While they may not be as chaotic as our favorite war-time films, price wars in ecommerce can still get pretty relentless. Some retailers change their prices multiple times a day to stay competitive, and a trend is starting to grow in the industry. According to the custom research study “New World of Pricing Optimization”, more retailers are looking to price optimization software to stay competitive
The study found that 21.1% of retailers today say they currently use digital commerce pricing optimization software. Over the next year, 18.4% more are looking to deploy it. But why? Two words: price wars. More and more retailers are being undercut every day by retail giants like Amazon or Best Buy, who are known to change their prices as frequently as every 15 minutes.
If you are a retailer looking to get involved in a price war, the one piece of advice we can provide is this: do not get involved. Like witnessing a fight in elementary school, it’s just for the best to walk away and let the others deal with the mess they got themselves into. Edwin Starr put it best: “War, what is it good for? Absolutely nothing.”
While this piece of advice is useful in theory, is it really applicable to the real world of online retail? The answer is simply yes, and price optimization software can actually help. That’s right, the same device many retailers use to price match their competitors can prevent vicious undercuts from occurring in the first place.
But the real companion is the minimum price function. By entering a minimum price, you can prevent destruction to your margins. They are the most common casualty of price warfare, and price optimization software can keep this from happening. A minimum price is exactly what it sounds like. The software will prevent you from pricing below it, allowing you to walk away from a vicious price war.
Price wars are natural occurrences in the world of retail, but that doesn’t mean you should get involved. Investing in price optimization software not only allows you to have competitive prices, but it also allows you to have smart prices. By avoiding price wars altogether, you can save your margins and come out on top. War is never the answer, especially in online retail.