How One Multichannel Seller Uses Repricing to Maximize Profits
By Ina Steiner
Alan Cohen is President of ecomElectronics.com, which generates $18 million in annual revenue selling general electronics and other items such as house wares and pet supplies on Amazon, eBay, Google, Buy.com and Sears Marketplace. Cohen understands the importance of offering shoppers the right price at the right time, a continuing challenge as price transparency has increased both online and offline.
One tool Cohen uses to optimize product pricing is a repricing tool called AppEagle. Merchants have nearly always engaged in manual repricing - regularly going into their product listings and adjusting prices, depending on how many other sellers offer the item for sale and at what price. But the prevalence of third-party repricing tools today means many sellers have automated the process, using rules to factor in a range of circumstances that impact the price of each SKU.
Automating the process means not only a savings in staff resources, but also a more timely and fine-tuned approach to pricing that, if done well, could boost profitability.
Using an example of a product priced in the $100 area, Cohen said his competition might set up pricing rules to put that item at between $100 and $102, a small bracket to make sure they're always at the cheapest price. "We'll do it a little differently. We want to make sure we're at the cheapest price, but we also set up a much higher ceiling." He said he might set the ceiling at $110 so that as competition drops out, his price rises.
"So if somebody comes in and they have a small deal and they have one or two, or a small handful of the item, and they're just looking to turn over quickly." In that case, sellers go down to the $100 mark and they'll stay there. "But we'll be looking, and as these people drop out or run out of inventory, we're going back up." And it's all done automatically once he's set up the rules in advance.
Many sellers believe the use of repricers - on Amazon in particular - helps set off a race to the bottom in terms of pricing. But Cohen said it's about being smarter about how you use the tools. "The general concept people have when using these repricing tools is okay, great, I'm going to use this to make sure I'm always the cheapest."
Instead, he said, "we try to force the prices up to maximize profits with the tools we have in place. Our repricers are more geared to detecting where we can raise, rather than lower."
While he used to vary pricing by channel, he said he stopped doing that, "as the channels frowned upon it and every channel wants a guarantee that our lowest possible offer price is what we use for the specific channel." So which channel dictates the product price? Cohen was, like many sellers, loathe to give away too many details about specific strategies, but he said certain items are based on certain channels.
He did reveal that not all competitors are equal and he sets up the repricing tool accordingly. Factors include what type of seller it is and how much feedback they have - so a bigger seller with good feedback might influence Cohen's pricing more than a seller with less feedback.
We asked Cohen if he used pricing as part of his marketing strategy, and if so, how. "Only on daily deal sites, as the deal has to be at a rockbottom price," he said. Rather, he sets pricing with the goal of maximizing profit while staying competitive.
"Price is always important, but it doesn't have to be rock bottom. Customers look at other things." And loyal customers will pay a little more for a known, consistent experience, he said.
For more background and a list of repricing software, see this June 2012 EcommerceBytes Update article.
About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to email@example.com.
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