Price wars: how to spot them before you buy

A product that looks profitable today can be unprofitable next month. These are the signs that a price war is under way.

What a price war looks like

When sellers compete only on price, the Buy Box price falls step by step, and each cut squeezes everyone's margin. By the time the price stops falling, the product often no longer makes sense for wholesale sellers.

Signs in the history

• A price trend that has moved down over weeks or months.
• A rising number of sellers.
• The Buy Box moving between many sellers within a day.
• Prices at or below the lowest level you can profit at.

Model the downside

Ask what your profit would be if the price fell by 10 percent. If it becomes a loss, the product has no margin of safety. Products that survive a 10 percent price drop with a positive return are much safer to hold.

Avoid the crowd

Listings with many sellers and low differentiation are where price wars start. Less crowded listings, or brands with few authorised sellers, tend to hold prices better.

Do not panic when it happens

If a price war starts on stock you already hold, you can hold the price and wait it out, sell down in smaller numbers, or take a small loss and move on. Wholesale Analyzer includes a price war risk signal, and the simulator shows how your profit changes if the price falls.