THE COMPLETE HANDBOOK FOR ONLINE SHOPS.
What is price checker (price monitoring tool) and how to choose the right one?
How to increase profits in an online shop?
A well thought-out pricing strategy is one of the most effective methods.
However, there is a large group of people who associate the “online store’s price optimization” with lowering them to the lowest possible level and thus attracting customers. That’s a common mistake, though.
Thanks to the effective monitoring of the market (prices and assortment of the competitors), online stores can easily identify which products are worth lowering the price for, but also – which are worth increasing it for. However, in today’s dynamic e-commerce market this is not possible without automated tools that support e-commerce monitoring.
What are the reasons for this?
If you don’t use such tools – you probably do this work “manually” by visiting e-commerce platforms and websites of competing stores and checking their prices there. Most likely, however, some of your competitors are already using price automation (repricing) tools, so they are able to react instantly after your change, and you won’t be aware of it (until the next time you visit their site).
The other reason is that the amount of data to analyze is incredible. Let’s take electronics market in the UK as an example – based on our analysis, there are on average almost 19 offers of a single product on Google Shopping available. Analysis of all of them for hundreds of products would be extremely time-consuming.
More and more online shops choose a solution for automatic price monitoring (sometimes referred to as price checker) to:
- save time,
- increase profits (by increasing sales and/or increasing margins in appropriate product categories),
- simplify the process of price monitoring and price management,
- enable an immediate reaction to the changes in the dynamic market situation,
- better understand the competitors – their pricing and assortment strategy
- get arguments for negotiations with suppliers.
In this article, we will explain:
What is the price tracking tool for online shops?
What can an online store learn from a price checker?
How does dynamic pricing (repricing) work?
What should you take into consideration when choosing the e-commerce price tracking tool?
Why prices are more important in e-commerce than in traditional trade?
- How to start tracking prices of your competitors?
The e-commerce price tracking tool is an online solution that allows online shops to check the prices at which their products are offered by competing e-shops. How does it work?
Imagine an online shop – buytv.com. The owner of the shop wants to check which of their products should be advertised because of their competitive price. They can do it easily with a price monitoring tool, which can verify which of their products are offered for the cheapest price on the selected websites (e.g. Amazon, Idealo, Google Shopping). The tool will also provide information about the lowest, average and highest price of every product.
In the above example we can see that the store buytv.com has the lowest price (first place in the ranking) for TV 03, for TV 01 its offer is the second cheapest (it is more expensive by EUR 4 than the minimum price in the market). On the other hand, for TV 04 as many as 16 out of 20 competitors sell this product cheaper.
Therefore, if the store Telewizory.pl wants to highlight on its website those products for which its offer is a bargain, it should think about promoting TV 03 or TV 01.
Tip: Analyzing your competitors’ prices can also serve as an argument for negotiations with a supplier. If you see that a lot of stores in the market offer a product at a much lower price than you, it may mean that you are getting worse terms than your competitors.
A price monitoring tool can do much more than just verify if your online shop has competitive prices. The system allows you to check:
which sellers offer a specific product,
on what channels (e.g. Amazon, Allegro, Google Shopping).
If buytv.com wants to use the Dealavo tool to check which retailers also sell the Sony TV sets, they can just click the product they are interested in (in the example below: TV Sony 1) to expand the list of all available offers on the selected websites (e.g. Amazon, Google Shopping). This way, they can easily check which online shops promote their offers in each of the channels and at what prices.
Looking at the example above, you can see that the price checker allows you to assess your online shop’s competitiveness not only from the perspective of the entire e-commerce market but also on individual sales channels. In the example, a competing seller (Retailer 1) applies a different price policy on Allegro than on Amazon. Their offering is more attractive on Allegro than on Amazon.
ANALYZE YOUR COMPETITORS
Online shop owners who use the price monitoring tool can also check which retailers have the most similar offering to theirs. They can also learn about the product categories in which they are more expensive and the categories in which their products are cheaper. This way, they can easily identify their biggest competitors.
Who is the biggest competitor of buytv.com?
You can check this in the Dealavo tool by opening the “Retailers” section and looking at the first positions on the list. This way, you will find the online shops that offer the biggest number of products from your offering. You can also easily see which products are offered by the buytv.com shop at prices lower or higher than the competition.
This, in turn, shows that buycheaptv.com is a cheaper competitor to buytv.com and has a very similar offering. In such a situation, if the analysed shop does not want to reduce their prices, they should focus on non-price aspects and promotion to attract more customers.
PRODUCT AVAILABILITY IN COMPETING STORES
The competitor price tracking tool can also provide the online shop with information about product availability in other shops. When using the Dealavo tool, you can choose to only display offers that are available or also include shops that do not have the product in stock at the moment.
Let’s assume that buytv.com is selling the latest Samsung TV for EUR 1000. If we compare the prices with the competition (without checking if the product is available in the shop), it turns out that the offer is ranked far below the TOP3 at Idealo. Some shops could choose to lose some of their margin and reduce the price to make their offering more competitive. However, this may actually be completely unnecessary, because, after the unavailable offers are filtered out, you can see that all the cheapest offers are no longer available.
Another useful module of the competitor price monitoring tool is the option of automatic pricing.
Automatic price management is a popular solution in tools for e-commerce price monitoring. It can be used to adjust your prices to the current conditions on the market and internal figures of your shop.
The purpose of dynamic pricing (repricing) is to streamline the pricing process. Simply put, price automation lets you respond:
according to your pricing policy,
in a way that boosts your profits the most.
Some sellers are afraid of using this solution because they feel that they are somehow “losing control”. However, in most cases (the only exception being dynamic pricing based on prices suggested by artificial intelligence), price automation comes down to simply “substituting into the equation”, which has to be defined by the person responsible for pricing and implementing the system.
