Though it’s a cause of great concern for merchants, one frustrating point persistently rings true in the eCommerce world — there’s no static recipe for a successful conversion. This is partly due to different retailers having different customer bases, but it’s also subject to external factors, particularly recently. Let’s just say that 2020 has hardly been what you’d consider a conventional year.
In recent times, conventional wisdom has persistently pushed online sellers to look past pricing or product quality and focus on just one thing above all others: experience. When you’re up against plenty of other sellers with similar prices and products, so the reasoning goes, you need something to give you an edge — and customer experience is the tool for the job.
This argument has a lot of merits. In truth, I’ve made it before, albeit in a weaker form. But times change, the recipe for success shifts, and businesses need to adapt — and in the midst of a perilous year, how you price your products has once again become the dominant concern for customers. In this post, I’m going to explore this development in more detail, so let’s get to it.
1. The internet is full of generic products
This is something that’s often used as a reason to dismiss price as a primary concern, largely due to the massive influence of the drop shipping fulfillment model. It allows sellers to list items from a range of third-party suppliers in their own stores, take orders as though they stocked them, then pass those orders to the relevant suppliers for processing.
Because the suppliers take set cuts for the products and the fulfillment, the sellers can’t reduce the prices without losing money. But it’s extremely difficult to raise prices too much without becoming uncompetitive. This is why most drop shippers fight over modest items that can accommodate substantial profit margins. Phone cases, hats, toys, hobbyist equipment: a phone case can be manufactured for cents, sell to a supplier for $1, sell to a dropshipping merchant for $2, and sell to its eventual owner for $5.
Since it’s so hard to rely entirely on such items, numerous sellers end up offering the same items at nearly-identical prices, concluding that price can’t be a big determining factor. Well, it can, and it is, and here’s why. When it’s abundantly clear that you are seeing the same product everywhere, you stop paying attention to the copy or the extra details and simply assume that the buying experience will be the same no matter which retailer you use.
The presence of meta shopping tools such as Google Shopping and the Amazon Marketplace has really pushed this visibility along. A given product might be described or illustrated differently, but its unique identifiers will always give it away. Given that, all that matters is paying as little as possible — why would you pay even a cent more than you need to?
2. Most websites are more than good enough
Back when a lot of eCommerce sites were poorly designed, a strong experience could make one stand out. But usability standards have come a long way — and the average website today is more than good enough to pass muster. Even the weakest stores in the online world are fast enough and adequately mobile responsive for most people.
This is largely due to the standardization of platforms and integrations, as well as falling costs. There’s no need to put time and money into developing a custom store site when it’s so much easier to choose a platform and a template. Something like having a knowledge base to provide instant answers to your customers went from high-end luxury to something anyone can do without burning through their budget.
Most checkout systems allow guest accounts to use social logins, feature varied product photos, have accessibility options, and provide customers with options for getting assistance (whether through live chat or through regular support systems). There really isn’t that much to complain about — and when most stores are perfectly fine, it’s the prices that matter.
3. Sales proxies are becoming common
It’s been common for smaller sellers to list their inventories through third-party marketplaces for quite some time now, with the aforementioned Amazon and eBay dominating eCommerce. This evens out customer experience. Two competing sellers can dress their storefronts up differently and use various tweaks, but they’ll ultimately use exactly the same conversion process. This makes it very hard to stand out through providing superior shipping or processing.
In addition to this, more and more retail sites are taking advantage of social selling options — adding direct conversion functions to their social media accounts. Some sellers allow everything (including the creation of an account and the provision of payment details) to be managed through those functions without the users needing to visit their sites. It’s still in its infancy and certainly doesn’t have mainstream popularity, but give it time.
Due to this, sellers are having fewer opportunities to really impress their customers with bespoke experiences. Much like buying through Amazon, buying from one brand through Facebook will be pretty much the same as buying from another — and when everything else becomes equal, as we’ve already noted, it’s the cost that matters.
Can you avoid this by sticking to your own independent store? You can certainly try: it isn’t overwhelmingly expensive to use a fully-featured hosting platform and steer well clear of larger marketplaces. But bear in mind just how dominant those marketplaces are. While Google is still a popular opener for online retail journeys, Amazon surpassed it for initial product searches back in 2018. Plenty of people will only buy outside of Amazon on rare occasions — such is the level of convenience inherent to using one store for almost everything you want.
4. COVID-19 has damaged spending power
Most significantly for this year, in particular, it’s inarguable that the broad impact of the COVID-19 pandemic has left people throughout the world with severely reduced spending power. In addition to leaving numerous workers either furloughed or seeking new employment, it has limited people’s options for shopping at traditional retail outlets through store closures and stay-at-home orders.
Even in cases where it hasn’t damaged spending power (and there are plenty of those cases since some industries have been able to operate largely unaffected), it’s made shoppers keenly aware of how quickly everything can go wrong. With many lockdown measures already lifted, others being tightened and more set to be lifted in the near future, long-term prospects are entirely unknown.
The result is that many people have significantly lowered their budgets, looking to focus on the staples and save as much as they can. What’s more, these aren’t short-term alterations to be abandoned once office life resumes. They’re adjustments to a new way of life (the need for which is clear to anyone who understands the full implications of the global recession).
And while it’s hard to be frugal when shopping for groceries (being limited by what’s in the store or available for delivery in your local area), it’s much easier when you’re looking for things you don’t really need through big online retailers. You can afford to look around for someone who has a particular product at a marginally lower price, even if it will require you to wait a little longer or deal with limited transparency with order tracking.
How much does customer experience matter?
To say that pricing matters more doesn’t mean that customer experience doesn’t matter at all, because it certainly does. Perhaps the best way to look at it is that exceptional customer experience isn’t very significant — even the slickest conversion funnel won’t win someone over if your prices are too high — but terrible customer experience has the power to ruin things.
Think about how you can draw someone in with industry-leading prices but still manage to irritate them enough with your checkout process that they give up and go elsewhere. It’s really about covering your bases. Then establishing a solid foundation to ensure that every part of your operation is at least adequate. And the better you make your buying process, the more leeway you’ll have to tweak your prices slightly without losing your edge.
How to approach adjusting your pricing
Let’s say you’re convinced at this point that you need to focus on pricing. How should you adjust your prices? Should you just set them all as low as you can manage without sabotaging your entire operation? Well, no, obviously not. Here are some core tips for proceeding sensibly:
Monitor the prices of dominant retailers
Prices are meaningless outside of context. What matters is what you’re charging relative to other sellers. By paying close attention to how prices are trending on sites like Amazon and eBay, you can keep yours competitive without going lower than you need to.
Know when you can take a profitability hit
Sometimes it’s worth eating into your profit margins to gain a temporary advantage and build up your brand, but you need to know when to go for it and when to refrain. This will involve a strong understanding of your financial situation and what your long-term goals are.
Offer varied ways to bring costs down
If you can’t outright cut the cost for a particular item, why not offer savings for large orders, or for customers who’ve bought from you numerous times before? Using such tactics can allow you to undercut the competition when it’s going to be most effective (and without hugely impacting your profitability).
Turn price and experience into a competitive advantage
To wrap up, then, customer experience will always matter (particularly for customer loyalty), but price matters more at the moment. These are extraordinary times and shoppers are trying to be rational consumers. If you want to keep up, don’t put everything you have into a slick buying experience: get your prices down instead.