If you are just starting out in online retail, or have maintained a profitable business for some time, you will inevitably have to compete with the big marketplaces. Companies like eBay and Amazon and even Staples have a multitude of resources that make them the most successful retail sites on the web.
Your company may not have the resources of these retail powerhouses, but can still tailor your pricing strategy to increase competitiveness online.
Here are some tips for bringing ‘Amazon Wisdom’ to your business:
1. Adjust your price according to the competition
If your competitors lower their price, follow suit. For example, maybe one of your top competitors has an item priced one cent below yours. You should match that price. In the case that this specific competitor goes out of stock, buyers will come straight to you. Always seize the opportunity to gain extra margins. (Knowing the market prices will help you know the right price.)
2. Adjust price at a specific time of day
Online stores are not terribly different from stores you would find in a shopping mall. There is almost no traffic in the morning and little business in the afternoon. Evening is the peak time for online shoppers. So why not price a bit higher when most of the shoppers are ready to buy?
3. Adjust price according to web traffic
Measuring the traffic for specific items can indicate what products should be repriced higher or lower. If there is a great deal of traffic for a particular item, it means there is a greater demand. Like simple economics, when the demand is low, the price should be dropped, and when the demand is high, the price should be raised. This strategy will attract more shoppers to buy. Web traffic will reflect profitable pricing decisions.
4. Adjust price based on conversion rate
Conversion rate is similar to traffic, in that it indicates clearly when a product is not priced optimally. If there is lots of traffic and little sales, something is wrong. In this case, the price is usually too high. Conversely, items that get a fair amount of views with a high conversion rate, can be marked up, due to their inherent popularity. By evaluating your conversion rates and traffic, you can change your pricing to get customers to buy, and increase your bottom line.
5. Price according to sales velocity
In this circumstance, the price is based on how well the item is sold. For example, if you wanted to sell 10 units/week of a given product, the conversion rate goal would follow as 10 sales per week. To reach this goal, adjust your pricing according to the competition, time, traffic, conversion rate. This will require you to fluctuate the price and experiment with these strategies until you get to the designated sales target.
By finding the optimal prices for your customers, you enable more users to buy, increasing your overall sales. Regardless of the size of your online store, you can reprice price based on the strategies of the giants.
Arie Shpanya is the CEO of WisePricer, a real-time repricing engine for online retailers. He has extensive experience business development with a focus on eCommerce (eBay and Amazon), as well as social media optimization, marketing strategy and multi-channel platforms.