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3 ways to maximize your profit on marketplaces
Winst maken op marketplaces, hoe doe je dat? Wij hebben 3 tips voor je!
Repricing is a well-known concept for marketplace sellers. Many Repricers work on the principle of lowest price: if your competitor drops the price, so do you. But, the lowest price is not always the best price! In addition, your selling price consists of several cost components plus a profit margin. How can you make sure you hit the buy box without destroying your profit margin? We have 3 ways for you!
From averages to product-specific costs
The first big profit generator is getting rid of averages in your pricing calculations. Most marketplace sellers work with average costs when it comes to price components. This has come about because they often have no way to average those price components (e.g., shipping costs) on a per-product basis for the entire assortment, which often consists of thousands of products. Since these averages are then not specific enough for each product, multiple pricing rules are created, eventually creating a plethora of rules and losing the overview of which rule is applied for pricing the products.
- Shipping costs per product
Suppose you sell 100 different items, each with their own shipping costs. If you were to include the same shipping costs for all of these 100 products in your pricing formula, you would be overpricing some products and underpricing others.
That means you won't sell the overpriced products and will run out of products that are priced too cheap. By including shipping costs as a variable in your pricing formula, the Repricer looks at the shipping costs belonging to each specific product, and then uses that to calculate the optimal price.
- Shipping costs by stock location
Shipping costs for a product often depend on the product itself (e.g., its weight), but also on the location where the product is stored. This can be your own warehouse, an external warehouse at a fulfillment company, or e.g. a marketplace's warehouse (such as at bol.com's LVB). The costs you incur in shipping a product are therefore often different. LVB involves different costs than shipping from your own warehouse, or shipping through a fulfillment company. So the price component "shipping costs" you use in your pricing formulas must take that into account.
- The "Danger Zone"
This is a pricing area where you never want to be with your price. Marketplaces work with commission rates by product category. For example, bol.com's commissions are based on a fixed price and a percentage of the selling price. Take, for example, personal care products such as day creams. These fall into the category below at bol.com. If your retail price is under €20, you pay 5% + 0.40 cents commission. If you are above €20, you go straight to 10.8% + 0.85 cents commission.
In the case of 21% VAT, the danger zone is between €19.99 and €22.21. On balance, you don't want to price between these amounts, because then you pay too much commission and thus the margin goes down. EffectConnect's Repricer includes this danger zone in the price calculation. This ensures that you never end up in that price zone with your Repricer result.
Benefits of working with EffectConnect's Repricer:
- Our Repricer is data driven: it uses variables to perform product specific calculations without adding many price rules.
Result: Always the right price for every product
- You can work with scenarios to adjust pricing behavior based on what is happening in the market: Are you the only provider? Are there multiple providers? Do you have the buy-box and want to keep it? Do you not have the buy-box and would like to achieve it.
Result: always the best price in every scenario.
- You can exclude/include competitors in the Repricer.
Result: this is how you compete with the right sellers.
- Include shipping costs, commissions and even return costs as variables in your pricing structure.
Result: a better cost structure that leaves you with more down the line.
Do you want to know how to use Repricer smartly for your organization? Or are you currently running into limits in the use of your current integration and repricer software? Then get in touch with us. We would love to show you how our software enables you to maximize profits for your organization!