Knowing your true competitors, their moves at any given time, being able to make the right decisions, including pricing decisions, faster than your rivals — all of these aspects are critical for staying competitive today. It is particularly important in e-Commerce, where the speed of decision-making distinguishes winners from losers, as customers can compare different offers instantly through their phones, laptops, and tablets.
The recent crisis has pushed retailers, in particular those businesses selling non-essential products, to their limits, making them rethink their approach to operational efficiency. Thus, advanced companies have started looking for innovative solutions that can help them reduce costs, speed up operations and make the right and much more complex decisions faster and more easily.
As the price of a product has grown into one of the most important touch points in retailer-customer online interactions, pricing has become one of the key growth leverages for innovation-driven retailers to apply the power of technology to.
How Wiggle Uses Market-Based Pricing To Optimize Operations
Let’s start with the following question: what is market-based pricing? It’s a pricing approach that lets retailers base their pricing decisions primarily on competitors’ prices and other market data. To apply this approach successfully, retailers need to ensure two things. The first is to focus on those competitors that truly affect their sales, so-called ‘true competitors,’ and avoid wasting time and money monitoring others. The second thing is to monitor as many ‘true competitors’ as possible, and as regularly as necessary, to get the full picture of the market at any given moment.
Knowing competitors and key-value items, retailers can set higher or lower prices for the same items as their competitors, depending on the brand and price positioning of these retailers — which is a great ability to have as it allows generating traffic and protecting margins at the same time. However, the bigger the retailer is and the wider the range of SKUs it offers, the more difficult it is to manage all of these processes at a necessary speed.
Luckily, modern technologies let retail teams do all of these things, while also speeding up the whole process of setting market-driven prices. WiggleCRC Group, a mature e-tailer of cycling equipment, can be a good example of an innovative company operating across many countries, with different currencies and dozens of web sites, that has been using market-based pricing to stay competitive and relevant.
In two months, the retailer has reduced repricing efforts by 50%, started repricing more frequently across five territories of operations, significantly improved its competitive coverage (doubled match coverage in the UK), and ensured coherent pricing of sizes across more than half a million SKUs. The company also has transitioned to much more complex pricing logic and rules: now its teams have access to the pricing decision-making tree to track every step of making every pricing decision for every SKU.
To sum up, online retailers need to make the right complex decisions, and pricing decisions in particular, faster than their competitors; have comprehensive market coverage; and streamline workflow while reducing costs to succeed in the e-Commerce scene of today. WiggleCRC Group’s story proves that using market-based pricing is a viable option to do it.
Alexandr Galkin is CEO and Co-Founder of Competera, price optimization software for enterprise retailers looking to increase revenue and stay competitive. He is a Forbes contributor, speaker at IRX, e-Commerce and RBTE conferences.