3.46 trillion dollars.
That’s the size of the ecommerce market in 2019. A 17.9% increase from 2018.
Our industry is growing at an unprecedented pace, and hundreds of new players enter the market each day making it harder for you to secure a decent slice of the pie.
But don’t worry if you’re feeling overwhelmed, because we’re going to tell you how you can differentiate your business to outshine and outperform the competition.
It’s quite simple.
Look from the perspective of any consumer and you’ll see that the pricing strategy makes a huge difference. It’s one of the most useful weapons in your hands if you know how to use it.
To some degree, the continuous success of retail giants like Amazon or Walmart comes from planning and conducting excellent pricing strategies.
In the past few years, marketers believed that factors like convenience, personalization and company values surpassed the impact of price on consumers’ purchasing decisions, but research proves otherwise.
Price is still the most important factor in deciding on a product or retailer, and there is a reason behind it. Millennials are financially worse off than their parents and naturally, they have much less discretionary income.
Moreover, technological advancements eased the price search process for online shoppers. Price comparison is becoming a step of the purchasing journey.
For all these reasons, online retailers don’t have an option other than competing on price. So, if you want to be competitive, improve sales growth, profit margins, customer satisfaction, brand reputation, and internal operations, let’s look at how you can do that.
Know your market prices
Most of the e-commerce business owners are not aware that tracking competitor prices is crucial to their business. The only way to make sure that your prices are competitive is by first tracking competitor prices. Pricing too high above the market average will seriously damage your competitive strength, but that’s not the only concern.
Take a look at this example.
Suppose you’re selling vacuum cleaners and Dyson’s V11 Absolute is in your inventory.
Without a doubt, consumers will do a quick price search before buying and here’s what they’ll see.
Can you give a reason why they’d pay £649 for the exact same product they can purchase for £478?
No? Neither can we.
Now, let’s look from another perspective.
This store offers the best deal and ranks at the top of a comparison shopping engine. You must think that these guys are quite successful, right?
Well, not exactly.
A price war between the first and second stores caused them to lower their prices too much.
They might have attracted a higher number of shoppers, but by eating into their margins they’ve damaged their profits and customer LTV. In essence, they’ve left money on the table unnecessarily.
The lesson here is that when the store you’ve entered into a price war with is out of stock, increase your prices. Add a little extra so you’re still the cheapest option out there, but have the benefit of reaping higher profits.
Pricing high or low both come with their own consequences that could negatively affect your business.
Which is why you need this second tactic.
Test different price points
Did you know that Amazon changes a single product’s price every ten minutes?
Why? To figure out what price attracts the most demand.
However, most smaller brands don’t run these kinds of tests. And that creates a great opportunity for you.
Take advantage of your competitions lack of testing and see if different price points create bigger opportunities.
After a while, you’ll start to find optimal price/demand ratio that yields the highest profit.
The key here is to have a well-planned strategy, a testing and logging environment, and a little risk-taking.
Turning back to our speaker example, if the store had tested a higher price point, there’s a good chance they could’ve made more profit.
Improve internal and external communication
Pricing a product is quite easy if you approach it systematically.
Usually, the accounting branch or the business owner records the overhead, variable, and static costs.
The purchasing department negotiates the best prices with the suppliers.
The marketing department tracks what prices other competitors are setting and creates sales campaigns.
But who sets the final price?
Each department has different responsibilities and KPIs, however, the ultimate goal is to make more than you spend. In order to have a harmonious relationship with your team, you need to have clarity on each pricing factor by having an open policy.
What do we mean by this?
When the holiday season is at the door your marketing department will prepare a sales campaign with a certain amount of discount rate. Imagine the chaos if they’ve published a 70% discount not knowing that 20% is the most they can offer and still make a profit.
Set up an open and centralized pricing database or an access by user-role type to get in front of damaging pricing issues.
A centralized pricing database improve internal communication in the following respects:
- greater control over pricing decisions
- reduced time spent on internal communication regarding pricing decisions
- user-role type access to enable the accounting department to determine costs, marketing department to manage the sales campaigns, etc.
- prevention of possible incoordination between departments
- ease of testing different price points to find the optimal price/demand ratio without hours-long discussions
Offer extremely fast delivery
43% of shoppers who participated in a Walker Sands survey stated that they purchase products on Amazon because the retailer had a better deal. We’ve already talked about the importance of pricing. Do you know what else has central value to e-commerce businesses?
26% of the participants stated that they choose Amazon because of the company’s delivery speed and better prices.
Amazon not only dominates the U.S. e-commerce market, but also sets industry trends and standards.
Thanks to Amazon, the modern consumers’ expectations when it comes to delivery are sky-high.
However, in most cases, even Amazon can’t meet the expectations they’ve helped establish.
Offer a truly fast delivery service and follow up with the results. This will make a tremendous amount of difference when a customer is in the decision phase.
You might not have a big operating budget like the giants but here lies your strength. You have much faster response times in terms of getting the order, checking its payment, making the packaging, and sending it over to the delivery department.
If you can’t offer a fast delivery service with the sources you have at hand, you can cooperate with third-party delivery services.
The results of the same survey reveal that 44% of consumers used a third-party same-day delivery service in the past year. And that 66% of those consumers would trust those third party services on future purchases.
It shows that more consumers aren’t just expecting faster delivery, but are willing to commit to your brand’s delivery even if provided by a third party service.
Give excellent customer service
Today’s shoppers expect excellent customer service.
Regardless of the number of communication channels you provide, they care about the result.
Of course, offering an excellent omnichannel customer service will achieve higher numbers of return customers, but keeping the quality of the service is the hard part.
80% of respondents in a survey stated that they stop shopping from a website because of the poor customer service.
A striking number, right?
You do your best to attract new customers to your store and only a small portion of them are converted.
And yet you still face a battle when it comes to those who have converted when turning them into loyal, repeat customers.
If you’re losing them because of your poor customer service, it’s a serious issue you need to focus on.
Keep a close eye on before and after sales conversations with your support staff. If you see a lot of people complaining about the packaging, deal with that immediately before others start to say the same thing.
Integrate an AI-backed chatbot solution into your store that enables online retailers to answer customer questions immediately. For example, if a customer query contains the consecutive words ‘return policy’, the chatbot directs the customer to your return policy page.
For the requests that are too complicated for chatbots, provide live chat. Answer customer questions in time. Today’s shoppers have too many options to wait for your answer more than a few hours.
With a small effort you can make a big change in improving the perception of how customers see your store and might make them lean more towards you than your competitors unknowingly.
As the competition in the e-commerce industry gets more and more intense each day, online retailers need to keep up with the industry trends and constantly test the pulse of the market.
Today’s shoppers expect a seamless purchasing experience, the best product value and the best prices all at once. Online retailers must answer their needs, or else they’ll be left out of the competition.
Author Bio: Basak Saricayir is the content marketer at Prisync which helps E-commerce companies increase sales by tracking prices automatically from any marketplace around the world.