Price strategies for drop-shipping businesses

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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.

Angela de la Vieja
Content Manager
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