Fix Competition with These Smart Pricing Tactics
We are in electronic age; commerce has gone beyond brick and mortar to online stores. A lot more individuals are finding it more easy to set up online store today than ever. The result of this is a bunch of retailers offering what you offer, which makes competition very fierce sometimes even brutal.
How do you get ahead of your competitors in such a time as this? Usually, the first strategy e-commerce store owners think of is price slash. It works up to a certain point, up until your profits start to get eroded, especially if you are new to the business and don't have enough money to fall back on.
Apart from slashing the prices of your products, there are many other things you can do to stay ahead of the competition, which won't necessarily hurt your balance sheet at the end of the day. So here we'll be seeing some smart pricing tactics to help you stay ahead of the competition.
Work on Operational Cost
This is perhaps the first thing to do before you think of reducing the price of your products. Zoning in on your product price only and reducing at every given opportunity will hurt you in the end. You are in business to make profits. So, if you are able to reduce your operational costs you stand to plug hole for wastages and make more money, since you'd be spending less. Think of ways to cut you operational expenses, before price slashing.
In 1992, the major airlines in America started a price war, in a rush for customers they slashed prices until they pulled the industry into its greatest loss in history. Ironically, customer patronage was also at an all-time high, yet, it didn't result in profits for the companies involved. As you think of price reduction, think of doing it in a way that it can be sustainable over time, yet competitive. If you can't compete at a certain price, you can offer other incentives or higher value to your customers.
Use Dynamic Pricing
With dynamic pricing, the prices of your products change with certain events. Usually, this is automated. So let's say when someone visits your site from Instagram, the person will see a different price from someone who visits your site from Google. Just know static pricing can hurt your balance sheet in the end. Commerce is very fluid, e-commerce especially, let your pricing reflect this.
Look for Opportunities for Price Increase
There's such a thing as being too competitive. If your price is too low, way lower than the average market price then you could be said to be too competitive. You'd also be losing an opportunity to make more profit. Even if you have to sell at the lowest price, it doesn't have to be so far below the average market price, or what your closest competitor is selling. So let's assume the average market price for a product is $25 and you have been selling for some reason you are selling for $17, you can raise your price still make more profit and not affect your sales volume.
Use History As a tool to Predict the Future
This strategy involves knowing how your rivals have charged for certain products or at certain times of the year. How much they do they discount or increase their prices. This will give you an insight into the way your competitors price their products, and will invariably help you in pricing your own products too. You don't want to price too low that you don't make profits and neither do you want to price too high that you don't have customers.
Take Advantage of Your Rivals' Out of Stock Products
Sometimes you see a product at a very good price on an e-commerce store, only to find out that it is not available. If it's something that you really want, you'd find some other online vendor to buy it from. Well, that's the same way other shoppers behave. Now, you can use this behavior to your advantage. It even works better when that product is a high demand product and it is out of stock in many other stores. Usually shoppers wouldn't mind paying a little bit more for such a product. Remember the law of demand and supply, the higher the demand, the higher the price, that exactly what happens here.
Get Better Deals from Your Suppliers
As a smart e-commerce store owner, you should constantly work to get your products at the cheapest price possible. What most store owners do is when they find a price they are comfortable with, they just stick with it. However, when you're able to negotiate better deals with your suppliers, you can keep your product price the same and make more profit. You could even lower the price, thereby snagging some of your competitors' customers in the process and make more profit now, based on sales volumes. So whichever way, it is a win/win for you.
Wrapping it up
You got into the e-commerce business in the first place for profit making. Slashing prices and racing to the bottom is not the only way to deal with competitors and it can also hurt you in the long run. Other pricing and cost reduction strategies such as stated above, if implemented properly will help you stay ahead of the competition.