Nowadays, consumers expect the best price from the eCommerce industry. They tend to compare prices and choose the best deal they find. But it has a negative impact on the eCommerce industry. Industry’s profit margin shrinks as it competes on the price of the products to secure shoppers.
Price wars are not the long-term solution for the eCommerce industry, as they will lead to a weaker market. Let’s see why it is a mistake and what the eCommerce industry should do about it.
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The rise in Customer Expectations
Nowadays, the majority of businesses offer numerous exciting deals to attract more customers. For example, fast delivery options, or sale extension, etc. Additionally, online prices are cheaper than the regular retailers, and they have so many offers such as coupon codes, regular sales, free shipping, and deals of the day.
The price comparison platform compares product prices across various stores and uses reviews to make the selection process easier. Thus, retailers are lowering their prices to match customer’s expectations and make it easier for them.
It may look good, but it decreases the value of your store. As we know, customers do not hesitate to abandon your store if they find a better deal somewhere else. Therefore, changing your pricing strategy to gain more customers will only attract low-value customers, and you won’t be able to stay long in the market.
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Low Price Equals to Low Revenue
It’s simple and basic math, Low Price Equals to Low profit. Even though you sell 100 units, it will still not be enough profit. You’ll need to sell more units to gain the profit of those 100 units. It is bad for both the market and the seller and both of them lose value.
Due to the pricing war, the margin across the industry has been tighter ever since. As we know, pricing factors only happen when the price is the deciding factor for the purchase. Thus, as a business owner, you need to put your brand value in front of the customers. This way, you’ll get high-value customers and you won’t need to do a price cut to fit in the market.
How to beat Price Wars?
The basic rule of beating the price war is to never participate in the first place. There will always be one seller who’ll have lower prices, it does not mean you have to change your pricing, too. Your strategy should focus on bringing your customer back due to your store value instead of your prices.
Sellers cannot put their reputation at stake just because of the prices. There are many ways you can attract your customers and gain their loyalty, such as doing to the upper market. If you decide to lower your price for some reason, you can try up-selling and cross-selling methods to make up for the cut in the pricing and earn the profit.
In a nutshell, you need to trust your brand and experience for a successful business and keep focus only on that. By comparing your business, you may drown your business and get a bad reputation. Make your customer understand why your prices are different from the rest of the market. Once the customers learn your brand value, they’ll become regular, forming a healthy relationship.
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