WASHINGTON, DC / ACCESSWIRE / September 27, 2020 / Rick Rahim says "Amazon is one of the greatest wealth platforms in the world." Rahim is a Third Party Seller on Amazon, and has successfully sold products to millions of customers online.
Rick's current annual revenue on Amazon surpasses $50,000,000.00 per year. On the low end, Rahim sells items priced as low as $10.00. On the high end, some of Rahim's products sell for $2,000.00 or more.
According to Rahim, most third party sellers do not understand Amazon's algorithms. Thus, they mistakenly believe they must always have the lowest price to increase their sales. Rick says this is a false and very flawed assumption.
Rahim says Amazon considers many factors when determining which seller will "earn" the Buy Box on any specific listing. "Price," says Rick, "is only one of many factors." According to Rahim, each Seller's other metrics are actually much more important than price.
Rick says the most important factor Amazon will consider is a seller's overall account health. Rahim says Amazon calculates account health by looking at a number of performance metrics; including how fast the seller ships, how quickly the seller answers buyer messages, overall seller refund policies, number of buyer complaints, whether the buyer ever cancels orders, seller reviews, and many more statistics.
"Assuming ten sellers all have the exact same lowest price; roughly the five best rated sellers (in terms of the metrics above) will get a rotating mix of the sales," proffers Rahim. Rick says Amazon will always rotate the sales around in an even spread to the best-rated sellers. "Amazon will never give all of the sales to just one seller," Rahim insists. Rick says this is called "rotating the Buy Box."
"When you accept that Amazon will never give all of the sales to just one seller," says Rahim, "then you can also begin to understand how little it matters whether you have the lowest price.
Rick says the seller with the second or third lowest price will still get his/her fair share of sales.
Rick says having the lowest price just won't make a difference. "The seller with the second highest price will likely get the same sales as the cheapest price seller, because Amazon won't put all of their eggs in one seller's basket," says Rahim. Thus, trying to be the cheapest is a very flawed strategy, according to Rick.
Rick says he is saddened every day when he witnesses competing sellers undercutting each other a penny at a time with automated pricing software -- in a desperate effort to be the cheapest. The result, says Rahim, "is sellers racing to the bottom - destroying profit margins for everyone." Rick says this a very flawed strategy executed by naïve and rookie sellers who truly don't understand how to be successful on Amazon.
Rick Rahim says top sellers should strive to be the second or third best price, with an eye on always raising their prices in those positions, rather than driving prices down for all sellers. Rick offers the following analysis:
• Realize a seller with the second or third best price will still get plenty of sales, since Amazon will never give any one seller all of their business. Amazon ROTATES the buy box!
• If the cheapest seller is selling a product for $19.99, and the second cheapest is $23.00, then the correct strategy is to price as high as you can in second place. Thus, being the second cheapest at $22.99 would be the optimum strategy, according to Rick.
Assuming a 10% profit margin on a $19.99 product, the $19.99 seller might be making a $2 profit on each sale. But the second highest-price seller would be making $5 on the same exact sale. Even if the second-best price seller only sells half as many units, the second-place seller still makes a higher profit margin, with less work, costs, and overhead.
Rahim says he believes the seller with the second-best price will still get just as many sales as the cheapest-price seller (assuming overall good seller metrics as described above). In fact, he believes the third-best price seller will also get an incredible number of sales, since Amazon ROTATES the buy box.
Rick offers the further point that Amazon actually has a huge financial incentive to give higher-priced sellers the buy box as often as possible. Rahim is quick to point out Amazon charges sellers a 15% commission on every sale. Thus, the higher each individual sale price, the more money Amazon makes in commissions. Amazon has a huge financial incentive to make a few extra pennies on every sale.
As of this writing, Rick Rahim says Amazon is reported to generate almost $300 billion in annual sales. This equals roughly $822 million per day in sales. If Amazon can squeeze just an extra penny in commissions each day on those sales, they make an extra $8.2 million per day. Thus, Rick says it's easy to understand why Amazon has no problem rotating the Buy Box among the higher priced sellers.
In conclusion, Rick Rahim urges third party sellers on the Amazon platform to stop driving prices down, by incorrectly thinking the only path to increased sales is the lowest price. "If you insist on being the lowest price," continues Rahim, "then just match the current lowest price." Rick says you'll get just as many sales, without driving prices down. "After all," says Rahim, "it only takes two sellers competing to be the cheapest before the price is driven all the way down to the bottom, where nobody is making any money."
Rick Rahim is the President of BusinessVentures.com. Rick has been a lifelong entrepreneur, having founded/acquired dozens of successful companies during his career, which began even before proliferation of the Internet. Rick is personally responsible for generating over $1 billion in retail consumer sales through companies he has founded in his lifetime.
Rick a proud husband and father of four, a best-selling author, a search-and-rescue helicopter pilot, airplane pilot, scuba diver, volunteer, and overall adventurer. Rick enjoys exotic cars and beach life.
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