Having the proper Amazon pricing strategy for your private label<\/a> brand is crucial. With the private label method, you’re not competing for the Buy Box<\/a> as you would using retail arbitrage<\/a> or wholesale<\/a> methods, but you are<\/em> competing with the other products within the search results. <\/p>\n\n\n\n So, how do you choose the perfect price for your product? <\/p>\n\n\n\n There’s no one-size-fits-all strategy—the right price largely comes down to your product’s quality, your production costs, and what customers are looking for, all of which can vary from your competitors. That said, there are a few data-driven techniques that will help you arrive at the best price for your product.<\/p>\n\n\n\n When researching the right price for your product, it helps to understand the Amazon marketplace, in terms of both what consumers want and how other sellers (your competition) meet those demands. <\/p>\n\n\n\n Ecommerce is surging<\/a>, and more people are shopping online<\/a> than ever before. In the past year, more U.S. consumers have shopped on Amazon than any other retail outlet—whether online or in-store. And while Amazon shoppers care about finding products listed at the lowest price, more than three-quarters of consumers are willing to spend up to $100 on a single product from Amazon. <\/p>\n\n\n\n That said, consumers aren’t splurging on $100 items each time they shop on Amazon, a fact which is reflected in Amazon sellers’<\/a> average prices.<\/p>\n\n\n\n In 2023, 58% of Amazon sellers priced their products between $16 and $50.<\/strong><\/p>\n\n\n\n Furthermore, 57% of highly successful sellers (those who have achieved lifetime profits of $500,000 or more) price their products below $30. You don’t need to sell luxury products to make a fortune as an Amazon seller—you just have to optimize your product pricing strategy. <\/p>\n\n\n\n Here are Jungle Scout’s top methods for pricing Amazon products. <\/p>\n\n\n\n Watching revenue roll in is great—but only when it covers the cost of sourcing, listing, and shipping your products by a healthy gap. That’s why it’s so important to calculate your profit margin early in the product research phase. Otherwise, you could eventually lose time and money on each sale. <\/p>\n\n\n\n Profit margin is the percentage of income you keep after all expenses, which include cost of goods sold (COGS), Amazon referral fees, FBA fees<\/a>, PPC costs, and other expenses. In general, profit margin is calculated with the following formula: <\/p>\n\n\n\n We can roughly estimate our profit margin by considering the “Rule of Three.” Assume that the money from each product’s sale will be broken up in the following way:<\/p>\n\n\n\n For example, let’s say you price your product at $30. According to the Rule of Three, you can expect to shell out at least $10 in landed costs ($30 divided by 3), plus another $10 in fees, and you’ll profit at least $10.<\/p>\n\n\n\n To determine your profit margin, divide your $10 profit by the sale price of $30. <\/p>\n\n\n\n $10 ÷ $30 = .33<\/p>\n\n\n\n Finally, multiply by 100 to get a percentage, and you’ve ended up with a profit margin of 33%. Spoiler alert: that’s a great profit margin!<\/p>\n\n\n\n Amazon sellers should aim for a profit margin between 25% and 30% for their private label products. For context, 58% of Amazon sellers<\/a> operate on profit margins above 15%; over one third have profit margins over 20%. The higher, the better: nearly half of those highly successful sellers mentioned above maintain profit margins between 21-50%. <\/p>\n\n\n\n Achieving a comfortable margin isn’t just great for profitability—it also gives you some built-in wiggle room for your initial advertising<\/a> spend. Once you’ve optimized your campaigns<\/a>, these costs should go down—and profits up.<\/p>\n\n\n\n Before sourcing a product from your supplier, you should already have an idea of what you’ll charge for it on Amazon. You need to calculate your landed cost, Amazon fees<\/a>, inbound shipping fees, storage fees, as well as advertising costs<\/a>.<\/p>\n\n\n\n Analyze potential products for profitability, demand, and competition<\/a>, and take all product-related costs into consideration.