The current retail environment is a turbulent one, principally because of the global economic and health crisis (COVID19). Both high street retailers and Etailers are suffering acutely. Etailers are suffering because they rely on many of the same supply chains as high street retailers. However, there are also opportunities but much is dependent upon your eCommerce marketing strategy and pricing strategy.
The actions that Shopify sellers take can mitigate some of the negative effects caused by uncertainty.
In periods of uncertainty when external events negatively affect businesses, remaining competitive has become a primary factor in terms of not just survival but succeeding when the crisis ends.
The goal should be to choose a pricing strategy that can help your business to survive the hard times for those areas of your business that are performing poorly, this should be a top priority for Shopify store owners. In addition, look to pivot your marketing efforts to those segments of your business that are doing well.
Avoid Three Killer Mistakes
Every marketplace is under the impact of both internal and external forces and events. Shopify sellers should deal with market dynamics when defining prices. This includes leaving space for making mistakes. Still, you need to focus on avoiding some basic ones which often occur as a result of a lack of agility, inappropriate cost estimates, and over-dependence on extra services, or specific suppliers.
Thinking that e-commerce or your specific niche will not be affected by the market changes is a potential trap, both in the short and long run. In particular, when there is rapid change, it can result in the reduction of resources.
According to Harvard Business Review, the Chinese cosmetics firm Lin Qingxuan had to close 40% of its stores and rechannel to online counseling due to the increased demand during COVID-19. Under the current market conditions, adaptation to the new order is now imperative. Agility, – the ability to meet changing requirements, and being able to act quickly is now an essential quality every business should be prepared to reshape for. Yours is not an exception.
Cost Under Estimation
While the market transition may be a necessity, retailers should consider the cost forecast to minimize losses. For a Shopify store owner, the fees for using services is an essential factor in defining the possible profit.
This includes delivery services, promotion fees, and maintenance of products costs. The failure to evaluate these factors may result in a mismatch between perceived profit and actual gains. Therefore, you should always prepare for a budget in dark times: meet its constraints, cover the essentials only, and estimate costs progressively.
Extra Services Trap
There is no better way to attract customers’ attention than using promos or discounts. However, a common mistake, especially in the period of decline, is to excessively use such options. According to Business Insider, it can make a buyer become accustomed to discounts and special offers, expected even, which is undesirable before the difficult times. Discounts usually assist in clearing the assortment.
Don’t forget about potential manufacturing delays or shipping delays during the crisis and the long-term effects of that. In other words, you can sell all your products with reduced prices on one day, but you will not gain a single loyal customer and it will reduce stock levels. Shopify sellers must react in a timely fashion, but never forget about the post-crisis era because you do not want to become a discount brand if it can be avoided.
Choose and Implement a Suitable Pricing Strategy
From the above, – staying focused on the market changes and reacting quickly to them is critical these days. However, Shopify etailers should recognize the fundamentals of doing that. Buyers are going to check prices thoroughly and search for bargains. Therefore, pricing remains the most significant pillar when it comes to surviving the economic recession.
In this regard, Shopify etailers should adopt a working pricing strategy. Some believe that the best way to pull through is to use resources during the decrease in demand cautiously. Others may emphasize the premium pricing that can add to brand equity and appeal to a more advanced audience. But during the change, when demand is changing too, it is likely to cause a sales reduction.
Price matching is another approach, used to follow market average prices, which may help a retailer to stay in the game. Nevertheless, it can result in lower profits, as an owner may get less due to the inevitable increase in manufacturing expenses, rapid demand shifts, or other influencers. Because of these factors realistically you are unlikely to devalue your products. So, you need something more stable and reliable.
Market-Driven Solutions for Shopify
Again, operating on a dynamic or even partially chaotic market makes Shopify sellers sensitive to external conditions. Consequently, you should view market-driven approaches. Primarily, market-based pricing is suitable for the crisis since it fully considers key factors needed for staying competitive and profitable in hard times.
Firstly, to remain a rival, you need to identify true competitors because this group of opponents is the most powerful in terms of negative influence on your business. Gathering data about competitors (their sales, prices, unique offers, etc.) allows you to implement a strategy of competition-based pricing. It focuses on competitive data and underlines your strategic advantages compared to your competitors.
Secondly, market-driven approaches to pricing may help you to maintain profitability. The analysis of historical data and market tendencies assists in the identification of true KVIs and allows you to examine low-selling goods. Needless to say, some best-selling items can bring you more profits than even some entire categories of items. So, owing to market-driven pricing, you can recognize, advertise, and offer the most needed options for customers at the time. Also, this strategy is an opportunity to highlight pricing thresholds, i.e. not setting prices too high, because high prices will cause rapid customer churn.
Notably, current and effective competitive pricing relies on technologies. AI-driven approaches that consider rules and market conditions help to keep agility. Smart pricing is live and non-sensitive to data volumes; thus, it tracks all the needed metrics of both the seller and true competitors instantly. When the market is transforming, time is vital.
Do Not Forget to Optimize Prices
In the post-crisis era, new conditions for e-commerce will emerge. In particular, other demand patterns will affect consumer behavior. You should take this into consideration when defining prices, as it will lead to time and resource savings. For instance, the Shopify platform enables the exploring of such data: particular patterns in customer preferences, inventory, acquisition, and more via a tool like Conversific. When collected, these statistics should be carefully analyzed, which is possible owing to technological solutions. GA data is also invaluable when installed on Shopify. Utilizing Shopify Google analytics with Conversific provides a more holistic user dashboard and greater insights into customers than either Shopify or GA can provide alone.
Price optimization empowered by machine learning is the next stage for a Shopify store owner to continue competition and development. Using the mentioned data, price optimization model gives you an additional set of opportunities:
- Identification of relevant demand influencers;
- Provision of optimal price intervals;
- Evaluation of consumer responses to price changes;
- Assessment of price elasticity (PED);
- Track of ‘magic’ (when demand remains high) price points ;
- Incorporation of prediction scenarios.
Hence, by implementing optimal prices, you can prosper after the situation stabilizes and customers become less sensitive to prices and needs of essential goods. Namely, you may receive consistent automated and proactive pricing solutions, which help to sell better, including non-essential products.I
The shifts within global retail affect customers substantially. eCommerce, including those using the Shopify platform, are in the winning position right now, but the rivalry is getting tough. Essentially, you should remember that a good price point provides a competitive advantage during the crisis.
While you should develop the agility and speed of adaptation, stick to the budget, and decide on promos carefully, choosing a pricing strategy suitable for the current rules is a must. Market-driven approaches work well with continually shifting market conditions.
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