Millions of consumers look for the best deals during the two shopping days — black Friday and cyber Monday. In 2020 alone, US shoppers spent $10.84 billion during Cyber Monday and $9 billion during Black Friday. With such record sales, retailers with a winning strategy during BFCM are assured of reaping handsomely. But since customers are in the market for the best deals, you must ensure you are providing exactly that.
Unfortunately, many sellers get the pricing wrong and keep lowering their prices to win sales. Ultimately, these retailers have no margin left and fail to make a profit despite their massive sales. You must price your products correctly to boost your eCommerce sales on BFCM and remain profitable.
Luckily, this post is about just that. We'll give you the BFCM pricing guide for eCommerce businesses and how to reap significantly during the period. But as you learn how to price your products appropriately, keep in mind the need for adequate inventory to avoid out-of-stock situations during these great shopping days. If you have cash flow issues, an eCommerce-friendly financing option can help you get the cash you need.
The Importance of Strategic Pricing
BFCM is short for Black Friday and Cyber Monday. It is a holiday shopping season starting on the Friday after Thanksgiving and lasting through Monday. Although businesses can start noticing increased sales in the week leading to this weekend, BFCM is at the peak of a mega-buying spree. BFCM is not loved by consumers only; even eCommerce businesses look forward to it as it presents an opportunity to make huge sales and acquire new customers in one weekend.
During this holiday shopping season, consumers take advantage of the low prices to purchase items they have desired for a long time. Unfortunately, eCommerce retailers find it a difficult period because they must craft an excellent strategy to maintain profit. This holiday is about price perception; your customers want to feel like they are getting the best deal.
But you need to set the optimal price for your items to sell during the holiday. If you set the correct price, you become more attractive to the customer; thus, you sell more. However, you need to ensure profitability for every item you sell. For optimal profits, you should project the maximum price your customers are willing to pay and the sales projection. It helps you to have a more balanced strategy while improving optimal prices.
Margin-Related Challenges Facing eCommerce Businesses
Online channels get you in front of millions of consumers. But there is still competition. With the high device usage today, consumers can compare prices with a few words or keystrokes. Some prospects will visit your store to see your product and pricing and find other retailers with a lower price than yours and order from them.
If these customers find out that other sellers have set the same price, they won't come back to your store to purchase, especially if there is no significant difference in the products. That is why lowering prices won't necessarily mean you will get more sales. You may need to do more than just that.
Managing Pricing Across Different Channels
As an eCommerce retailer, chances are you are selling on different platforms, e.g., Amazon, Etsy, Shopify, etc. A multi-channel strategy is beneficial for your brand. But customers have become multi-channel consumers, and they can even compare prices on different platforms.
One major challenge facing eCommerce retailers is ensuring their inventory is accurate across these channels to avoid out-of-stock situations. You also want to ensure your pricing is correct; otherwise, shoppers can quickly lose trust if they find a lower price for your item on Shopify than on a different website. The challenge is keeping a balance, yet your pricing in a particular platform could depend on competitors in that web store.
BFCM Pricing Guide
Before determining your prices, you must have a strategic plan. Here's how to settle on an optimal price.
Run the Numbers and Make Comparisons
Below are some of the factors to consider before settling on the final price for your products:
Evaluate Historical Sales Data
Check last year's sales report during BFCM. Consider crucial indicators, e.g., shoppers' demographic details, high-margin products, best-selling items, and day-wise sales, to establish the sweet spot in product pricing this year.
Consider Your Costs
While calculating product pricing, consider expenses such as administrative, marketing, and salary costs during the BFCM season. Be sure that product prices cover your costs.
Examine Your Competitors
Keep an eye on competitors' prices. Check their promotions to spot potential competitive advantages. You can even check their inventory as well. They may run out of stock before the shopping season ends, creating an opportunity to increase your prices and reap higher returns.
Determine the Price
Competitive pressure or other reasons tend to force eCommerce businesses to slash prices. But you don't want to reduce prices if it lowers the perceived value of your item. Although customers are looking for the best deals during Black Friday and Cyber Monday shopping holidays, if you price your products too low, customers may consider them inferior. You don't want to slash your prices beyond the profitability point. Keep in mind that staying profitable during BFCM significantly impacts your annual turnover.
Only in some rare cases that eCommerce sellers may introduce 'loss leaders' to attract more customers to their store. For example, if you are sitting on an older inventory but want to increase your cash flow, you may hold a clearance sale and discount the items below their market cost.
