McKinsey: 1% Increase in Prices, Results in 8% Increase in Profits

Every e-commerce entrepreneur, or the manager who handles pricing for an e-commerce store is in a dilemma about deciding the optimal pricing of their products. Every shop has their profit calculations, purchase prices, moving average prices and must have done basic or in-depth mathematics to arrive at a price at they list.

It makes the job of a pricing manager very tough at first to sell his product online and when he gets a sale by lowering his prices, he is not sure if it actually saves him any penny or not. The margin calculations are further difficult due to various facts:

• Post covid 19 supply chain problems.
• An instock product not sold for six months also incurs cost of money invested.
• Some competitors just take backorders without storing any inventory. They have higher wait time on shipping, may never get a sale, but you end up competing with them and burning your profits.
• Amazon Automate Pricing where before you know Amazon reduces the price of your competitors in real time
• Amazon has now started submitting various branded products to Google Merchant Center, so now, Amazon is mostly found selling at lowest price in GMC too.

We dealt with a kind of hilarious situation when one of our clients was trying to beat a competitor by one percentile and the competitor used a very good gimmick by lowering its prices on Google Shopping but still keeping a higher price on its website. Normally GMC suspends such accounts, but still some smart vendors find out ways to circumvent Google merchant Center rules. The below screenshot from the live website of ​​a very popular e-commerce store will make you understand how Google Merchant Center trick is applied:

This popular vendor on Google Merchant Center, shows 3 prices of each product on his website, but submits the lowest price to GMC Feed.The lowest price is available only if the customer is okay to wait for the product for 2 to 6 weeks i.e. when the product is backordered. You know Backorder pricing can mostly be lowest. You can sell at low margins as you have not to invest any dollars in inventory.

The smart techniques like above further make it very tough for an eCommerce Pricing Manager to decide the prices of his products. By checking insights from Google Merchant Center or investing heavily in the pricing analysis algorithms, he may actually end up trying to beat the base price provided by a backorder vendor and that would be impossible to beat.There are various material facts to be considered before deciding an Optimal Price for your product where you at least make required percentage of profits:

• Your current stock level [how much you have in stock],
• Stock turnover ratio [how many times your inventory is replenished in a given period of time],
• Time required to replenish the stock, today’s replacement cost,
• Your Moving Average Price Vs. Purchase Price,
• Supply Chain replenishment time,
• Competitive Pricing of vendors with whom you wish to compete. Identify with whom you wish to compete,
• Ignorning unwanted competition from unpopular or trickster stores. They cannot take your customers even by selling 10% less than your prices

Here on PricingMix.ai, enjoy some free basic analysis of various branded products.

If you wish to get done:

• Detailed Daily Pricing Analysis of your branded products ecommerce
• Daily Recommended Price Suggestion individually for each of your product
• A dedicated eCommerce Manager to manage and ensuring competitive price for your products on daily basis.

then, you are at the right place.

We hear you, we understand all of your problems, so we now provide you a seamless experience, a dedicated pricing manager who is well versed with on an average 5+ years of experience working under our pricing strategy director who has over 15 years of eCommerce management and pricing strategies. Our pricing algorithms take care of all of the above problems + we enhance it by embedding your peculiar problems in our algorithms.