In ecommerce, pricing of products can change quite fast. Competitors may provide discounts, lower pricing or free shipping to entice clients. That means vendors that ignore market pricing can miss out on sales or find themselves hard pressed to compete.
Competitive price monitoring is a great way for firms to keep tabs on similar items, understand industry trends and make informed pricing decisions. But going toe-to-toe with every competitor on pricing isn’t necessarily the best option. Lower prices might eat into profit margins when you add in the cost of the goods itself, marketplace fees, shipping and other expenditures.
Therefore, sellers should use competitor research and precise financial data to set pricing that are competitive and profitable.
What Is Competitive Price Monitoring?
Competitive price monitoring is the practice of frequently tracking and comparing prices for identical products supplied by rival companies. It helps merchants assess where their products are in the market and notice changes in pricing that may affect customer decisions.
Let’s say you’re selling wireless headphones for $49.99 and similar products are between $44.99 and $52.99. You can monitor those offers to see where you stand on price.
Typically the process entails:
- Competitor product pricing monitoring.
- Comparing like products and features.
- Reviewing deals and savings.
- Verifying shipping costs and availability.
- Record the historical price changes.
- Assessment of the impact of price on margins.
However, tracking prices does not mean that you change them. Rather, it provides information to help you make better price selections.
Why Is Competitive Price Monitoring Important?
Regular pricing monitoring helps ecommerce businesses to grasp the market situation better and respond to the competition in a better way.
1. Keep Prices Competitive
Customers generally check several listings before making a purchase. If your product costs much more than similar offers, customers may prefer to buy from another seller.
But you may be able to justify a greater price if your product is of superior quality, has additional features or can be delivered more quickly. So compare the entire value, not just price.
2. Safeguard Profit Margins
You can increase sales by lowering your prices, but you may also lower the amount of money you make on each order. Before applying a discount, sellers need to factor in the cost of goods sold, marketplace fees, shipping, advertising, packaging and fulfillment.
“Competitor pricing should always be taken into account when considering business costs,” he says.
3. Spot Market Trends
By looking at competitor prices you can see if there are any seasonal trends, promotions or variations in demand for a product. By collecting prior prices, sellers can know if a discount is an anomaly or a longer-term plan.
4. Identify New Pricing Opportunities
Not every competitor’s price drop is a call to action. If competitive products are not accessible or become more expensive then your firm may have an opportunity to win clients.
However, any adjustment must reflect your profitability goals and client needs.
How Does Competitive Price Monitoring Work?
An organized procedure makes pricing comparisons more useful and helps vendors avoid making unnecessary changes.
Step 1: Identify Your Competitors
Find businesses that offer similar features, quality, and consumer value. For example, compare stainless-steel water bottles with the same capacity and structure, instead of comparing with simple plastic bottles.
Step 2: Select Products to Monitor
Target best-selling products, high-revenue listings, seasonal items and products with significant competition. This means that you may concentrate on the price fluctuations which can have a big impact on your organization.
Step 3: Note down prices of your competitors
Create a spreadsheet and write down the product name, competitor’s name, current price, discounts, shipping charges, availability and date checked.
Also keep earlier data so you can track pricing fluctuations over time.
Step 4: Review the Full Offer
A cheaper product price does not always indicate a better deal. Think about shipping charges, how many you’re buying, accessories, delivery time, return policies, and customer reviews.
This allows you to compare the entire customer offer, not just the price indicated.
Step 5: Look at your costs
Before you change your rates, evaluate the costs of your products, marketplace fees, shipping, promotion and other charges. Then determine a minimum acceptable selling price.
Step 6: Change Prices When Needed
The results help you maintain the current pricing, offer a temporary reduction, enhance the bundle of products you sell or increase the value for the consumer.
The goal is not to be the lowest price seller. Instead, aim to price competitively, so that you may still keep profitable margins.
What Should You Monitor When Comparing Prices?