Once you know the exact price to place on your products, you still have a range of figures to choose from. You can delve into psychological pricing to understand how customers perceive your prices. For instance, a price reduction from an even figure to an odd number may signal a more significant discount than exists. e.g., reducing pricing from $18.00 to $16.99. Similarly, prices that end in .88 may even appear to be less expensive.
Be Creative with Your Strategy
Although optimal pricing is the most crucial aspect of the BFCM shipping season, you can incorporate other interventions to attract customers. You aim to increase your sales and get maximum profit without slashing prices to the point that you hurt your profitability.
Below are creative ways to add to your pricing strategy:
You can choose to run special promotions for your existing customers. Identify your regular customers and email them a discount code. It shows appreciation for their loyalty and motivates them to buy from you again.
Promotions during BFCM are ideal if you sell items that customers will likely buy again soon. You take advantage of this great season to entice and acquire customers and plan a careful follow-up to encourage them to buy again.
Diversify Your Catalog
The pricing strategy you adopt during BFCM can directly impact consumers' perception of your business. It does not matter whether you are pricing your product to give the customers a better deal during the mega shopping days or not; ensure you are careful when choosing how much to sell your products.
Although consumers want a good deal during BFCM, they tend to associate too cheap products with lower quality. A high price can sometimes send signals that your product is premium. While competitors are lowering their prices intending to sell more, consider what would make your product special. One way to do that is by diversifying your catalog. You can bring different products to take care of your discount and high-end customers.
When lowering the prices to compete with others in the market, you can't do that for your entire line of products. However, you can use a marketing message that makes the customer feel they are getting a similar or more excellent value for a lower price. It eliminates the feeling that they are getting less or the perception that your low-priced products are inferior.
You should also be careful not to diversify your range of products to a point where you are outlaying a ton of products. Overexpanding your product portfolio will require you to have more funds to purchase inventory and need more warehouse space.
Consider Product Bundles
Another way to sell more to customers during BFCM without having to slash your prices extensively is by creating product bundles. You just launch the bundles during the two shopping days and advertise them as a unique combination you won't offer again. Such a marketing language makes the product combination more appealing.
Below are tips for successful bundling efforts during BFCM:
Recognize your Customers' Needs
Understand the problems consumers are trying to solve by buying the product. It will help you choose products that meet customers' challenges. Further, you must have a complete picture of how customers use a product and bundle it with another, which is often necessary for the process. For instance, an eCommerce business selling photo and video shooting equipment can combine cameras and tripods. The relevance of the product combination is the key to bundling success.
Consider the Value
While displaying your product combination on the online channel, ensure you communicate how much they save by purchasing the bundle instead of going for each item separately. The resulting value is the most critical factor in closing the deal, not the price. You can express it in dollars or percentages depending on what looks more impressive to your customers.
Partner in Bundling
Your portfolio may be limited to a single product, but that does not mean you completely lose the opportunity to bundle products. You can consider joining forces with other sellers, provided their products fit with you and are not competitors, and create a combination from which you both benefit.
Bundling does not always have to go with physical products. If you sell photo and video shooting equipment per the example above, you can bundle it across industries. For instance, you can bundle with a company selling image and video editing software. It will touch a larger pool of customers and maximize your product exposure during BFCM.
Having Adequate Inventory for BFCM
Pricing challenges can affect your profitability during BFCM regardless of your selling products. Adding to the pricing woes are the customers and end users with access to more information regarding items and substitutes.
Even as you create an intelligent pricing strategy, you cannot overlook the need to make inventory decisions in advance. You must pick and order enough products for BFCM, mainly if you depend on suppliers to source or manufacture your products. You don't want to price products correctly and attract many customers but run out of stock before the shopping season closes.
Unfortunately, you may lack sufficient funds to stock up during the mega shopping season adequately. eCommerce retailers stuck with cash flow challenges often rush to traditional bank products to sort out their financial problems. These options may be great for mortar and brick stores. However, they are not ideal for eCommerce retailers due to factors such as the long cash cycle in these businesses.
Further, they may require collateral and come with high interests. It might also take a long time before you get the cash. If you want a financing option to ensure adequate inventory for BFCM, consider a product developed with eCommerce businesses.
Set Yourself Up for Success
The secret to success during a mega shopping season is to craft an optimal pricing strategy that attracts customers while ensuring you have a good margin. However, it does not end with pricing your products correctly. You need adequate inventory to avoid running out of stock after developing a good deal for your customers.
But if cash flow issues hinder you from getting adequate inventory, consider a financing option provided it is a product created with eCommerce interests at heart - contact Onramp Funds to learn more.