How to define your pricing strategy
Pricing across multiple markets
Marketplaces do not have a single universal definition, but the core principle is the same—they are platforms where multiple sellers operate within one system. These marketplaces can emerge in different ways, with one of the most common models being the transformation of a traditional online store into an open platform. A prime example is Amazon, which started as a classic e-commerce store but gradually allowed third-party sellers to list their products on its platform. This model enables rapid marketplace growth without significantly increasing cash flow demands, as the platform itself does not need to invest in inventory or conduct detailed category analysis. This approach offers flexibility, benefiting both sellers and customers.
Another marketplace model is the classifieds-based platform, such as eBay. These platforms initially focused on C2C (consumer-to-consumer) sales. A major challenge for this type of marketplace is catalog standardization, as the platform often lacks structured content, and users create product listings freely. This inconsistency hinders scalability, as customers lack a unified shopping experience. eBay still struggles with this issue today, while platforms like Allegro actively work on catalog standardization.
Marketplaces can also evolve from price comparison sites, which not only drive traffic to retailers but also facilitate direct orders. Examples include Ceneo in Poland and Heureka, which operate as hybrid models, combining pay-per-click advertising with marketplace functionality.
One of the key advantages of marketplaces is that they aggregate a significant portion of the market, leading to strong price competition. Lower prices often play a crucial role in a marketplace's success, as seen in Jeff Bezos’ Flywheel Model, which defines Amazon’s growth strategy. The model highlights the relationship between:
In the early stages, low prices are often a marketplace’s biggest competitive advantage and a key part of its marketing strategy. Examples include European marketplaces like Kaufland or Allegro, which do not yet offer extensive services beyond sales. Instead, their value proposition heavily emphasizes pricing, with messaging like "Buy cheaper with us".
As marketplaces grow, they often expand their service offerings, evolving into full-fledged ecosystems. Amazon Prime is a prime example, but Chinese marketplaces go even further, integrating social features, logistics, food delivery, and more.
Marketplace catalogs and algorithms typically prioritize relevance, which is largely driven by sales volume and pricing. This system favors fast-selling, lower-priced products, as seen with Amazon’s Bestseller Badge, awarded based on order volume rather than profitability.
Aside from sales volume, pricing is critical for marketplace algorithms. Cheaper products are more likely to rank higher, further reinforcing price competition. Other factors affecting ranking include customer reviews, conversion rates and many more. These elements are especially important for higher-priced products. However, pricing remains one of the strongest success drivers. That’s why new sellers are often advised to start with lower-cost, simpler products—this allows them to test the market and gain experience before scaling.
This introduction to marketplaces and pricing outlines key principles that sellers should consider when developing their marketplace strategy.
Marketplaces have become an essential sales channel for e-commerce businesses looking to either expand into new markets or reach a broader audience domestically. The reason for choosing a marketplace depends on whether the goal is market expansion or optimizing presence in an existing market.
Expanding into a new market via a marketplace is one of the fastest and most efficient ways to reach new customers. Platforms like Amazon and Allegro offer the advantage of built-in trust and brand reputation. Customers are more likely to trust transactions on a well-known marketplace, regardless of the seller’s origin. This allows brands to quickly establish credibility and generate sales without needing to build brand awareness from scratch.
With cross-border selling capabilities, marketplaces are ideal for expanding across multiple European markets simultaneously. If an e-commerce business wants to enter several countries and acquire thousands of new customers, using a marketplace is a no-brainer—it enables faster and more cost-effective market entry compared to establishing a direct local presence in each country.
For brands already established in their home market, marketplaces help increase brand visibility and boost sales by improving product discoverability. Marketplaces often act as a top-of-funnel channel, where potential customers first encounter a brand while searching for products. These customers can later be redirected to the brand’s website or social media, turning them into loyal, repeat buyers.
Another key advantage is customer convenience. Many consumers are already accustomed to shopping on marketplaces and prefer their familiar shopping experience, such as Amazon Prime’s fast shipping and bundled services. Marketplaces serve as a complementary sales channel for customers who prefer flexible delivery options, such as pickup lockers or same-day delivery.
There are situations where joining a marketplace may not be beneficial, particularly in the following cases:
Selling on marketplaces comes with specific costs that must be factored into pricing strategies. Most marketplaces operate on a commission model, where the platform charges a fee based on the product’s selling price. This model, popularized by Amazon, has become the global standard and is now used by most major marketplaces.
The commission rate typically ranges between 10–15% of the product's selling price, depending on the product category. Categories like electronics tend to have lower commission rates. Other categories may have higher fees.
A critical factor to consider is that commissions are usually calculated from the total amount the customer pays, which includes VAT and shipping costs
This can catch sellers off guard, especially if they are used to calculating costs excluding VAT.
Marketplaces offer two shipping options: Fulfillment by Merchant (FBM) and Fulfillment by Marketplace.
Fulfillment by Merchant (FBM): The seller handles shipping independently through their own logistics provider. The shipping cost is charged to the customer, and marketplaces usually allow sellers to choose from multiple carriers. Sellers often prefer trusted logistics partners they already use but may experiment with different local carriers in various countries to get better conditions.
