Burc Tanir is its CEO Prisyncthe price optimization software company that helps e-commerce businesses apply smart, data-driven pricing.
2022 is clearly not the year of e-commerce.
One could state the exact opposite after looking at all the stats out there.
According to the latest Mastercard SpendingPulse report, physical store sales increased by 10%, while e-commerce transactions decreased 1.8% from a year ago. From another point of view, research (download required) reported that, on average, the share of total e-commerce spending rose sharply from 10.3% in 2019 to 14.9% at the height of the pandemic. However, it then dropped to 12.2% in 2021. Including inflation, ever-expanding CPC costs across all types of paid advertising channels, and intensifying competition, the overall outlook for the market is even less rosy.
In short, it becomes increasingly difficult to attract customers to your store. So it makes sense to maximize what you already have in an effective and efficient way. A key transformation strategy that innovative e-commerce companies are using in this pursuit is pricing automation.
In this piece, I’ll walk you through three important ways pricing automation is transforming an ecommerce company’s operations, while explaining why ecommerce pricing automation matters.
1. Save time and money
Let’s start with the obvious.
E-commerce may seem digital on the surface. However, behind the scenes, it’s good old technology-powered retail. We all know that retailing consists of various labor intensive tasks.
Just like any other retail operator, an e-commerce operator must deal with both the supply and demand side of the business. On the supply side, one has to take care of locating, curating and sourcing the right set of products, and on the demand side of things, an operator has to deliver those products to their customers. This journey – from the manufacture of an item to the hands of a customer – is technically what an e-commerce company needs to overcome its stiff competition.
The main driver of this competition in today’s somewhat shrinking inflationary economy is prices. Therefore, offering attractive prices has become an even more impressive value proposition for all kinds of e-commerce companies.
However, without a decent amount of competitive intelligence, one can hardly claim to be competitive enough. Let’s say you set a very attractive price for a product by looking at competitors’ prices one day. The problem there is that a typical e-commerce company carries about 2,000 to 3,000 items in stock, and also typically has dozens of competitors retailing the same variety. Therefore, you cannot technically repeat these price checks manually for all your assortment and competitors. Adding to this complexity, prices online tend to be very dynamic (ie, a price you find on a competitor’s website can change within minutes).
Theoretically speaking, it would require too many man-hours to maintain comprehensive and dynamic competitor price tracking manually. It would be a huge waste of scarce e-commerce talent and labor costs.
By automating the competitor price tracking process, an e-commerce company can generate thousands of live competitor pricing data points instantly, spot price outliers with a few clicks, and quickly identify opportunities for action.
2. Mitigation of (Unforced) pricing errors
“Oops, forgot to add a comma there!”
If you know this sentence, you know it.
Manually building price lists for your items may seem like a bulletproof way of doing things, but we human computer operators make mistakes (in this case, typos)—quite often.
However, typos aren’t the only reason e-commerce companies make pricing mistakes.
We could also call it a bug to set prices online at a lower than optimal level. Collecting only what is available (mostly limited manually collected data) and arriving at the “ideal” price may not necessarily give you the ideal price that you would otherwise get if you or an automated pricing engine did a thorough analysis and calculation.
Needless to say, computers are superior to humans in crunching and storing massive amounts of data.
Pricing automation consists of that piece of data analysis in which the pricing engine suggests the optimal price considering the profitability of the product and helps e-commerce merchants mitigate sub-optimal pricing and making a costly pricing error in today’s highly competitive time. landscape.
3. Enhancing return on investment
As I mentioned in the opening, customer acquisition costs across all kinds of subscription channels are also on the rise. This simply means that attracting customers to your online store is now more expensive than ever. Converting this exact traffic into sales has become a very important strategic priority for all e-commerce companies, regardless of their size or industry.
Attractive prices are a powerful conversion magnet—just as unattractive prices are great pushers.
I’ve already mentioned how pricing automation can help ecommerce companies set optimal prices and convert their paid traffic into more sales and improve their ROI. There’s another often-overlooked initiative that billing automation could enable.
By automatically assessing how competitive one’s prices are, one can immediately identify which items in their collection could lead to better conversion rates while still offering decent profit margins. Similarly, one could also identify the elements that would perform poorly.
By better managing their paid marketing budget, in the sense that the more competitive—and attractive—items get more exposure and the rest get no or limited exposure, an e-commerce company can simply boost their paid marketing ROI and spend money.
How to get started with billing automation
The first step is the competitor price collection section. To automate this, e-commerce merchants should create a competitor list and decide on their own collection to be tracked against their competitors. The second step is to use all this automatically generated competitor pricing information while making automated pricing adjustments. Marketers also need to have an overall pricing strategy in mind, which could then be fed into the pricing automation engine.
Conclusion: Pricing power
A key characteristic of winning markets like today’s has always been price strength.
It is unthinkable to achieve this without automation in an extremely data-intensive market like e-commerce.
E-commerce companies of all sizes should consider prioritizing the automation of their invoicing processes today, if they haven’t already, and enjoy the transformational journey ahead.