The pricing of the products are not the only good comparison. Take into account these factors:
- Jetzt Preis: Log normal prices and short-term markdowns.
- Discounts and coupons: Know the effective pricing after applicable deals.
- Shipping costs: See total amount customers spend.
- Availability of product: Check availability of competing products.
- Product Quality: Check specifications, materials and features.
- Customer reviews: Check out the ratings and feedback to get a sense of how good the product is.
- Seller reputation: See how reliable they are at delivering and their return policies.
Such factors help explain why people can go for one deal over another even when the price is higher.
How to Monitor Competitor Prices Without Dedicated Software
I think small ecommerce enterprises should begin with simple ways, not complicated systems.
Make a Price Tracking Spreadsheet
Keep a spreadsheet with columns for product name, SKU, competition, current price, prior price, discount, shipping cost, availability, and date checked.
This formula can also be used to work out pricing differences:
Price difference = Your product price – Competitor product price
For example, if your product is priced at $40 and a similar competitor offering is $36, the difference is $4. But that doesn’t immediately mean you should lower your price.
Set up a Monitoring Schedule
The optimal frequency depends on your product category and competitors.
- Daily: Highly competitive items.
- Categories: Multiple times a week, Fast-changing.
- Moderately competitive products: Weekly.
- Stable categories: Monthlies.
Also, check prices more often during seasonal sales and big shopping events.
Keeping an eye on competitor pricing on e-commerce sites
Amazon vendors
Often, a number of businesses sell comparable products to Amazon merchants. So check out similar ads, discounts, delivery terms and product availability.
Another factor that can affect what to buy is the Featured Offer, or the Buy Box. Price is one consideration in its decision, but fulfillment, shipping speed, inventory and seller performance may contribute as well.
Before you meet a competitor’s price, consider all the Amazon-related costs – referral fees, fulfillment fees, storage fees, advertising costs, and so on.
eBay Sellers
For eBay sellers, compare the listings on the basis of the condition of the product, specifications, and accessories provided. You can’t compare a new product to a used product without considering the difference in condition.
In addition, solid data can assist sellers in seeing what the market is really doing, rather than just looking at the present asking pricing.
Evaluate the full offer by checking seller feedback, shipping charges and delivery circumstances.
Shopify Store
Shopify sellers have more control over their store and promotional tactics. But companies still need to know how their prices compare to similar products across online marketplaces.
Be on the lookout for deals, package offers, shipping conditions and promotions. Also check product views, add to cart activity and completed purchases to uncover any pricing concerns.
Price isn’t the only thing that affects conversions. And product descriptions and photos, customer trust and the checkout experience are all important.
Common Ecommerce Pricing Strategies
Companies might utilize different pricing strategies according to their products, consumers and financial objectives.
1. Competitive Pricing
This means we price our products by looking at what similar products are selling for in the market. But consider product quality and running costs before you decide on a price.
2. Pricing with markups
Cost-plus pricing is the cost of the product added to a percentage.
Selling Price = Total Product Cost + Mark-up
For example, a product that costs you $20 and you mark it up 50% would sell for $30. But
Markup and profit margin are separate calculations.
3. Pricing Based on Value
This strategy is customer value driven. It is reasonable to charge a higher price for products that use better materials, have more features or last longer.
4. Dynamic Pricing
Dynamic pricing is the practice of modifying prices according to such conditions as demand, competition, seasonality and product availability. But too many modifications without a clear approach can damage profitability.
5. Package Price
Bundle pricing is when you mix many products into one offer. It can promote higher purchases and improve average order value. But before you can put a price on the bundle, you must compute the cost of each item.
How to Calculate Profit Before Matching Competitor Prices
Lowering prices without calculating costs can damage profitability. Consider this example:
| Financial item | Original price | Reduced price |
| Selling price | $50 | $45 |
| COGS | $20 | $20 |
| Marketplace fees | $7 | $7 |
| Shipping and packaging | $5 | $5 |
| Remaining amount | $18 | $13 |
A $5 price reduction decreases the remaining amount from $18 to $13, assuming other costs remain unchanged. This is approximately a 27.8% reduction.
