The price war in online retail is heating up. According to the Global Pricing Study from the management consultancy Simon-Kucher & Partners, some 80 percent of the 2,186 retailers and manufacturers surveyed complain of rising pricing pressure in eCommerce. Almost one in two companies describe their situation as “locked into a price war”. Retailers subsequently see themselves forced to adapt their prices in the shortest of timeframes. Particularly in the segments of smartphones, tablets, notebooks and computer accessories, every day sees up to a million price adaptations.
This is no surprise, since 82 percent of those aged 18 to 24 years view price as the decisive buying incentive, according to a Statista survey, as do a hefty 93 percent of those aged over 45 years. For online retailers, this means that the competitor with better offerings is just one click away. The impact of such a price war is proving to be devastating for online retail, says the head of the eCommerce competence group at eco, the Association of the German Internet Industry, Prof. Dr. Georg Rainer Hofmann. “Companies need wisely implemented programs, instead of haphazard discounts thrown about the market”, says Hofmann. The expert warns that, when everyone gets cheaper, none will benefit in the end. In the following, we will show you alternative ways to escape the pricing spiral.
Avoiding the price war with exclusive offers
Buyers are prepared to pay more for products that are unavailable in any other shops. The exclusivity needs of the customer can be catered for with special sales, such as signed books or fashion collections by local designers. For these exclusive products there exist hardly any comparable offers, so that the retailer avoids direct price competition. Premium services also have an attractive draw to customers: As the DHL Express parcel service found in a study, retailers with premium shipping offerings grow 1.6 times faster than competitors without comparable offers.
Good advice should not be expensive: Customers seek advice from experts, especially when purchasing high-value products. Online retailers can utilise this situation by providing detailed product information and competent customer service.
Set yourself apart with effective branding
To create customer confidence, low price is by no means sufficient. Equally important is a positive image. As well as a good reputation, this incorporates a firm promise: What does the retailer offer the customer that no other outlet can? This promise to formulate and establish defines the process of branding. This is why Coca Cola not only represents a refreshing drink, but also an easygoing lifestyle. The new star in the startup galaxy, Einhorn Condoms, is aiming for conscious interaction with the environment. Those who sharpen and distinguish their customer promise will increase their recognition value and thus generate customer trust. This simultaneously opens up some scope in pricing.
Provide your customers with detailed product information
For every product presented in the online shop, product information should be quickly accessible. Particularly for specialised online retailers, here arises the chance to position yourself as an expert. In one article in eStrategy Magazin, it recommends switching the advisory expertise of a retailer over to the Internet. Customers still buy high-value products in stationary retail because they seek the advice of experts. When an online shop provides detailed information, quick-to-find problem solving and a personal contact for service, then this is almost as valuable as an actual face-to-face consultancy. This also promotes trust in the customer.
Offer your customers personalised product suggestions
Big data gives retailers the opportunity to analyse customer needs and to furnish the fitting offer to every individual customer. A Business Intelligence software enables the structured preparation of data and provides deep insights into the purchasing behaviour of a customer. This makes it possible to recognise typical patterns in purchasing decisions. Online retailers who know the buying habits of their customers reinforce the relationship with their customer base. Consumers evaluate advertising demonstrably more positively when it is tailored to their personal preferences.
With the right support for intelligent price management
Regular discounts and low-price guarantees make sense among the big retailers, whereas smaller outlets would ruin their margins and at worst drop out of competition. No price war is to be won by this method. It is therefore all the more important for online retailers to break away and find their own unique strategy.
To define an individual strategy for yourself and to shape it successfully, it becomes inescapable to know what other competitors are doing. You can do this with the help of the blackbee Business Intelligence software. In this way, retailers always keep their competitive surroundings in sight. This knowledge forms a strong foundation to develop and implement your own pricing strategy. With an ingenious pricing strategy, retailers boost their margins and also stay ahead in the price war.
Would you like to know which pricing strategies your competitors are pursuing? Test blackbee now and strengthen your position on the market!