So, how does a seller snag a sale? They try to get in the buy box. The buy box is the coveted real estate of the product listing that shows which seller is benefiting when a customer clicks “Add to Cart.”
Many Amazon customers are unaware that there are usually multiple sellers for products. When they decide to purchase a product, they click the yellow “Add to Cart” button, instead of viewing all purchasing options. The seller in the buy box gets the most sales.
So, how does a seller get in the buy box?
Each seller gets in the buy box a certain percentage of the time. Amazon has a proprietary formula that determines this based on these factors:
- Number of Sellers – The buy box formula is like a pie where each seller gets a portion. The more sellers that there are, the smaller piece of the pie each seller gets. But all sellers are not equal.
- Amazon Retail – Amazon is a marketplace, which means that there are many sellers. Amazon Retail is Amazon’s own seller. When Amazon Retail is in the listing, they always get priority and will dominate the buy box.
- FBA vs. Drop ship – Many sellers fulfill their product sales using Amazon’s warehouses and distribution system. This is referred to as Fulfilled by Amazon (FBA). Sellers use this service to provide the Prime 2-day shipping that many Amazon shoppers expect, and in turn, pay Amazon a fee. Sellers who ship their products directly to the consumer themselves are referred to as drop ship sellers. Since Amazon benefits from FBA, those sellers receive priority over drop ship sellers in the buy box.
- Product Price – Amazon prides itself on offering the lowest prices to customers. So, the seller offering the lowest product price will earn more of the buy box. This is the strategy for most sellers.
Sellers attempt to earn more of the buy box by having lower prices than their competitors. This price dropping significantly harms brand perception by lowering the perceived product value, in addition to hurting traditional brick and mortar retailers who are honoring the product MSRP.
Next time, we will discuss how enforcing a Minimum Advertised Pricing (MAP) policy can level the playing field for your authorized sellers.