<\/p>\n\n\n\n Use your sourcing costs as a reference to calculate your minimum and maximum sales prices. These boundaries will keep your product in competition with similar items. <\/p>\n\n\n\n Remember: if your prices are too high, customers will buy from your competitors. Price your product too low, and you’ll eat your own profits. <\/p>\n\n\n\n To avoid the latter, set your minimum price to your breakeven price—that is, the same amount of money it costs to produce it. Let me show you an example. <\/p>\n\n\n Let’s say I’d like to sell steering wheel knobs for boats. I’ll use the one pictured above for product research. It sells for $16.99. Hypothetically, I can source a similar model from my supplier in China for a total of $4.56 per unit in landed costs. <\/p>\n\n\n\n Next, I’ll determine potential fees. Using Amazon’s FBA Revenue Calculator<\/a>, I’ll plug in the exact ASIN of my example steering wheel knob to get accurate weight and size measurements<\/a>, which can affect Amazon fees. <\/p>\n\n\n\n I’ll type in the current price of $16.99 under “Amazon Fulfillment,” since I’m an FBA seller<\/a>. Then I’ll add in $3.56 for product cost. <\/p>\n\n\n At that price point, our projected profit through FBA would be $5.61 per sale, with a profit margin of 33%. Now let’s figure out what our break even price will be, again using the FBA Revenue Calculator. <\/p>\n\n\n\n In the “Revenue” box in the calculator, play around with different prices until “Net profitability” is about $0.00. That’s the breakeven price—the cheapest we could price our product and still cover production costs (which exclude PPC and other advertising costs.) <\/p>\n\n\n After a little trial and error, I determined that our breakeven price is around $10.40. Note that you’d never want to actually sell your product at your breakeven price—you won’t make a profit that way! But knowing your minimum will help you from going too low. <\/p>\n\n\n\n Use the Jungle Scout Extension<\/a> to view a product’s average sale price. This will give you an idea of what your maximum price should be. If you do want to set your price higher than average, you’ll need to justify the hike—which we’ll discuss in technique #3. <\/p>\n\n\n This kind of product has an average price of $26.47. If we look closer, we can see that most are priced below $20, and that the average is skewed high because a couple of these products sells for over $30. <\/p>\n\n\n\n If we keep our price around $16, we’ll have a healthy profit margin and we’ll stay competitive with most of our competitors.<\/p>\n\n\n Leverage Jungle Scout’s industry-leading Amazon intelligence to grow your business.<\/p>\n<\/div>\n As a private label brand on Amazon, your goal should be to provide a great value to the customer. Value comes in the form of high product quality at a reasonable price. <\/p>\n\n\n\n Your goal should be to build a legitimate, unique brand on Amazon versus selling generic products. This creates more perceived value for your product and sets them apart from the competition. It’s a key pillar of your Amazon pricing strategy.<\/p>\n\n\n\n If your product is brand new with no reviews<\/a>, it may be wise to keep your price a dollar or so lower than your lowest-priced competitor. Use this as a short-term strategy until your product begins to gain traction and reviews. <\/p>\n\n\n\n For example, if the average price point for a similar product is $16.99 – $19.99, try pricing your product at the lower end of that range. You can try $15.99 or $16.95. Just be sure to avoid setting a price that’s significantly lower than the competition, as that could trigger a “price war.”<\/p>\n\n\n\n Here’s what I mean by that: let’s say you price your product at $11.99—well below the $16.99 average price for similar products. Your closest competitor notices your low price and decides to undercut you so they don’t lose sales. Soon, customers won’t pay more than $11 for a similar product, and your other competitors have no choice but to also lower their prices indefinitely. It’s a race to 0% profit margins, and nobody wins.<\/p>\n\n\n\n The last thing you want to do is devalue your product or niche—that harms everyone’s profitability. <\/p>\n\n\n\n Entering a price war is a major concern for private label sellers on Amazon. In fact, two thirds of sellers are concerned about increased competition driving prices down. <\/p>\n\n\n\n Sellers who seek to drive sales through aggressive price-cutting will typically not last long as a seller. They’ll quickly realize that by driving prices down, they’re removing any possible profitability their product had, especially after factoring in PPC costs. <\/p>\n\n\n\n My advice: Stand your ground. Don’t play along with “race to the bottom” tactics and destroy the product niche you’re selling in. Eventually, those sellers will be phased out when they lose profitability. Stay within your minimum and maximum price and focus on creating a great, optimized listing<\/a>. <\/p>\n\n\n\n That said, you’ll want to keep an eye on how your competitors price similar products. Whether