Price strategies for drop-shipping businesses

Online businesses who use a drop-shipping strategy have experienced their boom thanks to the ease of management.

22/03/2023

Angela de la Vieja

Online businesses who use a drop-shipping strategy have experienced their boom thanks to the ease of management compared to other business models: by not having to manage stock, avoiding product devaluation, etc. After all, a drop-shipping eCommerce allows the online store to focus on the promotion and marketing actions necessary to promote the products within its catalogue and thus achieve maximum benefit. In this sense, it is important to develop a pricing strategy adapted to the characteristics of each eCommerce and the products it offers.

The first thing that must be taken into account are the different categories to which products belong. Checking the state of the sector and the market in which they are going to move is key to knowing the sales volume of each product and the profit margin that can realistically be applied.

Once checked, the next step will be to analyse the total cost that the sale of a product will entail. A drop-shipping business is characterised by ordering the product from the manufacturer once the end-customer has requested it, so in the cost of sale it is necessary to include the different steps of shipping, receiving, returns and everything related to the maintenance of the online platform

Armed with the cost analysis for the overall eCommerce, it is time to draft the pricing strategy which will be implemented. One idea to consider, is to add a fixed percentage as profit margin to the calculated sales cost. This way it is possible to ensure a minimum profit with each transaction. Some, more daring, businesses also choose to add this margin to each price unit, so the gains increase even more. However, it is necessary to verify how the final price fits with the price offered by the competition so as not to lose sales precisely because of the price factor.

On the other hand, the prices in drop-shipping can be guided by the MSRP recommended by each manufacturer or seller. In this way, the eCommerce can ensure that it is offering an attractive price to its potential customers and even offer interesting discounts on the MSRP to improve the conversion while continuing to obtain benefits.

Tricks to contemplate in order to make eCommerce prices more attractive, psychological rounding on the big figures and the old favourite '0.99' on the lowest prices. In some cases, a drop-shipping eCommerce chooses to offer higher prices than the competition and include certain discounts that generate acceptance by the client. However, we must remember that users also use tools to monitor the prices of the products that are of interest to them, so it is increasingly difficult to ignore these actions. Nevertheless, these practices are increasingly frowned upon by the online community, as they can be interpreted as being high risk factors for the brand image.

In most cases however, once the price strategy is established for the drop-shipping store, it is essential to keep it updated by reviewing the changes that may occur in market conditions. A dynamic pricing tool can become an important ally to carry out this task in a efficient, effective and global fashion.

11/11/2022

Consumer behavior: How can behavior tracking be effective for setting the right pricing strategies?

Behavior tracking is becoming massively popular today. As a result, pricing strategies born from studying consumer behavior are a merchant's dream come true. If done right, it can conquer every market for the business quickly. With abundant data available, the strategic makeover of the pricing models is becoming easy for companies.

What is behavioral tracking, and how is the data beneficial in pricing?

For a quick understanding, behavioral tracking refers to gaining in-depth knowledge and insights into consumers through their web data. Their browsing habits, spontaneous decisions, shopping interests, and preferences come under behavioral tracking.

How can enterprises use customer behavior data?

Companies can use customer behavior data as a tool to strengthen their hold on the market. A customer’s preferences, values, and tendencies allow businesses to work in sync with them through the collected data. Apart from this, customer behavior can also aid in:

Tailoring customer needs for customer retention

Personalization is becoming the heart of a company’s growth. No matter in which area an enterprise is functioning, tailoring the services, products, and solutions is becoming increasingly crucial. Uniqueness and personalization attract the crowd like no other.

Increasing the overall value

One of the best ways customer behavior data affects a business is by upgrading the value of customers for the business. The customer’s characteristics allow the company to target the people that match the business prospects well.

Optimizing every type of content

Everything that is up for digital display requires content. You must have seen companies unveiling their products or services through advertisements and making the initial public appearance. Two essential sales strategies – upselling and cross-selling comes through content optimization.

Pricing Strategy

Last but certainly not least is the influence of customer behavior data on the pricing strategy. The pricing strategy essentially constitutes content derived from data analysis. Companies need to have a dynamic approach to the pricing system to attract the right customers.

17/02/2015

Saint Valentine’s Day, always a good opportunity

V-Day is looming, a long-awaited date for all and also a good occasion for the eCommerce. According the study conducted by Prosper Insights and Analytics, it is forecasted the average consumer expense that day will be the highest in last years. Furthermore, 25% of them will buy online, which means an increase of 4% regarding 2014 (The US department of Commerce). This is, therefore, a key date where market competitiveness increase and which could be assumed as a big opportunity for our business or, a big fail if we do not adopt the correct strategies.

How to turn this event into an opportunity? To achieve this goal, we need to adapt our prices to this hostile environment, i.e. we need to develop an appropriate Dynamic Pricing strategy that allows us to adapt our prices to the variations produced in supply and demand and to position us ahead of our competitors. In V-Day, the frequency in changes will be higher, carrying it out each hour or even each minute. It is estimated that 65% of leader retailers have the ability to respond quickly at these variations, such Amazon. For this reason, it acquires great importance the correct use of a software specialised in price motorisation of competitors. Do not miss the time and adapt your business to new adversities.

28/12/2022

Which are the best footwear marketplaces to sell on?

Footwear marketplaces are booming. The last decade has seen the launch of new specialized marketplaces with millions of different users. Among them are Spartoo, Sarenza and Farfetch, portals with international reach. Their main value is that they unite hundreds of footwear brands, as well as offering clothes and accessories. Although each has its own characteristics, they are all vertical marketplaces, i.e., they focus on a specific area, and their sales categories are interrelated. For sellers, these portals provide an opportunity to expand sales channels and drive the globalization of their e-commerce business. We explain how to sell on these footwear marketplaces so that you can assess whether they align with your plans for the future and then start defining a possible pricing strategy.