catches per hour for two days.
Once the analysis has been carried out, it is concluded that, of the 132 products analyzed, 96 have experienced at least one price change during the 48 hours of the study. In turn, these 96 products underwent a total of 378 price changes, obtaining an average of 3.93 price changes per product. Amazon is the one that registers the most price changes, 185, doubling the second in this ranking, MediaMarkt, with 91 changes. Far behind are El Corte Inglés (38 changes), Fnac (35) and PcComponentes (29 changes).
Full flexibility in Amazon’s pricing strategy
Regarding the hours of the day in which the changes occur (the study was carried out between 11 a.m. on June 26 and 11 a.m. on June 28), Amazon is the only one that changes its prices at any time, unlike its competitors who perform them in one or two windows a day. This greater flexibility allows Amazon to react in “real time” to the price changes of its competitors, with the minimum time detected being 6 minutes and 36 seconds after a change in MediaMarkt.
Why this quick reaction from Amazon?
The answer is simple: Amazon’s strategy goes through match the cheapest price, but only for the bare minimum of time. If Amazon is price matched with the cheapest competitor, and the latter raises its price, Amazon will try to detect this as soon as possible to raise its price as soon as possible, so that its loss of profitability is minimal.
Keys to Amazon’s pricing strategy
With all these data, it is possible to reveal Some price positioning strategies detected on Amazon:
- If Amazon is matched at the cheapest price with one or several competitors and these competitors increase their price, then Amazon, from its cheapest position, increases its price on average by 6%, so that it remains the cheapest of all and in turn improves its profit margin.
- If a competitor lowers its price and becomes the cheapest, then Amazon also lowers its price to match it. It is noteworthy that in the vast majority of cases it simply equals it, that is, it does not beat the competitor’s price.
- If a competitor makes a significant price reduction (close to or greater than 20%) Amazon, in its objective to match the cheapest price, instead of doing it immediately, begins to progressively reduce its price until it reaches it. It follows that its objective is to measure the balance between price and demand as the competitiveness of its supply improves.
- If there is a situation of similar price positioning in which Amazon is not the cheapest, then, if it considers it appropriate, it will break this situation by positioning itself as the cheapest with reductions close to 5%.
Some significant examples of Amazon’s pricing strategy:
Web
Date of capture
Reaction time after last change
Price before the change
new price
Observations
mediamarkt.es
06/26/2018 11:00:00
€1,361.00
starting price
amazon.es
06/26/2018 11:00:00
€1,319.00
starting price
elcorteingles.es
06/26/2018 11:00:00
€1,506.00
starting price
fnac.es
06/26/2018 11:00:00
€1,499.00
starting price
pccomponentes.com
06/26/2018 11:00:00
€1,350.00
starting price
amazon.es
06/26/2018 13:41:23
2:41:23
€1,319.00
€1,331.62
Amazon increases its price, staying as the cheapest and improving its margin
fnac.es
06/27/2018 7:59:15
18:17:52
€1,499.00
€1,319.00
Fnac reduces its price matching the initial price of Amazon and positioning itself as the cheapest
amazon.es
06/27/2018 8:20:28
0:21:13
€1,331.62
€1,319.00
Amazon reduces its price and matches Fnac 21 minutes later
Web
Date of capture
Reaction time after last change
Price before the change
new price
Observations
mediamarkt.es
06/26/2018 11:00:00
€299.00
starting price
pccomponentes.com
06/26/2018 11:00:00
€270.00
starting price
amazon.es
06/26/2018 11:00:00
€254.15
starting price
elcorteingles.es
06/26/2018 11:00:00
€254.15
starting price
fnac.es
06/26/2018 11:00:00
€299.90
starting price
elcorteingles.es
06/28/2018 0:22:42
37:22:42
€254.15
€299.00
ElCorte Inglés increases its price
amazon.es
06/28/2018 0:32:01
0:09:19
€254.15
€269.00
Amazon, being the cheapest, increases its price while remaining the cheapest and improving its margin 9 minutes later
Web
Date of capture
Reaction time after last change
Price before the change
new price
Observations
pccomponentes.com
06/26/2018 11:00:00
€89.99
starting price
fnac.es
06/26/2018 11:00:00
€96.99
starting price
amazon.es
06/26/2018 11:00:00
€89.99
starting price
mediamarkt.es
06/26/2018 11:00:00
€89.99
starting price
elcorteingles.es
06/26/2018 11:00:00
€95.00
starting price
mediamarkt.es
06/26/2018 11:26:42
0:26:42
€89.99
€89.90
MediaMarkt reduces its price
amazon.es
06/26/2018 13:10:38
1:43:56
€89.99
€89.90
Amazon cuts its price to match MediaMarkt in less than 2 hours
Image: DepositPhotos
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