The Amazon Buy Box – The Internet’s $80 Billion Button

Amazon, Amazon.com, Amazon buy box, ecommerce, ecommerce technology, marketing, pricing information, online marketplace, B2C, B2C marketingWith 2014 winding down, ecommerce analysts are predicting that Amazon will have made over $120 billion in revenue this year alone. Of this, between $40 and $50 billion will be going straight to the hands of third-party merchants, online retailers that sell on Amazon’s massive international marketplace.

Since there is no limit from Amazon on the number of third-party merchants, or the amount of products they sell, the same product is often sold by multiple merchants, each competing with each other and sometimes with Amazon itself. To help with this situation, Amazon has created a very clever system to determine which of the many merchants competing to sell the same item will actually make the sale: the “Amazon Buy Box.”

Essentially, the Amazon Buy Box acts as a personal researcher, analyzing each product to determine which merchant will give the customer the best overall experience and value for their money. It takes into consideration things like positive and negative reviews, how soon they promise to ship an item, and how often they’ve kept that promise. It looks at how often deliveries arrive late or damaged, as well as many other metrics. Finally, it determines how much value for the money each merchant is offering at their given price.

To Amazon shoppers, this guarantees the best possible shopping experience. But for online merchants, it means that if reviews are good, customer satisfaction is high, and they’re working hard to offer a near-perfect experience, they can sell their item on Amazon at a higher price than their direct competitors and still make the sale. Over the years we’ve seen top merchants winning that coveted buy box position, and realizing massive sales volumes at prices up to 20% higher than others selling the identical item.

There’s one more feature of the buy box worth mentioning. Amazon has long abandoned the idea of giving the buy box to a single merchant for very popular products. Instead, it’s shared among several merchants, with their share determined by their performance history. For example, if there are ten equal merchants competing for the same product buy box, they might each get 10%. This means that each merchant will have their offering shown in the buy box for a tenth of each day. Alternatively, a relatively high performing merchant could have 70% of the buy box, an average merchant could have 25%, and a lower performing merchant 5%, all within the same day.

To the skilled retailer, this opens up a world of possibilities. By adjusting their prices, not only can they control the profit margin they make on each item, but also their share of the buy box, thus boosting sales volume. Knowing that a certain item would be difficult to restock, a savvy merchant could raise their prices, happily making fewer sales with a much higher margin. Alternatively, if their seller rating is high enough, they could take a much larger chunk of the market share for a popular and easily restocked item, still maintaining a healthy profit margin on a massive amount of sales.

So what can you do to improve your chances of winning the buy box? While Amazon looks at many variables, there are a few things merchants can do today to increase their chances of winning the buy box over the upcoming holiday period:

  1. Focus on feedback – Any negative feedback can have a massive impact on your buy box share. Contacting customers that have given you negative comments over the past year and doing whatever you can to solve their issues and get them to remove their complaints will have a serious positive impact on your bottom line.
  2. Ship on time – According to Amazon’s scoring system a late delivery is nearly as bad as no delivery at all. If you promised to ship within two business days, set yourself a mental deadline of one, to ensure there is no risk of you breaking your promise.
  3. Price smart – Lowering your price will usually help you win buy box share, but it will severely eat into your profit margins. Understanding your competitors for each and every product you sell, and pricing your items to match your performance as a merchant, is absolutely critical to both ensure sales and maintain a healthy profit margin.
  4. Respond to customers quickly – Amazon doesn’t know what your customers are asking you, but they do know how long it takes you to reply. Even small queries and comments need to be replied to within 6 to 12 hours, for Amazon to know that your customers take top priority and you have their best interests at heart.

In short, the best way to take advantage of the buy box is to work with it, not against it. By focusing on your seller performance and getting your pricing right, you are guaranteed more sales, a higher profit margin, and most importantly, very happy customers.

Shmuli Goldberg is director of marketing at Feedvisor

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