Best Practices for Retail Pricing and Inventory
It’s crunch time for online retailers around the world, so now’s the best time to iron out the details. Success is largely dependent on the products a retailer has to offer and how much they’re selling them for. So naturally, optimizing these two factors should be on the top of your priority list.
Having the Right Products
The holidays are a time to do what the top retailers do best: sell, upsell, and cross-sell the items that shoppers want most. Back in October Adobe suggested that 76% of items bought during the holidays would be from just 1% of SKUs. That makes it clear that assortment is hit or miss and the most successful retailers are stocking those popular items.
This can be hard to follow through at times because it’s necessary to filter out the products that are dropping in demand and the ones that will only be trendy momentarily. That’s why it’s necessary to monitor the best selling products over time to determine which ones are popular and profitable enough to add to your assortment.
Stocking up on Star Wars toys might seem like a good idea, depending on your vertical. Checking in to see how volatile their popularity and ratings are gives a clearer idea of the potential impact on your bottom line.
Pricing Products to Win
Once you’ve stocked up on the best products, it’s time to make sure that they are priced accordingly. Those Star Wars toys probably aren’t going to move if you have a higher price than all other sellers, unless everyone else is out of stock. Data has the answer at any given moment to the question: how should I price my products?
The data that you need is both internal and external. You probably know how price changes have impacted demand for your products, but what about your competitors’ prices? Especially on comparison shopping engines and large marketplaces, your prices are going head to head with competitors’ all day. Sure, price isn’t everything. The brand you’ve built, your customer service, and policies all help you stand out, but it’s impossible to argue that prices don’t matter.
The problem with pricing is that it never stands still. It’s all over the place, following changes in demand, stock, competitor pricing, and more. However, many retailers have static pricing and only change every once in awhile, like when they clear out an item that’s left over from last season.
Amazon’s success has made it clear that that strategy isn’t effective in eCommerce. If you’re selling commodity items that have fluctuating prices, writing your prices is stone is generally a recipe for disaster.
The solution is to implement a dynamic pricing strategy that has the ability to keep up with the industry. There are certainly times when you should ignore the industry, such as when competitors are engaging in a margin depleting price war or when you’re running low on stock.
Changing prices, whether increasing or decreasing, must always occur within reason and in accordance with your goals. That’s where minimum and maximum prices come in to save the day. When you decide the range of prices that is reasonable for your business and how close you want your prices to be to competitors’, repricing becomes much safer and more effective.
The holidays are in full swing and the time is now to set your business up for success for the rest of the year and through 2016. The first two steps are to improve your assortment and the pricing on all of your products.
Additional Pricing Resources:
How Dynamic Pricing is Disrupting Online Retail in 2015
How to Get the Most Out of Branding and Price Perception