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Price Optimization Is A Key Strategy For Online Retailers


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It’s a cart-eat-cart world out there for online retailers. Whereas their brick-and-mortar counterparts need to worry about competition down the street, online retailers need to face up competition from the entire world; free shipping included.

The internet has leveled the playing field as far as competition – complete transparency is the new norm, thanks to price-comparing websites and apps. You can no longer claim that you have “the best prices” you need to actually have the best prices, since all the information about you – and your competitors – in one click away.

The hunt for consumers is taking place everywhere around the web, not just in E-commerce platforms and shops. Online retailers need to be present and attractive on a multitude of social networks, online publications and search results. Online retailers must devote resources to improve online presence strategy, as detailed in an article by eTraffic, an SEO and web marketing agency. Because if you are not out there, if you are not posting and sharing and pinning and tweeting, the chances are your competitors will win the lion’s share of relevant traffic.

The New Pricing is Dynamic and Fluid.

The change that pricing went through since it migrated online is remarkable. Back in the offline world pricing was a stable variant. There was a season-long price, and then there was the end-of-season discounted price. If a shop was closing its doors it did a Clearance Sale with super-discounted prices. Life was simple, price was predictable.

Enter the web, and out the door went price stability. Anyone who shopped online knows (anyone hasn’t?) that price of the same item can change in the span of hours and sometimes even minutes, be it a pair of shoes, an airline ticket or insurance. Why does it happen? Because technology enables it.

The idea behind price elasticity is to maximize the online retailer’s operating profits. Taking into account variables such as chain of supply, existing stocks, product popularity (demand) and the number of retailers offering the same product (availability) prices are tweaked constantly.

A prime example of the new pricing norm is the airline industry and the dozens of sites that compete for clicks by offering price comparisons. The prices of flights and hotels are changing while you are looking at the screen, and what you see today will definitely be different tomorrow.

What enables this real-time price elasticity? Price optimization software.

Predictive Pricing is the Future.

It goes much deeper than comparing prices with other vendors and trying to beat them with the lowest price. If that were the case, you wouldn’t need software.

First, the online world moves too fast for us humans to keep track, and the sheer volume of competition makes it impossible to control manually. Second, it’s just not about what prices are now, but increasingly what prices will be.

All the variables mentioned before are calculated in order to determine a price, but are also analyzed on a timeline that stretches into the future. Leading pricing intelligence companies are offering advanced pricing tools, such as UpstreamCommerce’s retail price optimization software. As the description suggests, these software can not only compile and analyze vast amounts of competitors’ data in real time to produce optimized prices and keep tracking and tweaking them, but they are also able to predict market pricing trends and allow the retailers to be ahead of these trends by offering competitive pricing before their competitors do.

Basically it’s like being engaged in a negotiation and knowing in advance how the person in front of you would react.

Stay Competitive by Adopting Price Optimization.

The online world is omnichannel, and online retailers need to become savvy multi-taskers. They need to be, on top of skilled merchants, also crafty social personas, original marketers and logistics masters. Their plate is very full, and leaving pricing to be done automatically by a solution-based software seems not only logical, but also essential.

Big-box retailers of the web, from Amazon to Target, Wal-Mart to Home Depot are applying high-end algorithm power to their pricing strategies. In order to stay competitive, smaller retailers must keep up; like your grandpa used to say, you don’t bring a knife to a gunfight.

And speaking of grandpa, it’s enough to look to what happened to Main Street retailers when Costco opened a warehouse just outside town to realize that the same could happen to SMBs online if they don’t step up their game.