If you’re not familiar with the concept of sales velocity repricing and how it can impact your margins and overall firm-level profitability, it’s time for an overview.
That’s because online sellers are only getting more informed and empowered by the vast amount of data and software at their fingertips. And with smarter sellers to compete against, you need to rely on a wider assortment of intelligent repricing strategies to keep your listings relevant.
Focusing on the sales velocity of your listings can help hone your repricing strategies and make your business more profitable, whether you face heavy competition or you sell private label goods.
So, let’s shed some light on how to best account for this vital variable in how you price your products.
What is sales velocity, anyway?
Simply put, sales velocity is the rate at which a product sells over a set amount of time, or, said another way, how fast your inventory turns.
Whether you’re calculating it over days, weeks, months, or even years, you can express sales velocity in terms of:
- number of units sold over time
- amount of revenue generated over time
- number of inventory turns over time
Products that sell frequently have high sales velocity; sluggish products that sell slowly have low sales velocity.
Typically, products with high sales velocity have lower profit margins (and vice versa), but smart sellers know that isn’t guaranteed.
Using sales velocity repricing strategies
The idea behind having a target sales velocity as part of your repricing strategies is to maximize profits by continually adjusting your prices to meet a specific sales goal.
This is especially helpful for private-label sellers who face no competition on their listings and want to test higher price points to see if they can still meet their sales targets with better profit margins.
Assuming you use software to manage your inventory, you can easily track how many units per product you’re selling over different time spans. You should also be able to see the following metrics at the SKU-level:
- units currently in inventory
- depletion days, or the number of days until you’ll run out of stock
- supplier lead time, or how long it takes to receive new stock after placing an order
So, let’s say you sell 30 skateboards per month and you’d like to increase that to 40 with the help of repricing software.
First, you’d set your minimum and maximum price points for your sales velocity repricing strategy based on your cost of goods sold, marketplace fees and shipping charges, and, when it comes to setting your max price, what you believe the market would pay at most for the product in question.
Your minimum price is the most important piece of any repricing strategy, and it should reflect the minimum amount of profit per sale you’d be happy making.
Some repricers make it incredibly easy to set minimum prices across bulk listings when creating repricing strategies by letting you set your minimum desired profit per sale and then automatically calculating your minimum prices based on that target profit.
Think of it as “reverse engineering” your minimum prices so you don’t have to do any math.
Then, if your automated repricer has a sales velocity repricing option, you can simply turn it on and apply it to your skateboard listing.
Once the strategy is set up with your desired minimum and maximum profit per sale and you’ve applied it to the skateboard listing, you can set your target sales velocity to 40 units/month for the skateboard’s SKU and let it get to work.
Sales velocity repricing in action
Once you’ve applied sales velocity repricing to the skateboard listing, your repricer will initially adjust the price to a baseline amount that the repricer’s sales velocity algorithm determines to be an ideal starting point, based on the historical sales prices of the skateboard.
Then, based on the number of sales generated at that baseline price, the repricer will algorithmically adjust your price continually over time to drive the number of sales you targeted. And if the skateboard isn’t a private label product, the sales velocity repricer will also factor in the competitive landscape for the skateboard, as dictated by your competitors’ prices and how many sellers there are on the listing.
One of the best parts about this is that your repricer will get smarter the more you use it, since it will have even more historical sales data on which to base future repricing decisions. And some repricers, such as Informed.co, are also able to tap into historical pricing data from tens of millions of products that have had their price changes managed over the years, further fueling the future pricing decisions your sales velocity repricer will make.
So, if your repricer boosts your skateboard’s sales velocity but misses your target of 40 sales per month, the likelihood of hitting your target the following month will be higher.
This kind of machine learning is the future of eCommerce software, and sellers who don’t start embracing it now will only have more of a learning curve to overcome when it becomes mainstream.
