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Sat Jan 1 2011 13:35:02

Does More Transparent Pricing Leave Room for Retail Profits?

By: Ina Steiner

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ComScore founder Gian Fulgoni wrote a blog post on Thursday in which he looks at data to see how consumers are conducting shopping research ("Has the Internet Moved Pricing Power to the Consumer?"). Consumers obtain pricing information in a wide variety of ways - on retailers' websites, paid and organic search, comparison shopping engines and email.

Gian includes some interesting points and statistics, such as:

- the number of users visiting coupon sites is up 19% versus last year to 45 million;

- this year has seen the emergence of group buying promotional sites such as Groupon, which attracted 10 million visitors in November;

- this year has also seen the growing importance use of mobile devices to research prices and product features.

Gian said all this price transparency mean consumers can easily find the most attractive price for any product: "pricing power has surely moved from retailers to consumers." He wonders if profit growth can match the surge in promotion-driven consumer buying that characterized the recent holiday-shopping season.

AuctionBytes readers know this can be particularly challenging for small sellers who cannot get the bulk-quantity pricing for their inventory that larger merchants are able to obtain. And it's not just a challenge for commodity sellers. Many online sellers are sandwiched between large retailers and casual sellers who price at extremely low levels - such is the case with online booksellers who compete with sellers of "penny books," a frequent topic of discussion on industry boards.

Online marketplace Silkfair raised this issue in a recent post on Facebook and warned online sellers not to price their wares too low.

"Assuming you're not a large supplier, your online shop is more like a boutique than a chain store. And boutique items should come at a premium, because they are usually one of a kind. Higher prices give an impression of value, so the rule of thumb for pricing is that you should increase your prices if you want to sell more."

Of course, pricing also depends on what you're selling. It may be harder to charge more for books than unique, handmade jewelry.

The price of an item conveys information about its quality, Silkfair says, and recommends sellers set prices "high enough to cover your costs, your hourly wage, and of course, profit!"

Silkfair suggests sellers who are hesitant about increasing prices try putting out a new line of products priced significantly higher than the other items in their shop, and it discusses additional pricing strategies as well.

It's worth taking a fresh look at your pricing strategy as we go into the New Year. It's not enough to simply survive the kind of discounting we saw in 2010 - sellers need to look for ways to boost profits and try to compete in other areas besides pricing.




Comments (19) | Permalink

Readers Comments

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: old timer

Sat Jan 1 13:56:17 2011

Unfortunately, this price pressure simply encourages the "race to the bottom" mentality.

All retailers face this challenge, more so for the small independent retailers. Somewhat related to trying to compete with the Chinese sellers (and others) who MAY (not always certainly) be pushing similar or pirated or counterfeit items.

It's more important than ever for small sellers to concentrate on offering unique items. Even though eBay seems to have decided to throw out the unique sellers in their constant drive to expanded growth and dominance by mega players. And even though eBay has raised fees so much as further erode the potential profit margins. We small sellers have to seek out and promote other venues as well as unique offerings if we are to maintain any reasonably healthy profit margins.

Otherwise, the consumer-dominated pricing model will simply result in a quickly reduced number of retailers offering non-unique items. In the end, the bigger sharks have to turn on each other until only one is left. And I'm not convinced that is really very healthy for any retail market, even for the lone survivor.

But agree or not, it is becoming the standard for the on-line (and B&M) marketplace.

On a brighter note, I do want to wish everyone a Happy New Year! Yes it will be another year of challenge, but also of opportunity to evolve. Best wishes to us all!

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: look around

Sat Jan 1 14:01:45 2011

I don't have a problem raising prices.

Gas is up, Food is up, Housing is up. Cat food is up.

I just got done raising my prices 3% on everything.

If a buyer doesn't like my price then I invite them to shop else where. I'm not intimidated by how they feel. Business is business.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Harriet This user has validated their user name.

Sat Jan 1 17:41:57 2011

I sell almost vintage, vintage and antique items and at least once a year I try to go through all of them and do some comparison price changes. Many items appreciate in value and I do change pricing to reflect that. It is interesting that something that has been sitting for quite a while at the lower price, sells right after I make a price adjustment. That has happened a few times.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Digby
Web Site

Sat Jan 1 18:22:21 2011

Great post Ina (as usual)

When I checked out that Comscore article the chart at the bottom was the one that interested me.

