Angelica Valentine is an expert from Wiser, a leading pricing intelligence suite, and she knows what she's talking about when it comes to pricing for eCommerce stores. She's here with a guest post, bringing her best advice for three things companies should start doing immediately to ensure best practices for pricing and eCommerce success.
Online retail has grown into a trillion dollar industry worldwide and eMarketer predicts that sales will reach $2.356 trillion by 2018. Each day there are lower barriers to entry, which is why competitors seem to pop up so often. However, there are a few barriers that have been difficult to break down: high shipping costs, uncompetitive pricing, and the expectation of deep discounts. Let’s go into the solutions.
There are a number of brick and mortar challenges that pure-play retailers don’t face, such as in-store theft. But online retail also has issues of its own. Sure, online retailers might not need as many employees to get their merchandise into customers’ hands, but the shipping process certainly isn’t free.
While it might be possible to negotiate shipping rates if you’re a larger seller, not all retailers will be able to. That means that internal changes have to be made in order to counteract the cost of shipping items to customers. Some retailers choose to slightly increase prices to make up for the cost of shipping, but this is often unpopular with loyal customers that are used to the original prices.
Shoppers love free shipping, and there’s a way to provide it without breaking the bank. The solution that I think retailers should take advantage of is raising the free shipping threshold. There are two related benefits that come with this strategy. On one hand, this will get shoppers to order more, increasing average order value. On the other, retailers can make up for shipping costs with the extra revenue and profit they’ll be pulling in.
From inventory to pricing, it’s easy to update online stores to keep up with what shoppers want and what retailers need in order to meet goals. Many retailers look to Amazon for inspiration on running an online business, but the way that Amazon plays the online retail game can be a bit ruthless. With the mountains of data they have access to, they’re able to reprice in real time based on a number of factors. Whether it's from changes in demand to changes in competitor prices, Amazon has really mastered the art of the price change to optimize for sales and profit.
I believe that other retailers should also have the ability to reprice, even though they don’t have Amazon’s resources.
Here are a few times when repricing is necessary:
-Changes in traffic
Most retailers experience higher sales during the evenings and on weekends because that’s when shoppers are free to browse their sites. But what about the times when there are fewer shoppers checking out? This doesn’t mean that retailers should accept the fate of having much lower sales during typically low traffic times. Instead, that’s the time when dynamic price changes should go into effect and improve conversions.
Lowering prices slightly when traffic is low is a useful way to capitalize on the traffic that retailers are already getting. The opposite is also true; retailers can raise prices slightly on items that are in high demand to improve profit margins. While dynamic pricing is often associated with just price drops, it is also important to note that there are numerous times when price increases are the best call. If a retailer’s dress was just featured in a magazine and they’re flying off the virtual shelves, that’s a great time to increase prices.
Dwindling stock can be worrisome, especially on marketplaces that penalize sellers for running out. That’s where pricing can help. Retailers can set rules so that when stock is too low, prices increase significantly until it is replenished.
Competitor stock levels should also be taken into account to capitalize on the times when you are the only seller. When a competitor runs out of stock, that is an opportunity to increase sales. And if you are the only retailer selling that item, it’s also a good time to boost prices and pull in more profit from each sale.
Being uncompetitive in online retail is dangerous because competitors are just a click away. Lowering prices to keep up with them makes sense within reason. The key to repricing is to always stay in-line with brand image and avoid price wars. With that said, there needs to be a minimum and maximum price in place for each item in a retailer’s inventory to uphold branding.
While competitors might be cutting prices left and right to try to win sales, it’s not a winning long term strategy without the ability to sustain substantial losses. Instead, it’s important to find other ways to provide value when you can’t or don’t want to cut prices. In order to charge higher prices than competitors, retailers must strengthen their brands in ways that aren’t easy to replicate.
For example, Zappos has higher prices than Amazon on many items. However, the companies have vastly different brand images. Yes, they both pride themselves on excellent customer service, but the across the board free shipping and 365 day return policy offered by Zappos gives them the ability to charge a bit more. Adding a personal touch, a recognizable brand identity, and added features makes it possible to charge a premium.
By knocking out these three aspects of online retail, it’s possible to improve sales, profit, and brand image. There are many barriers beyond those addressed with these three tips, but getting over them can be the first step to an optimized and more competitive online selling experience.
Angelica Valentine is the Content Marketing Manager at Wiser, the leading pricing intelligence suite. Wiser’s flagship product, WisePricer is a full-featured pricing and merchandising engine that monitors, analyzes and re-prices retail products in real-time. WisePricer enables retailers to grow profit margins, price with confidence and improve merchandising through powering the development of a sound pricing strategy.