This simplified example excludes other possible expenses, and actual marketplace fees may vary with the selling price.
Therefore, calculate your minimum acceptable selling price before responding to competitor discounts.
Minimum Selling Price = Total Variable Costs + Required Profit
Also, remember that revenue and profit are different. Higher sales revenue does not necessarily mean higher profit because expenses must still be deducted.
How Ecommerce Bookkeeping Supports Profitable Pricing Decisions
Competitor price data lets you see how much other sellers are charging. But it doesn’t tell you whether your own things are profitable.
Ecommerce businesses require reliable records of sales, refunds, marketplace fees, settlements, shipping costs and COGS to determine how they are doing financially.
How PlugBooks Helps Ecommerce Sellers
PlugBooks helps with the bookkeeping part of the ecommerce business. It enables merchants to track financial information from supported channels, such as Amazon, eBay and Shopify.
Sellers can control key financial details such as:
- Orders, refunds, marketplace fees.
- Taxes, settlements and expenditures.
- Payouts and charges.
- Cost of goods sold (COGS)
- Financial Dashboards & Reports
PlugBooks also enables relevant CSV and PDF settlement and COGS reports, along with connections for QuickBooks and Xero.
PlugBooks is an accounting solution and not a rival price monitoring or an automated repricing tool. Organized financial records can help sellers assess whether their price strategies are helping to maintain healthy profit margins.
PlugBooks is an accounting software that gives you a lot more access to your ecommerce accounts. Check it out, and get a 3-month free trial.
Closing thoughts
Competitive price monitoring helps ecommerce retailers to know the prices in the market, identify changes and make educated decisions. Successful pricing, however, is not about having the lowest price.
Sellers can use comparisons with similar products, historical price tracking, customer value reviews and company cost calculations to establish more sustainable pricing strategies.
Good bookkeeping may also help organizations see how pricing changes effect sales, expenses, and profitability. Ultimately the optimal solution finds a compromise between competitive offers and long-term financial health.
Common Questions
1. What Is the Difference Between Competitive Price Monitoring and Price Intelligence?
Competitive price monitoring is simply keeping tabs on what your competitors are charging, while price intelligence is about digging into the data to understand market trends, customer behavior and how you compare to the competition. Both assist e-commerce enterprises make better pricing judgments.
2. How Many Competitors Should An Ecommerce Business Monitor?
An ecommerce shop can start by tracking three to five direct competitors for each significant product category. If you are in a market with many competing vendors, don’t watch all the businesses. Watch the sellers who are selling similar products to the same target buyers.
3. Should Ecommerce Sellers Always Price Match the Lowest Competitor?
No. Competing on the lowest price in the market can eat away at profit margins, especially when your competitors have differing costs of goods sold, marketplace fees, or fulfillment charges. When changing prices, sellers need to think of the value of the product, what customers want and the least acceptable profit margin.
4. What is the Price Gap in E-commerce?
A pricing gap is the difference between the selling price of your product and the price of a comparable competitor offer. For example, if you have a product priced at $40 and a competitor has a similar product for $35, that’s a $5 gap.
5. What should sellers do when a competitor is out of stock?
Before you change your pricing, verify whether the product is temporarily unavailable or discontinued. If buyers cannot afford the rival offer, your product may become a substitute. However, only change prices after considering customer demand, inventory levels, and market conditions.
6. Do competitor price changes affect marketplace profit margins?
Yes. Competitor price fluctuations may affect the pricing decisions businesses make to remain competitive. But if you reduce your selling price, you may have less revenue to pay your COGS, marketplace fees, shipping and other expenditures. Reviewing these costs helps to ascertain if a price modification is financially sustainable.