I am not quite sure exaclty how it works as Amazon, ebay etc were off in a different part of the chart.

But the amazing thing to me was the very high numbers for Social Shopping, Retail Sites and Comparison sites. Each of those put the rest to shame.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Jim This user has validated their user name.

Sat Jan 1 19:08:27 2011

1.  Do not compete against Walmart or other mass merchandiser.  You will lose.

2.  Do not sell commodity or mass produced items; you will lose.

3.  Sell niche, unique, one of a kind and specialty items.  You have the advantage here.

4.  Make a profit.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Ron

Sat Jan 1 19:21:49 2011

Unfortunately, shoppers often buy on price rather than value.  There's usually a reason for something being priced lower and that often is because obsolescence is about to set in, quality is lower, the item is a return or the buyer receives inferior service or is charged extra for add-ons.

I personally will not buy most Chinese manufactured items, even commodity items, because they often don't last - if I have a domestic alternative, I'm always willing to pay more because the item will function better and last longer, in most cases.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Rich

Sun Jan 2 01:10:47 2011

sellers need to look for ways to boost profits and try to compete in other areas besides pricing???

sounds good, but how???

I used to make a small handling charge of about 50 cents per order which helped offset some of Ebay and Paypal's high fees.  Ebay turned around and did a max shipping charge and now I lose 15 cents per order unless I buy cheaper boxes.  That's a bad option because damaged items means negs and refunds. Boost profits?

Ebay used to charge $16/month and 3 cents per item per month so a store with 2,000 items would have a $76 up front fee.  Now at $49/month and 5 cents per item per month and store with 2,000 items is double at $150/month.  Boost profits?

I used to pay 12% final value fee for sold store items and now Ebay charges 15%.  Boost profits?

I used to do a lot of ebay with 2,000 items and 200 monthly auctions.  But Ebay has made boosting profits impossible, so I now have a store of 500 items and run 30 auctions per month. But I did find a way to boost profits. I do less and less ebay and more and more of my regular full time job.  And I had a great 2010.  

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: bleedinobvious

Sun Jan 2 06:45:27 2011

the answer is simple
sell something that buyers want and nobody else sells
any suggestions are most welcome!

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Feehike

Sun Jan 2 08:06:10 2011

I agree that sellers should be careful about starting their items off to low on ebay, particularly as the  manipulated Best Match search past sales criteria favours the Retail sellers who sell the same identical items in the thousands. Retail sellers also get more advertising promotions of their items on ebay.

Sellers of one off items would not have a past sales criteria for their items, so cannot prevent their items being buried at the bottom of ebay searches, IMO small to medium sellers may be better off looking at other sites to sell their items on.

One off hand made jewellry etc may fair better by being sold on a site like Etsy who caters for hand made items.

Specialist sites specializing in specific antiques may also be more profitable to sell on e.g coins stamps etc, less relist fees to be paid, more profit.

I moved my General items to ebid Net Auction site, I now get more sales there than I was getting on ebay after the Best Match search came in.

Its not all down to pricing, if you are a seller of one off items it would be near impossible for potential buyers to be able to find the items that get pushed down the bottom of searches & get no extra promotion.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: buck efay

Sun Jan 2 11:39:24 2011

I cut my bills by over 60% by not having to pay Ebay fees anymore! I make less sales, but have less stress & still making the same after saving $25K a year in Ebay fees! Thanks, JD. And my pricing was more "transparent" before on Ebay, when I could break out & show my customers what they were paying for. When listing with FREE SHIPPING on Ebay, I actually charge MORE, 15% added on top of actual mailing costs to cover the higher fees I am stuck with. My free 100 a month with Free shipping cost buyers more than before JD. I guess that's another part of the fabled "Ebay Experience" getting to pay more due to Ebay's failures as a venue. As everyone here said, if you are buying drop shipped or easily sourceable Chinese junk, you will not succeed. If you sell unique, OOAK goods, transparency & price wars both recede into meaninglessness regarding your business/pricing. If you are trying to compete with Chinese sellers that get free government shipping, and have a cost of living in the pennies a day, YOU WILL FAIL. Create your own unique niche, and YOU will control the prices.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: race to the bottom

Sun Jan 2 12:02:57 2011

I knew as soon as eBay began posting the selling price of your last auction that It was a move to drive down prices to compete with other sites or brick and mortar

They accelerated the slam down by burying your product in search insuring low bids or no bids and a possible relisting fee. Very clever. They win  no matter what.