How sales velocity-based repricing can impact the market
There are two main situations where you might incorporate sales velocity into your repricing strategies:
- on listings with competing sellers
- on private label products OR products with no competition
In the first scenario, your price changes will be based in part on how your competitors change their prices. And, as you probably know, every seller’s repricing strategies will differ based upon their unique set of circumstances, including:
- sourcing costs
- shipping costs
- miscellaneous fees
- desired target profits
Because all these factors affect every seller differently, you’ll find that some sellers can afford to set lower minimum price points than others.
So, how does sales velocity repricing come into play in these scenarios with multiple competing sellers on a listing? Let’s go back to our skateboard example.
Suppose you’re on pace to exceed your target sales velocity of 40 skateboards sold in a month, having sold 20 in your first week of the sales cycle. At that point, you may decide to test the market by raising its price.
Here’s what might happen next:
- Other sellers offering the skateboard at a lower price will sell out, leaving you with less (or zero) competition below your price, shifting the demand for your higher-priced offer
- Competitors using their own repricers may have their price changes pegged to yours, so their prices may increase in response to your price increase, driving up the entire market for the skateboard
Depending on how the market reacts, your repricer will continually respond accordingly by adjusting your price in a strategic attempt to hit your sales velocity target.
Private label repricing based on sales velocity
When private label repricing based on sales velocity, you won’t have any competition to worry about. That makes sales velocity repricing incredibly valuable for private label sellers.
That’s because repricers tend to keep your prices steady or raise them to your max when you have no competition.
But when you have a private label repricer that can account for sales velocity, you can have the prices of your unique goods fluctuate up and down to help you meet your targeted sales velocity while simultaneously maximizing your profits.
Using historical pricing data for each listing, your sales velocity repricer will continually optimize your price for generating profitable sales between your minimum and maximum price points.
So, if it seems like you can still generate enough sales to meet your target at a higher price, your repricer will adjust your price upwards and test it out. If it finds that your sales velocity has slowed down and it is no longer on target to meet your goal, it will shift the price to stimulate sales.
This capability is crucial for private labelers looking to maximize their profitability with minimal effort.
Where to find sales velocity repricing
Now that you have an overview of how and why sales velocity should factor into your repricing strategies for both private label and competitive listings, consider testing it out to decide whether it’s something you want to incorporate into your business to help it scale.
Informed.co will have a beta-version of sales velocity repricing ready by the end of 2017, so if you’re looking for an easier way to hit your sales targets while maximizing profits, be on the lookout for this powerful feature release.
If you’re already an Informed.co user, you can easily sign up for our Early Access Program to try out sales velocity repricing as soon as it’s put into beta—and to become a beta tester for other new updates we’re working on as they’re released.
Just click on the person icon in the upper right corner to release a drop-down menu, click Early Access Program in that menu, and on the next screen, make sure you’ve click Enabled where it says Early Access Program. Once you’ve done that, you’ll receive alerts whenever a new beta is released, so you can be the first to experience our latest enhancements.
Whether you call it an “automated repricer” or “automated repricing software,” Informed.co is an intelligent price management tool that enables online sellers on Amazon, Walmart Marketplace, and eBay to have the prices of their products automatically and strategically updated in relation to their competitors’ prices. Simply put, think of Informed.co as “autopilot for strategic price changes” on the most lucrative online marketplaces.
Sellers can use Informed.co to compete on price against different types of competitors in different ways. For example, an Amazon seller with an FBA listing can use Informed.co to automatically price above MFN listings of the same product by a set amount or percentage, while simultaneously price matching competing FBA listings. Pricing differently against sellers depending on their fulfillment method is just one of many examples of how sellers can tap into the power of Informed.co’s automated repricer.
By using Informed.co, sellers no longer have to spend countless hours on the inefficient and ineffective process of manual repricing, and they’re able to drive more sales—and make money in their sleep—with the help of our continuous, strategic price updates. And, they’re able to make more data-driven decisions and spend more time growing their businesses—or enjoying life in other ways.
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