Repricing / Dynamic Pricing (Internet Shops and e-commerce)
Below is a practical guide to the next steps and sample situations that may occur when using the tool in an application.
Have you ever heard about Repricing or Dynamic Pricing?
It’s a continuous process of adjusting your products’ prices to the market changes so they aren’t too low or too high. For e-commerce brands, the main goal of repricing is to stay competitive and always be up-to-date with different market changes.
Repricing is particularly helpful for e-shops with a wide range of different products. The main advantages of implementing Dynamic Pricing in your shop are:
- Higher profits – Repricing spots opportunities for higher profits much better than anyone could do it manually. What’s more, it automatizes the pricing process and adjusts it by given circumstances such as lack of availability in stores of your competitors
- Time savings – Manually adjusting prices is nothing but a nightmare and a real energy drainer. Our system will match the prices accordingly, and you can always control the results of recent repricing actions in a transparent panel.
Do you know how to save hundreds of hours on price changes and always have your pricing strategy reflected in current prices using the Dealavo app?
Thanks to the “Reprice” tab in the Dealavo app, you can automate your pricing. For example, you can decide that your offer should always be the cheapest one on Amazon under the condition that the margin is minimum 15%.
Dynamic pricing (also known as repricing) is a tool that, by automatization of processes, allows you to react quickly to any changes in the e-commerce market. Well-set rules allow you to automatically identify specific solutions aimed at maximizing profits, without having to spend time on manual analysis.
It is a very convenient tool in case of a larger number of products that we want to control, directed at suggesting solutions for specific customer business strategies.
The rules we set are target-oriented and make the price purpose of a certain goal e.g. to be the lowest of the selected retailers. The price will set itself to the target as long as it is allowed by the limits you set in the Limitations section. If the function hits a limit, either upper or lower, then the price will set as close to that limit as possible.
The second step in creating a rule is to choose for which products or product groups you want to use automatic pricing.
DYNAMIC PRICING – WHO IS IT FOR?
Dynamic Pricing is used particularly often by online shops that offer a wide range of products on highly competitive markets.
Pricing automation can provide them with the following benefits:
- Time savings – with pricing automation, it is no longer necessary to manually adjust all offers to the ever-changing market depending on the current demand and moves of your competition. The system will match the prices accordingly, and you can always check the results in a transparent panel.
- Higher profits – Dynamic Pricing makes it much easier to react to any opportunities for higher profits. Sometimes, reducing the price by 1 cent can cause your product to be shown first in the ranking on the most important marketplaces, providing you with bigger profits. Pricing automation is more than just price reduction – sometimes, increasing your price can yield much better results (e.g., when the offering of your store is still the cheapest option or if the product is not available in stores of your competitors).
HOW DO DYNAMIC PRICING AND REPRICING WORK?
- First, you have to determine the products for which you want to use automatic pricing.
- Then, you have to specify the rules according to which the prices are to be set (see below for some examples). You can define different rules for different product categories, sales channels and locations.
- Based on data collected from the market, ERP systems, etc., the system will propose prices for your shop. You can choose to have your prices changed automatically based on Dealavo calculations, but you can also require that every proposed change be approved before it is applied to the sales channels.
- It is also important to follow up on the results of your actions – you might want to check if the rules you use to define the prices are optimal. You can also test various repricing rules.
WHAT PRICING AUTOMATION RULES CAN BE USED?
The rules for automatic pricing frequently depend on the nature of the particular industry, company or sales channel. Below, we have provided examples of the most popular rules:
- TOP 10% offers on the particular platform – use this rule to be included among the first 10% offers in a specific sales channel, e.g., Google Shopping.
- Between two competitors – the rule allows for automated price setting between the selected competitors.
- Below/above selected numerical attributes – this option offers the possibility to set the target profit margin as a specific amount or percentage (e.g. the specified product price should include a margin of at least 5%).
- Below/above selected competitors – if we use this rule, the algorithm will generate lower or higher prices than the prices of our selected competitors.
- Increase/decrease by a specific amount/percentage – this option allows you to decrease the price by a specific amount or percentage in a specific period of time. This means that, for example, the price of a product will be reduced by PLN 1 every three days.
- By cost – this rule is based on the “cost-plus” method.
- Based on competitor market position – if you use this option, the prices of the products will be based on the market position of your competition. You can, for instance, set prices that will be higher than those offered by the cheapest competition.
One of our clients is an online shop operating on the highly competitive market of Consumer electronics goods. The Dynamic Pricing platform can optimise the prices to make sure that our customer’s products are always among the 5 cheapest available offers at Amazon, as long as the margin is not lower than a specific percentage. If this rule cannot be met, a different rule is used, ensuring that the product is not the most expensive product on the platform (in this case, too, there is a specific limit).
Initially, our client applied this rule to only one product group, using different rules for other categories. Thanks to A/B tests of repricing rules, however, the client found out that the described pricing method provided the best results, and they decided to use them for a wider range of products.
To do this, go to the Products section (Assign products to a rule) in the Repricing tab.
From the list select the items in the column Assign to rule or simply filter the entire group, which can already be set in the feed file.
Groups can contain any number of products, and separate rules per source (channel) can be defined for the same group of products and the same priority:
- marketplace (e.g. Amazon, bol.com, Shopee),
- retailers (online stores, such as Zalando, Answear),
- comparison websites (Idealo, Google Shopping).
