Repricing in online retail is more than a requirement because the market is constantly in flux. Having the ability to change pricing to match inventory levels or react to competitor promotions is the only way to insure pricing is in sync with internal and external factors. Before an online retailer can pick the best way to reprice their products, there are a number of questions they need to ask themselves to make the best decision. Let’s go over each of these key repricing questions and discuss their implications for online retailers.
1. How Often Do I Want to Reprice?
Frequency of price changes largely depends on the type of products a retailer carries and how competitive that product type is. Repricing often can work for high demand commodity products that are offered by a number of sellers. Consumers have many options of who they could buy the item from, so retailers must stay aware of what direct competitors are selling the item for. Either they will need to sell it for a similar price, undercut competitors, or offer it at a premium because of additional value they can provide.
On the other side, a product that takes weeks or months of consideration, such as luxury goods, should not change price very often. Price changes could damage brand value and disrupt consumers who are considering the purchase. A retailer may have products that fit into either of the categories we discussed above and the differences between the two will have to be taken into account to create the right repricing plan by category.
2. Is Competition Consistent Across My SKUs?
Creating a repricing plan requires an audit of all the products an online retailer carries and how their pricing differs. Products must be priced based on sell cycle, exclusivity, supply, and more. If one product category is highly competitive, then an online retailer will have to reprice often to keep up with competitors and be considered by consumers. If a different product category is more stable and full of products that have a steady price, then those prices should not change as often. Retailers need to be able to act on specific pricing plans, so that certain products get updated prices often, while others remain consistent.
3. Do I Want to Enforce Price Parity Across Channels?
Depending on the sites that an online retailer sells on, price parity might be a simple strategy to update prices simultaneously and keep brand image consistent. However, if a retailer has different strategies across selling channels, then repricing will need to take these specifications into account. At the same time, showrooming and webrooming are common shopping practices, meaning that shoppers may spot incongruent pricing and not trust a retailer based on that.
A few things to take into account when considering price parity are brand image and strategy, pricing requirements imposed by channels (Amazon’s stipulation that seller prices be the lowest of any of their channels, for example), and repricing abilities. Starting with these factors, online retailers can plan out appropriate pricing strategies that match their goals on each selling channel.
4. How Do I Want to Compete with Top Competitors?
This repricing question taps into an online retailer’s overall strategy. If a retailer operates within a highly saturated market and has a number of retailers they want to keep up with, then that overarching strategy will need to translate into the way they handle repricing. This could mean pricing a percentage or dollar value higher or lower that those competitors, or maybe matching them (as long as they don’t fall below a certain threshold to protect margins.)
5. How Should I Go About Pricing Exclusive Products?
The exclusive products an online retailer offers gives them the most flexibility in pricing. After all, no other competitors offer it yet and consumers have only one place to get it for the time being. This is not a time to price gouge, but instead to determine a comprehensive pricing strategy for those products that allows them to test reasonable prices with fluctuating profit margins. As competitors enter the market, online retailers will need to adjust their pricing strategy to take into account competitors’ prices. But until then, the online retailer can update pricing based on supply and demand, and any other metrics that are important to them.
6. How Will Seasonality Impact Pricing?
For online retailers that offer seasonal products, pricing may vary based on what season it is. For a swimsuit retailer, spring and summer may be the busiest seasons. During that time, shoppers may be much less price sensitive. However, during the middle of winter, the few active shoppers may be shopping around more than usual, in search of the best deal.
For this retailer, they will need to stay aware of competitor prices year-round, but this is especially true when it comes to the most competitive times of the year. Being able to shift pricing strategy based on the changes in competition, as well as supply, is a must for seasonal retailers that want to optimize their prices around the clock.
These are just a few of the repricing questions online retailers need to ask themselves to put a pricing plan in place that puts them in a favorable position. There are many more, based on target market, product niche, territory, and more. Repricing in online retail is a necessity and requires the help of a third party that can help set repricing rules to match a retailer’s strategy.