Smaller marketplaces such as Kaufland, eMag, and Allegro also offer fulfillment services, but their impact is more limited. Unlike Amazon, they lack fully developed ecosystems, so using multiple fulfillment services across marketplaces is often less efficient for sellers.
Marketplaces typically offer paid advertising options, similar to Google PPC ads. Advertising costs are often a major expense and should be factored into the overall budget. The most common format is sponsored ads for keywords and products, which improve visibility in search results.
Over time, marketplaces have expanded their advertising formats, including banner ads, brand awareness campaigns, seasonal promotions, such as Black Friday sales. Optimizing marketplace advertising is a key task for any marketplace manager.
On Amazon, sellers typically allocate 10–15% of total revenue to optimized ads, which is considered a benchmark. However, when combining Amazon Ads with other marketplace fees, total costs can reach up to 50% of the product’s selling price, especially when using Amazon’s fulfillment services.
Costs also vary depending on whether a seller offers a private label product or resells other brands. Private label sellers face higher costs, including marketplace commissions, advertising, and shipping expenses. Resellers often use their own logistics and only pay a basic platform fee, resulting in lower costs. While resellers benefit from lower operational expenses, private label brands have more control over marketing and branding, which can provide long-term competitive advantages.
Setting prices on a marketplace requires a strategic approach that considers commission fees, shipping costs and dvertising expenses. To succeed on marketplaces, sellers must understand commission models, optimize logistics (choosing between self-managed shipping or marketplace fulfillment services) and effectively manage advertising costs, as sales performance often depends on visibility
When reselling branded products, most marketplaces with integrated product catalogs operate using a Buybox system. The Buybox consolidates multiple seller offers under one product listing, allowing customers to compare prices and additional factors. For sellers, winning the Buybox is crucial, as the majority of sales occur from the recommended position.
Buybox is the recommended position displayed as the primary offer for a specific product. Winning the buybox significantly increases the chance of making a sale. Smaller marketplaces tend to favor sellers with the lowest price and fastest shipping. In more advanced marketplaces like Amazon, additional factors such as seller reviews, return rates, delivery speed, and other performance metrics influence buybox eligibility.
On Amazon, a huge factor in winning the buybox is Prime eligibility, meaning the product is stored in Amazon’s warehouses and shipped via fulfillment by Amazon (FBA). Prime-labeled products have a higher chance of securing the buybox, which is beneficial for private label sellers but often increases costs for resellers.
Setting the right price can significantly impact profitability in reselling. If you can optimize logistics and reduce costs, you may be able to lower prices while increasing competitiveness and overall profit. This strategy works best for high-demand, fast-selling products.
A major advantage of reselling well-known brands is that customers don’t care who the seller is as long as they trust the brand. When purchasing Samsung or Apple products, for example, buyers focus only on price and availability. In these cases, winning the buybox is all that matters, and customers often don’t even notice which seller they are buying from.
Sellers use marketplaces not only to maximize profit but also to increase sales volume or clear out excess inventory that didn’t sell in local markets. These strategies help reduce advertising costs, as resellers usually rely on brand popularity and high product search demand rather than investing in their own marketing.
On marketplaces, resellers don’t compete with alternative products—they compete against other sellers offering the exact same product and fight for the buybox. The key is to optimize pricing, delivery speed, and service quality to increase the chances of winning. Shipping costs can be structured either as a customer-paid expense or absorbed by the seller.
If you sell a private label brand, the strategy changes significantly. For private labels, Amazon Prime and FBA offer major advantages, as products fulfilled by Amazon receive better visibility and higher rankings in search results.
Although private label sellers face higher costs (including Amazon’s 15% commission, FBA fees, and advertising expenses), the benefits—such as increased exposure and better positioning in the catalog—outweigh the additional costs.
For new product launches, investing in advertising is crucial. In the first few months, ad costs may be as high as 50–100% of revenue. Amazon takes a larger share of early sales, but the goal is to gain initial reviews, build customer trust, and gradually optimize expenses. Over time, as ads become more efficient, long-term advertising costs typically stabilize at 10–15% of revenue.
Experienced sellers often experiment with prices weekly, testing different price points and analyzing click-through rates (CTR) and conversion rates. The goal is to find the optimal price that delivers the highest margin without reducing sales volume.
For example, if there’s no drop in sales between €19.90 and €21.90, the higher price doubles the margin, making it a clear advantage. However, this strategy requires experience in price elasticity and is best suited for advanced sellers.
For private label products, competition is based on catalog positioning—shoppers search using keywords and compare your product to others in the category. In contrast, resellers compete only with other sellers of the same product to dominate the buybox.
For new product launches, price testing is critical. A common strategy is to start with a lower price and gradually increase it. For example, setting an initial price at 50% of the target price and raising it weekly allows the product to reach its full selling price within six weeks.
Autorem of this chapter is David Cikanek, Amazon Brand Manager & E-Commerce Freelancer.