That means we will be able to identify offers of the same products with different prices and it goes as below:
- the product could have a different price on Amazon, bol.com, and on its domain,
- a product featured in a price comparison engine cannot have a different price than the one shown on the website of the retailer whose offer it presents.
Consequently, you can create a rule for one group of products with a high priority on comparison websites and online stores and another one e.g. for one selected marketplace with the same priority.
Note: If after setting and approving a rule for a particular group, we want to add more products, we have to do it manually, product by product.
All available filters that will help us in setting the desired configuration as below:
- Assign to rule
- Cost price
- Margin % (Same in percentage)
- Average price (Avg)
- Rule (which is actually active)
- Price recommendation (Price reco) for each competitor’s channel
- Difference (Diff) for each competitor’s channel
- Diff (%) (Same in percentage)for each competitor’s channel
- Margin recommendation (Margin reco) for each competitor’s channel
- Margin (%) reco (Same in percentage) for each competitor’s channel
- σ (Deviation between the prices of the product in the market)
- Max (Maximal price in the market))
- Min (Minimal price in the market)
- To max (Difference between your price and the most expensive one)
- To max (%) (Same in percentage)
- Offers count
- To min (Difference between your price and the less expensive one)
- To min (%) (Same in percentage)
- Product brand
In the upper right corner we can adjust the visibility of the columns to our needs by clicking the icon:
And if necessary, reset the view by selecting the icon:
We can check the ranking of the offers each time by expanding the R column in the upper left corner.
In the third step, specify the rule parameters by which you want the price calculation algorithm to operate.
In the Rules panel (Set a rule’s algorithm), firstly we decide for which channels among the available sources we monitor a rule should apply. This means that a price is recommended for a particular channel. This allows customers to flexibly adjust prices for different channels by comparing to selected retailers in the market (from all available sources).
Example of selection:
In tab 1. we provide the direction in which the rule should follow by calculating the price according to the planned business strategy, i.e.:
- Being the cheapest among all or selected competitors,
- Positioning yourself a specific amount lower/ higher/ an equal with the cheapest competitor on the market,
- Positioning on a specific position among selected retailers or in the whole ranking.
Step by step it looks like this:
In the My Price panel, we can choose as below.
We decide whether, for a product added to this rule, the price should be included with or without the competitor's shipping costs (taken directly from the listings).
If we want to compare with shipping costs, we have to remember that the application refers to the product feed if we have provided shipping prices in it and to the competitor's shipping prices. Note: In this situation, simulated results are given without shipping prices, but they will always refer to the cheapest/most expensive price with shipping, which is not always the same as the first place on the list without shipping.
If we want to be the cheapest, but the cheapest competitor has a higher shipping cost than the second cheapest, and as a result, the latter will have a better overall price, the system will compare us to the latter.
Next, we select:
- by how much (percentage/quota) the price should be:
- which selected competitors, if any, we select from the monitored sources for comparison:
EXAMPLE: I own a store in the beauty industry. I want my price to be 5 % lower than the cheapest competitor selling beauty products on Heureka.sk. So I choose the parameters below and the retailers I am interested in from the list.
If you wish to add new retailers to the list automatically, please click on the box next to "Automatically add new retailers".
An alternative to the above option is the Gives me field, where we can select:
- our position (from 1 to 7) in the overall ranking of offers from pre-selected sources or competitors.
- relatively allows us to select a spot among the cheapest X% of bids in the entire ranking of bids, from pre-selected sources or among competitors.
EXAMPLE: I own a beauty store. I want my price to be among the 20% listings of selected competitors selling beauty products on Google Shopping. So I select the parameters as below and the retailers I am interested in from the list.
In this case, the system will rank us in the last place among those who meet the criteria, according to the number of competitors and the percentage range in which we want to be placed. So in the situation when there are:
- 9 competitors with different prices, where we appear as the 10th retailer,
- we want to position ourselves in the 30% of the cheapest retailers,
the system will place us on the 3rd position recommending 0,01 EURO lower value than the position of the neighbouring offer, i.e. 4th.
To check the details of Relatively rule check this link: Relatively rule in Dynamic Pricing
It is worth mentioning the possible usage of additional options to calculate the recommended price if there is no competitor:
"Set catalogue price as recommended"
By checking the above checkbox we are able to calculate the price for selected channels even if we have no competitors, based only on the catalog price from the product feed. This option will be available only if the product feed contains the product prices.
The product feed can also contain minimum and maximum limits if we don't have specific amounts, but only ranges in which we sell products. Such limits will be separate from the list price, but they will not calculate the simulation if the option Set catalogue price is not selected, and there will be no competitors to compare against.
After checking the box we will see a reminder message:
In a situation when there are no competitors, the system should suggest exactly the price in the simulation that we set on our side as the best for us. In one rule, it is possible that some products have no competition and some have it. For the first group, the simulation will separately refer to the catalog price mapped to the application. For the second, it will compare with the competition and calculate simulated prices based on it, according to the set rules, considering the limits and roundings.
Note: If you do not enable the option Set catalog price when there are no competitors, the price will not be calculated if it does not find among the selected competitors offers that meet the criteria of the rule and limits for comparison.
Note: In this case, when the catalogue price is selected as a reference, the simulation rejects price roundings if there is no competitor to compare with.
"Set recommended price to achieve"
This option allows you to set the selected % of margin or catalogue price or minimum price or maximum price in case there are no monitored competitors' offers. Thanks to this option, you can set the price e.g. with a margin of 20% or 100% of the catalogue price.