you are just starting out doing product research or expanding your current product line, it is important to track your competitors’ products over time to determine the product’s viability. <\/p>\n\n\n\n Use Product Tracker<\/a> to track real-time sales, Best Seller Rank<\/a>, inventory, and Buy Box price. You want to be sure that your competitors’ products are actually selling at a consistent price point, and that you’re not inadvertently entering a price war. <\/p>\n\n\n\n We know that as a new seller, you’ll likely have a smaller budget to work with—and that’s ok! But this may limit you in terms of what you can sell. For instance, if you have a small startup budget of $500 to $1,000, you won’t be able to sell products with a $100 price point, as you won’t be able to meet your supplier’s minimum order quantity<\/a>. <\/p>\n\n\n\n Not to worry—most sellers list affordably-priced products and are still successful. Here are the most common product price points, according to Amazon sellers:<\/strong><\/p>\n\n\n As you can see, as prices rise, competition decreases. That’s partly because listing expensive products requires more investment into inventory. <\/p>\n\n\n\n If you have the budget, go for a higher-priced product to reduce the risk of a price war among lower-priced products. <\/p>\n\n\n\n To justify setting a higher price than your competitors, you need to show customers why<\/em> your product is worth more than a similar item. <\/p>\n\n\n\n You can’t just source a competitor’s exact product on Alibaba<\/a>, slap your logo on it, and expect to sell it at a higher price. You need to consider the additional features, benefits, and\/or materials your product offers the customer.<\/p>\n\n\n\n Here’s a simple place to start: Read customer reviews for your competitors’ products to find out how they’re lacking, and improve on those pain points with your own product. <\/p>\n\n\n\n Can you use better materials in your product? Could you add a feature that improves the customer’s experience? These are the types of competitor-related questions you should ask yourself during product research<\/a>.<\/p>\n\n\n\n Here’s an example of two products that purport to do the same thing, but are priced quite differently:<\/p>\n\n\n As you can see, the support pole on the left is priced almost two and a half times higher than the one on the right. According to Jungle Scout Extension<\/a> data, it also sells more, even at that higher price. <\/p>\n\n\n\n Why the difference? Upon further inspection, the support pole on the right is made from a thin plastic material that, according to the many angry reviews, snaps easily. On the other hand, the blue support pole on the left appears to have solved that problem—it’s made out of stronger aluminum. So while Righty is the cheaper option up front, buying it will likely cost the customer more money in the long run, when they inevitably purchase a sturdier replacement—like Lefty. <\/p>\n\n\n\n In this case, the seller of the blue support pole can justify the higher price point with the material quality differential. Without ditching the flimsy materials, there’s no way customers would purchase their product at a higher price. <\/p>\n\n\n\n Moral of the story: you can’t sell the same old product and expect a higher sale price. <\/p>\n\n\n\n A great way to figure out which price your product performs better at is to run a split test, or A\/B test. A\/B price testing<\/a> is simple: list your product at two different prices for a set amount of time, then compare its performance. In this way, running a split test allows you to make data-driven decisions on pricing instead of just guessing.<\/p>\n\n\n\n For example, let’s say you have a product priced at $24.99, but you want to know if it’ll still sell well at a higher price point. For two weeks, track your product’s sales performance at $24.99. Then for another two weeks, list it at $26.95. At the end of those four weeks, take stock of which period of time saw the highest sales. If you sold more at the higher price, keep it! <\/p>\n\n\n\n Amazon Prime members receive free shipping on all Prime-eligible products—but what about buyers who are not Prime members? <\/p>\n\n\n\n Non-Prime members in the US pay for shipping on all orders below $25. That shipping cost can add an additional $5-10 to the customer’s order, which could deter purchasing. If you price your products above that $25 threshold, you may experience a higher conversion rate among non-Prime customers. <\/p>\n\n\n\n Let’s use the same product examples as before to see how this works:<\/p>\n\n\n Using the same example as earlier, the poles on the left are priced at $59.99 and the ones on the right are priced at $24.99, just one cent below that free shipping threshold.