The ways in which customers shop these days and how businesses sell their products and services online have significantly changed over the past 10 years.
Every year we see a new trend in e-commerce that influences billions of customers and business strategies. Shopify online store owners shouldn’t miss out on the following trends and it is important to pinpoint the ones that can increase their sales and profits.
Online retail has become very flexible due to new advances in technology and platforms. One of the biggest trends that has emerged in the past two years is dynamic pricing.
Dynamic pricing has a wide variety of uses and works as much for customers as it does for your Shopify store.
The core idea of dynamic pricing is that it gives you the opportunity to adjust prices to real-time supply and demand, allowing you to react quickly to the rising or falling popularity of your products.
The airline, hospitality and entertainment industry base their pricing on several factors, such as; time or date of purchase, destination popularity, free seats remaining or quality of service.
Customers get the opportunity to buy cheaper tickets when demand is low, and business owners are presented with the opportunity to increase prices when demand is high.
Shopify is a great e-commerce platform where you can sell profitably. Inspired by other industries, you can use historical sale, visitor and margin data to evaluate your latest profitability and sale conversions.
Static vs. Dynamic pricing
With static pricing, e-shop prices don't change according to supply and demand curves. They remain constant and as a result, profit and growth opportunities are left undiscovered and untapped.
With dynamic pricing, not only do you have the opportunity to adjust your prices based on many factors that influence your business, but also to influence the shopping decisions of your consumers. Let's look at the steps to creating a dynamic pricing strategy.
Dynamic pricing on Shopify
The first step is to understand how dynamic pricing might work for your online retail environment, so you can run a pricing experiment.
If you have hundreds of products, you might consider adjusting prices based on category or collection levels. If you have fewer, but high performing products, you might consider dynamic pricing for individual products.
For a Shopify online store, you can change prices in the Shopify Admin Product section.
A successful dynamic pricing strategy should positively influence your conversion rates, revenue and most importantly your profits. If there was no impact after a chosen period (e.g. a month) dynamic pricing might not be right for your product category.
A SaaS solution such as PriceOptimizer, with automated Shopify integration, gives you access to a powerful data analysis tool without investing and risking too much implementation time and budget.
Finally, you can decide on particular ways in which to best use dynamic pricing for your context.
Consider segmenting products into groups by specific product qualities or features and offer segment wide discounts. Monitor discount performance and find opportunities to grab more sales when price is too high and conversions are low, or achieve greater profit when discounts are too high and conversions don’t make up for thin margins.
When launching a new product, you can decide if you want to introduce it at a premium price for the novelty of it, or at a lower price as an introductory offer.
Pay attention to the popularity of your products and their inventory level. Conversions can be negatively impacted by out of stock levels. Optimize your inventory levels and keep popular products at a premium price, while making sure that other factors don’t decrease your sales.
Finally, weather changes are a perfect example of time-based dynamic pricing strategy. You can monitor weather or holiday seasons and implement special pricing promotions accordingly.
Take inspiration from present trends in e-commerce pricing strategies and boost your Shopify sales and profits. Dynamic pricing has been widely tested and implemented in many industries, so Shopify retailers shouldn’t miss out on this opportunity to grow their business.
PriceOptimizer is a pricing tool for evaluating and driving pricing strategies for e-commerce stores. Using historical sale, visitor and margin data, PriceOptimizer can be used to improve your e-shop product pricing and profit. Available integrations: Shopify and API.