In its second-largest acquisition, Amazon buys the company for $970 million.
The tool checks the price of the product Amazon is highlighting and automatically reprices a client retailer’s product to beat that price, assuming the retailer is willing to go that low. E-retailer Cookies Kids says the new service will increase sales.
Competition is fierce on the Amazon.com marketplace, with 1.9 million retailers offering their products for sale-along with Amazon.com Inc. itself. Mercent is introducing a new tool designed to help its client retailers win more sales on Amazon.
Mercent, which facilitates sales through online marketplaces for client retailers, starts with the proposition that success on Amazon means winning the Buy box-which means being the retailer that gets the sale when the consumer clicks the Add to Cart button. While Amazon also displays the names of other merchants selling the same product, as many as 90% of sales go to merchants that win the Buy box, says Eric Best, CEO of Mercent. “It’s absolutely critical to seller performance,” he says.
The new Mercent Retail Price Optimization Engine works by looking at the price being offered by the featured merchant, including shipping charges, and comparing it to what a client retailer is charging. The repricing tool can automatically lower the price to under the price offered in the Buy box, if that meets criteria set by the Mercent client, such as if the lower price would still generate an adequate profit margin. For example, if the retailer featured by Amazon is offering an item for $40, and a Mercent client can sell it for $39.50 and still meet its margin requirements, the Mercent tool might lower the client’s price to $39.50.
Cookies Kids, an online retailer of school uniforms, children’s clothing and toys, has been testing the new Mercent tool for more than a week, and e-commerce director Al Falack says the tool works as intended. He says he provides a data feed to Mercent that includes his cost on an item and the profit margin he wants to maintain. Mercent knows Cookies Kids charges a flat $4.95 shipping charge on Amazon orders, so the repricing tool has all the information it needs to reduce the price as needed to put Cookies Kids into the Buy box for products in its catalog.
“What’s unique to this product is that it’s also looking at the shipping prices of other vendors,” Falack says. “It puts my total price with shipping against the merchandise price plus shipping cost of whoever is winning the Buy box and automatically beats that price.”
Falack says the tool will be especially helpful during the holiday season when his staff reprices items on Amazon continuously to win the featured position. He has had three employees focused on this task during the peak of the holiday season in the past, but with the Mercent tool will only need one. That one person will continually check how the retailer is doing on its most important 10 or 15 products, products that generate enough sales that it’s worth repricing them continuously to stay in the Buy box. “We can focus on high turnover products and less on the stuff that the tool can handle,” Falack says.
Privately held Cookies Kids does not report its online sales. Falack says 30% of its revenue comes from sales on Amazon.
Mercent says its new tool also lets retailers set rules to make sure they stay within the minimum pricing restrictions of product suppliers, and enables them to tailor product offers based on what’s being offered by particular competitors. The Price Optimization Engine comes at no extra cost to Mercent clients, the company says.
While Best says price is an important factor in determining which merchant Amazon puts into the Buy box, he notes it’s not the only factor. Amazon decides which merchant to feature, he says, based on an algorithm that also takes into account consumer feedback about a merchant, available inventory and how long a seller takes to deliver a product.
The repricing tool is initially available for Amazon only. Best says he intends to offer similar functionality for other marketplaces Mercent supports, which include eBay and Buy.com.