What would Adam Smith say about modern ecommerce if he were alive today? For one thing, he’d be surprised no one is buying beaver pelts anymore… but he’d also be confused by the complicated pricing of online goods across multiple channels, which undermines his “natural price” theories.
He wouldn’t be the only one confused, either. Ecommerce brands from all over the world are unsure about whether to use price parity or dynamic pricing when selling on multiple channels. Should they sell the same items for the same price everywhere, or should they stagger the prices for the particular market and hope their shoppers never find out? Is it worth it to invest in “repricers” — software that automatically sets or suggests prices based on individual marketplaces?
In this article, we discuss the pros and cons of price parity and dynamic pricing, how they affect your ecommerce brand, and which repricers to use if you choose that route. First, let’s look at how price parity fits into the general backdrop of modern ecommerce.
Price Parity in Modern Ecommerce
In the early days of ecommerce, price parity was the default due to the low number of places to sell. But as soon as marketplaces like Amazon and eBay matured, with brick-and-mortar giants like Walmart and Target doubling investments in their online stores, we started taking price parity for granted.
One of the biggest issues was Amazon, which had a clause in its seller agreements that prevented them from selling the same items on other marketplaces for a lower price. This legally enforced price parity, but only in a way that benefited Amazon. This set the standard for price parity for the last few years, until now, when Amazon ended the policy and essentially reopened the price parity debate.
So sellers on the world’s largest marketplace can now use dynamic pricing to change their prices however they see fit. If you’re selling on multiple marketplaces, you’ve probably already wondered whether you should optimize prices based on the individual marketplace, or keep them uniform for the benefit of your customers.
Customer Loyalty vs. Profits?
Price parity in ecommerce is a complicated issue with no cut-and-dry answers. It helps to understand it if we boil it down to the heart of the debate: do you prefer customer loyalty or profits? That’s not a rhetorical question, but rather one to challenge your business strategies and priorities.
Some companies revolve around the sale, surviving and thriving from purchase to purchase with little regard to whose credit card is entered. Some companies revolve around the customer, sacrificing their own profits to build a loyal community and reinvesting their earnings into long-term payoffs. Where you land on the price parity vs. dynamic pricing debate should depend on which of those you prioritize more.
If your brand is built around niche marketing, community building, and developing a loyal customer base, you should adhere to price parity, selling your products at the same price on different platforms. True, most customers stick to their preferred platform when shopping, but that doesn’t mean they never check out other channels. If they see the same item they bought for cheaper on another site, they’ll feel betrayed — and that’s the opposite of what a loyal customer should feel.
If, however, your brand lives and dies by the bottom line, then dynamic pricing serves your goals better. You may lose some regular customers, but in theory you’ll make up the loss with more business from other customers.
Certain industries and product categories benefit from customer loyalty more than others. For example, if you’re selling consumer packaged goods that customers buy periodically, loyalty is crucial. Making an extra dollar on another channel is not worth losing the next few years of regular business from a loyal customer.
If you’re selling one-time purchases, particularly low-cost goods, loyalty is less important. That goes double for limited edition and one-of-a-kind products. Furthermore, if your sales strategy centers on highly competitive markets like Amazon, price parity may be a luxury you can’t afford.
What Are the Best Repricers?
Decided that dynamic pricing is the best strategy for you? The good news is, you don’t have to continually monitor your competitors and redo your prices all the time — you can use automated software to do it for you. Here are some recommendations to help you get started.
- Informed — If you sell on Walmart and Amazon, Informed may be the best option for you with their custom repricing strategies.
- Skuuudle — A favorite among users, who like that they have a team of humans reviewing prices rather than an automated algorithm.
- Omnia Dynamic Pricing — A well-reviewed dynamic pricing algorithm, although the cost might be too high for beginner and small-scale online sellers.
- Prisync — A more cost-effective repricer than the above two options, Prisync is generally well-reviewed, although users comment on technical issues within the software.
- xSellco Repricer — If you’re dealing exclusively with Amazon, Xsellco is one of the most popular repricers for optimizing prices and winning Buy Boxes.
- SellerRepublic — One of the most popular repricers for Amazon or eBay, SellerRepublic is on the cheaper side to accommodate smaller retailers.
Of course, you can always check competitor prices yourself, although this opens you up to human error and opportunities falling between the cracks. Automating tasks like repricing frees you up for more important decisions.
Looking for more pricing tips, check out our blog and learn how to price your online products.
Editor’s Note: This blog post was originally published May 2015 and was updated in July 2019 to reflect more accurate and relevant information.