By Martin Heubel, Amazon Strategy Consultant at Consulterce
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.!
For further information and support, contact Martin Heubel here