It can't last. Price fixing will come about. The major retailers and manufactures will have to price fix or go out of business.
They will begin set the price fixing trend.
The only variable will be China and India.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

This user has validated their user name. by: Ina

Sun Jan 2 16:00:17 2011

Think about new ways customers can use your products. Books are for people who read or collect books - but what about books as interior design?

The trends toward going green (recycling), crafting (reusing existing items in new ways), and buying American can help you market your wares - this article may inspire you:
http://bit.ly/gZJEWp

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Lawrence A Dickerson

Mon Jan 3 00:03:16 2011

I don't understand the sellers complaining about their products being placed further down the list.I used the ,'ending soonest',feature and I shop by  time left,buy it now or by price,but I always use the,'soonest ending' option.

I spent 40 years in the food business and everybody sells hot cakes  and hamburgers.I had to  make sure mine were the best with the  greatest service and cleanliness around. I priced my competitors out of business

I sure didn't sit around and complain.I gave the market what it wanted at a price they could afford.I didn;'t sell sauerkraut omelettes because I got a good buy on a palette of pickled cabbage.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: Tekgems

Mon Jan 3 02:57:33 2011

It's a slippery slope. We've managed to reduce someof our business expenses but utilizing bulk shippers but you have to get to a certain consistent volume for this to occur. So you work more for less per order, but you also have lower overhead with better negotiated shipping rates. Most small sellers dealin in commodities will fail if they can't leverage lower fee structures or expenses like the bigger guys. If your competitor is spending $.75 to ship a package but you are spending double you can't compete.

As for Chinese sellers, you can provide the value of quicker delivery, being local, and better service at a slightly higher price.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: RAOTFLMAO

Mon Jan 3 08:51:24 2011

Well, I just raised a few of my prices too, you cannot sell for 10% below cost and hope to make up for it on volume.  The key, as has already been pointed out, is unique items and better service than the competitor.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

This user has validated their user name. by: Ming the Merciless

Mon Jan 3 12:06:19 2011

@ Lawrence A. Dickerson

If you don't have enough to do in your retirement, I understand LiveWorld is hiring forum moderators.

They'd hire a man like you with your keen mind and razor sharp observations in a New York minute, and you could cook your hot cakes and hamburgers for your cubicle mates at lunch.

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: irene_salehoo
Web Site

Tue Jan 4 00:35:35 2011

The luxury of high pricing to establish brand value seems to be the privilege of high end designer labels.  With your competition to your left and to your right, we all know so clearly that consumers will still choose to spend less. Selling below cost however is just too risky.  Really tough times. :(

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: propergander

Tue Jan 4 07:28:40 2011

"put your prices up so we get more in sales commission"

Does More Transparent Pricing Leave Room for Retail Profits?   Does More Transparent Pricing Leave Room for Retail Profits?

by: unaware This user has validated their user name.

Tue Jan 4 14:41:28 2011

The comment about ''casual sellers who price at extremely low levels - such is the case with online booksellers who compete with sellers of ''penny books,'' caught my eye.... one of the things that disappointed me about the new requirement for Tax Reporting for eBay sellers was eBay fighting so hard to set the cut-off point for reporting so high: I report ALL of my sales and pay taxes on ALL of my sales and have been doing so for a number of years. Quite honestly I wish EVERYONE on eBay had to pay taxes on sales... I'm tired of ''part-time'' sellers having a competitive advantage over me because they don't think what they are doing is a ''business''.... well it is and if EVERYONE had to pay taxes on their sales, I for one would be happy about it. I really resent that eBay fought so hard to make the sales threshold so high... $20,000! It should have been $2,000 so that truly only those trying to rid the house of a few items could skip the reporting of and paying of taxes... if you sell $12,000 a year or whatever you are a business and should pay taxes as one! Cranky old coot will end his comments here.



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