Why You Shouldn’t Participate in the eCommerce Race to the Bottom!

It’s hard out there for a retailer. Traditional retail stores are quickly closing physical stores, emptying out malls, and (failing) to try to adapt to the new demands of consumers online.

The options and choices are endless online for savvy shoppers looking to save money. To counter this, retailers are trying to keep their competitive edge, by cutting their prices. Desperate for profitability, but in turn entering the eCommerce race to the bottom.

Enter dynamic pricing strategies. Our CEO Matt Bertulli wrote recently about dynamic pricing, a strategy implemented by retailers looking for a positive margin contribution on their products. These pricing strategies include:

  • High-value customer pricing
  • Peak demand pricing
  • Time-based pricing
  • New release pricing
  • Competition driven dynamic pricing

Competition Driven Race to the Bottom

why you shouldn't participate in the ecommerce race to the bottom
Competition driven pricing is probably the most popular strategy but also one that we frown on the most.

Many merchants are using their competitor’s pricing to adjust their product catalogues, ensuring that they have the lowest price possible to try and make a sale. It doesn’t help that shoppers are shown to favour retailers with competitive prices, and use the internet to aggressively hunt for competitive prices. In fact 81% of shoppers conduct online research before making a big purchase!

You’re Destroying your Margins

This dynamic pricing strategy is being used and abused by retailers online, without full understanding of how slashing prices impacts your bottom-line.

We get it, you want to win customers, you want to drive growth for your eCommerce business, but you won’t stay afloat long if you keep cutting prices.

Not only will aggressively discounting dig right into any profits, you won’t in actuality be competing with anyone.

Related: eCommerce First Steps – How Many Products is Enough?

Zero Respect

Customers are humans, who make emotional decisions, who will make judgements about you and your products that can be long-standing.

Competing on value, means more than discounting your products to incentivize action. Consumers will see right through your act as soon as you start blasting discounts on a regular basis.

You’ll damage your own reputation and brand. Customers will either stop shopping with you, or they’ll refuse to ever pay full price for your products. Online shoppers will be quick to disengage with you; stop buying, stop browsing, stop opening emails from you…

Related: Strategies for Creating Customer Stories

How to Race to the Top: Compete on Value

why you shouldn't participate in the ecommerce race to the bottom

So without slashing your prices to compete online, how can you remain competitive? You could try one of aforementioned dynamic strategies.OR try to sell/compete based on VALUE…this tactic works especially well if you’re in a niche market:

  • Compete on value, beyond monetary
  • Communicate your Company’s and product’s value(s)
  • Build a positive brand reputation
  • Reward loyal customers
  • Provide exceptional customer service
  • Solve problems, don’t just sell features
  • Build a community among your customers
  • Give customers a story to tell (and ask them to share their stories)
  • Knowledge share by creating great content

Great Experience + Great Product = Loyalty

Don’t do this when setting your pricing:

  • Set prices based on nothing at all
  • Continuously discount or change prices
  • Deeply discount to inspire a purchase