<\/p>\n\n\n\n Below the listed price, you’ll see that the shipping options differ. The $59.99 product is eligible for “FREE delivery Sat, Jul 8” because it is priced above Amazon’s $25 minimum. The other product will only ship for free if it’s part of an order “over $25 shipped by Amazon.” <\/p>\n\n\n\n So if I ordered the product on the right, I’d either have to pay for shipping or tack on another item to qualify for free shipping, whereas shipping the product on the left is already free. So, the brand on the right should bump their price up by one cent (or 25.99, see the next section!)<\/p>\n\n\n\n Charm pricing, also known as psychological pricing<\/a>, is the practice of purposely pricing products in a way that influences customers’ purchase behavior. This is a great way to enhance your Amazon pricing strategy.<\/p>\n\n\n\n For instance, try pricing your product at $19.99 vs. $20. At $19.99, the product seems <\/em>like a better deal, even though it’s literally one cent cheaper. <\/p>\n\n\n\n If you’re selling a product that’s more of an “impulse purchase,” like a novelty item, using this pricing strategy may help increase your conversions as the customer may feel like they’re getting some kind of deal. <\/p>\n\n\n\n Here’s an example of what I’d call an “impulse purchase.” This waffle maker comes in a rainbow of colors, is highly rated, and is quite affordable. But it’s tiny—well outside conventional notions of waffle size—and is therefore more of a novelty than a staple kitchen gadget. <\/p>\n\n\n You can use A\/B testing to see if charm pricing works for your product. Try prices ending in .99, .95, or .90 and see if they perform better than a round number. <\/p>\n\n\n\n By contrast, if you’ve listed an expensive or luxurious product, you could try going for prestige pricing. Luxury products tend to sell at prices ending in .00—think Apple gadgets<\/a> and designer handbags<\/a>. A round-number price may work better for your product, so try A\/B testing prices ending in zeroes.<\/p>\n\n\n\n\n
Creating an Amazon pricing strategy in 2024<\/h2>\n\n\n\n
1. Understand your profit margin<\/h2>\n\n\n\n
Profit Margin = ((Sales – Total Expenses) ÷ Revenue) x 100<\/strong> <\/h6>\n\n\n\n
\n
What’s a good profit margin?<\/h4>\n\n\n\n
Identify your minimum and maximum price<\/h3>\n\n\n\n
![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2017\/06\/Screen-Shot-2021-01-19-at-6.47.54-PM.png\")
\n <\/figure>\n\n\n\nCalculating fees<\/h4>\n\n\n\n
![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2023\/07\/Screen-Shot-2023-07-03-at-10.46.08-AM.png\")
\n <\/figure>\n\n\n\n![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2023\/07\/Screen-Shot-2023-07-03-at-10.47.51-AM.png\")
\n <\/figure>\n\n\n\nJungle Scout Extension<\/strong><\/h4>\n\n\n\n
![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2023\/07\/Screen-Shot-2023-07-03-at-10.49.08-AM.png\")
\n <\/figure>\n\n\n\nBuild data-backed Amazon pricing strategies.<\/h6>\n
2. Price Competitively <\/h2>\n\n\n\n
Price new products with no reviews lower at first<\/h3>\n\n\n\n
What happens if my competitors aggressively cut their prices?<\/h3>\n\n\n\n
Monitor your competitor’s price<\/h4>\n\n\n\n
What price point should I stay in?<\/h4>\n\n\n\n
![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2023\/07\/Screen-Shot-2023-07-03-at-10.53.04-AM.png\")
\n <\/figure>\n\n\n\n3. Differentiate your product<\/h2>\n\n\n\n
Read customer reviews <\/h4>\n\n\n\n
![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2023\/07\/Screen-Shot-2023-07-03-at-10.54.14-AM.png\")
\n <\/figure>\n\n\n\n4. A\/B test different prices<\/h2>\n\n\n\n
5. Price products above Amazon’s free shipping minimum <\/h2>\n\n\n\n
\n <\/figure>\n\n\n\n6. Use “charm pricing”<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2017\/06\/amz-pricing_impulse-buy.png\")
\n <\/figure>\n\n\n\n7. Set a Business Price<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2021\/01\/Screenshot-2023-07-05-at-10.11.05-AM.png\")
\n <\/figure>\n\n\n\n![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2017\/06\/amz-pricing_biz-price-enable.png\")
\n <\/figure>\n\n\n\n![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2017\/06\/amz-pricing_biz-price-quantity.png\")
\n <\/figure>\n\n\n\n![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2023\/07\/Screen-Shot-2023-07-03-at-11.03.54-AM.png\")
\n <\/figure>\n\n\n\n![\"\"](\"https:\/\/www.junglescout.com\/wp-content\/uploads\/2023\/07\/Screen-Shot-2023-07-03-at-11.05.10-AM.png\")
\n <\/figure>\n\n\n\n