Price matching involves quickly adjusting prices to meet competitor prices. While price adjustments to stay competitive have always been in practice, it has become a bigger challenge now, with digital technologies and the emergence and rise of ecommerce.
Price Matching and ECommerce
Price matching requires the use of price monitoring and dynamic pricing techniques. When it comes to price adjustments, the giant online retailers are extremely nimble, with pioneer Amazon leading the way. Price adjustments are made several times a day across a huge number of products.
Is this necessary?
Why is Price Matching Necessary?
Price matching, whether done dynamically or on request by customers, is done to stay competitive and not lose out on sales. Most consumers now use price comparison apps on their mobiles, even while buying items in a physical store. If a customer sees a significantly lower price for a product they are about to purchase in another store, the customer will not add that item to the shopping cart in your store. Ultimately, the customer will make that purchase at the lower price offer. This means a lost sale for you.
So, Should you always Price Match?
Price matching is a complicated game, and you cannot keep offering lowest prices on everything. Your business model is different from any other retailer and you need to stay within your business parameters to stay profitable. So, how do you stay competitive without undercutting your margins drastically?
For this, you need to use good price monitoring and dynamic pricing tools, and you also need to collect and process a huge amount of data. You need to implement solutions that does competitor price monitoring constantly, assess supply and demand changes continuously, monitor customer interest in a product, and determine when to lower or raise prices.
Yes, dynamic pricing is not just about lowering prices, it also helps you spot opportunities to raise prices to increase profit margins, and to lower it when demand goes down.
To do all this you need access to a huge amount of data.
Why is Dynamic Pricing So Easy for Online Retail?
Ecommerce runs on a digital platform. So with etail, it becomes far easier to collect every bit of data in the digital world than out in the real world. Every page view, every click on a link, customers adding products to wish lists, the number of times they visit a product page, are all tracked and recorded. They help assess interest in a product.
With a digital platform, it is also easier to implement other solutions and integrate data from various sources for analysis. It is easy to gather competitor data and study market trends, and combine them with internal data to analyze various factors and set parameters for price changes. It is also easier to update prices constantly on ecommerce sites than in physical stores where prices still have to be changed manually, unless a store has fully adopted electronic labeling.
Besides, this, online retailers can afford to offer lower prices because they generally have less overhead. They don’t have to rent store space and buy shelves and displays, they don’t have to employ so much staff, they don’t have to factor in electricity bills and other such expenses. They also generally maintain their stocks in huge warehouses conveniently located to ship to various regions. They can also easily cater to huge markets beyond boundaries that deter conventional retail.
Because of all this, monitoring competitor prices and price matching automatically becomes so much easier for online stores. This is why most ecommerce businesses besides Amazon quickly adapt dynamic pricing methods to make more frequent price adjustments to stay ahead in the hugely competitive retail arena. This is why online retail is spearheading the price matching game and is changing the way retail pricing works.