Does selling to more retailers lead to greater price competition on #Amazon?

I recently joined forces with Profitero to answer this question.

We analysed data from 6,000+ top-selling ASINs across HPC and Beauty categories. We then segmented the results by Average Selling Price (ASP) bands across retailers.

Here's what we found:

𝟭. 𝗣𝗿𝗶𝗰𝗲 𝗖𝗼𝗺𝗽𝗿𝗲𝘀𝘀𝗶𝗼𝗻 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝘀 𝗮𝘀 𝗥𝗲𝘁𝗮𝗶𝗹𝗲𝗿 𝗖𝗼𝘂𝗻𝘁 𝗚𝗿𝗼𝘄𝘀

Across all price bands, there's a clear increase in price compression as the number of retailers grows. In other words: Competition intensifies price pressure, especially for higher-priced products, leading to tighter margins for retailers.

Once four retailers sell a product, the price compression does not further increase, even if the number of retailers does.

𝟮. 𝗗𝗶𝘀𝗽𝗿𝗼𝗽𝗼𝗿𝘁𝗶𝗼𝗻𝗮𝘁𝗲 𝗖𝗼𝗺𝗽𝗿𝗲𝘀𝘀𝗶𝗼𝗻 𝗶𝗻 𝗛𝗶𝗴𝗵𝗲𝗿 𝗣𝗿𝗶𝗰𝗲 𝗕𝗮𝗻𝗱𝘀 (£𝟭𝟬-𝟭𝟱, £𝟭𝟱-𝟮𝟬)

The highest price compression occurs in the £10-15 and £15-20 bands once more than two retailers sell the product.

Generally, the data suggests that for higher-priced products, competitive forces lead to more aggressive price drops when multiple retailers are involved.

𝟯. 𝗛𝗶𝗴𝗵𝗲𝘀𝘁 𝗖𝗼𝗺𝗽𝗿𝗲𝘀𝘀𝗶𝗼𝗻 𝗶𝗻 𝗟𝗼𝘄𝗲𝗿 𝗣𝗿𝗶𝗰𝗲 𝗕𝗮𝗻𝗱𝘀 (£𝟬-𝟱, £𝟱-𝟭𝟬)

Price compression in lower ASP bands (£0-5 and £5-10) remains relatively stable as the number of retailers grows. While compression increases with more retailers, the variation is less extreme than in higher price bands.

This implies that lower-priced products are often used as loss leaders. As a result, there's limited opportunity to compress prices further.

👉 The key takeaway?

Brands selling on Amazon shouldn't focus on the number of retailers when trying to raise ASPs. Instead, they must review the »quality« of their retail partners.

Distribution control has never been more important than in 2024. Otherwise, your distribution partners may soon start selling on Temu, Shein, & Co.!

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What's your take on the results? Should CPG brands track the number of retailers per listing?

Join the discussion in the comments!