This means that it is actually the shop representative who decides how the products should be priced. You can, for instance, choose the following rule: “I want to sell at the highest possible price that keeps me ranked in the TOP3 at Idealo. The price, however, cannot be lower than the purchase price +5% margin”.
This means that price automation lets you be more consistent in the implementation of your pricing policy. The choice of the policy itself, however, is up to you.
Another important aspect is that the shop does not have to use full automation from the very beginning. You can start by using so-called semi-automation. In this case, the system only suggests the prices based on predefined rules, without making any changes directly in your shop. The prices must first be approved by a representative of the shop. This way, the owner has full control over every price change.
Let’s go back to the example with the buytv.com online shop. The price tracking system shows that among the offers on Google Shopping, the shop’s offer for the Sony 1 TV is ranked 5th. However, the difference between the shop and its competition is small. The offer of buytv.com is more expensive than the offer of the cheapest competitor by just EUR 2. If the pricing policy allows this, buytv.com could reduce the price by EUR 2 to be ranked first automatically and attract more customers to visit their website to make the purchase.
If the prices are managed manually, it is easy to miss such opportunities, but with repricing / dynamic pricing, such actions can be performed automatically.
What should you focus on when choosing the application for online price monitoring?
Getting a quick overview of the entire market – many product price monitoring platforms show data from a single source (e.g. Amazon, Google Shopping) in separate views, which makes it difficult to quickly check your current ranking in all of the most important channels simultaneously. You might therefore want to make sure that the application offers an integrated view (which can then be narrowed down to a specific source, if necessary).
- Possibility to monitor the most important price comparison websites, marketplaces and online stores’ websites – you should make sure that the price tracking tool enables monitoring all of the most important websites. One of the most relevant sources of information is Google Shopping which is quickly gaining popularity among both – customers and retailers.
Form of the data – pricing data can be displayed in various ways. There are price tracking solutions that offer such data only in the Excel format as well as solutions that only use a web application. The optimum solution is when the data are available in different forms:
Application – to analyse the market data shown in an easy-to-grasp form (preferably: including charts),
Excel file – to use the data in your analysis and upload them into your systems,
API – this option makes it much easier to use the data in your internal systems,
E-mail alerts – shops that receive notifications of the most important changes on the market to their e-mail inbox will always be up to date with the actions of the competition and their own ranking on the market.
Frequency of price updates – when deciding on the terms of your cooperation with the provider of the price monitoring solution, you should also specify how frequently the information on market prices is to be updated. In some sectors, where prices change slowly, frequent updates will not be necessary. In other cases, the situation can radically change overnight. You can see this, for instance, in so-called night-time promotions, where consumers can buy the products much cheaper at night or in the evening. If the competition is monitoring the prices in such a shop only once per day, they will not have the full perspective of the situation.
Customer support – You might also want to check if the company offering a price checker has a dedicated team to give you advice when you need it and clear any doubts you may have. Mistakes in price management can cost you dearly, which is why you should have a suitable team at your disposal to conduct the onboarding and answer all your questions.
Data quality – this is a very important aspect that is difficult to assess before you actually use a particular solution. After all, you may be facing a disaster if you make your pricing decisions based on inaccurate or incomplete data. That is why you should choose a tool that is recommended on the market. You can also ask how the offers are matched – using EAN codes? Or product names? If so, is this done only by an algorithm or is it also verified by a person? Can you make adjustments in the panel yourself to eliminate any mismatches you notice? Some companies offer an SLA (service level agreement), which guarantees that the data you get are accurate.
The importance of prices in e-commerce
There is one relevant question: Why is price management so important in e-commerce?
There are many factors that contribute to the success of an online shop:
good presentation of the offering,
shopping process that is easy for the customer (using the shopping cart, available payment options, etc.),
good positioning in a search engine, etc.
However, there is an increasing number of studies that show that price is the key factor taken into account while making an online purchase. A lot more important than when shopping in physical stores. Why?
When customers shop in a physical store, they are also influenced by such factors as personal service, fragrance, music, etc. These elements do not even exist in online shopping. When the role of non-price aspects diminishes, price becomes more significant.
Even more importantly, however, checking the offering of competing stores in traditional commerce requires a lot more effort – you might, for example, have to go to another district. Online shopping is much easier. You can quickly check product offers in other stores (with just a few clicks) or on a growing number of price comparison websites, which make such price comparisons really easy. Some of them (e.g. Google Shopping) allow you to check the best offers without even entering any specific website. You can simply enter the name of the product you are looking for into the Google search engine and, at the top of the page, you will see a comparison of the best offers. In such a situation, it is more difficult to attract customers to your shop using non-price aspects because the price the consumer will have to pay for the product will be the most noticeable piece of information.
Also, consumers are becoming increasingly aware of the price level, their knowledge of prices is no longer limited to their city or even country. They can check how the product is priced by sellers on the other side of the globe (as evidenced by the rising popularity of AliExpress).
This means that online shops have to be aware of their price position because this is something most consumers take into consideration when choosing which shop to buy from. Does it mean that shops should compete only with price? Of course not. However, effective product price monitoring can identify the products (and product groups) that might benefit from advertising and that might let you attract customers who browse price comparison platforms to the website of your shop.
Price monitoring can also be used to check which products could be sold at a higher price without losing their competitive position. We wrote more about this in our article on multichannel selling and promotion. In the article, we also described which products from your assortment should be monitored this way.
If your shop has not yet carried out regular product price tracking in e-commerce, you could instantly determine your competitive ranking by downloading a free Shop Analysis report. The report will provide answers to the following questions:
How frequently do I offer products at prices higher/lower than the average price on the most important platforms?
How many retailers do I compete with?
Which products could earn me more money?
To receive the report, simply fill out the form on the Shop Analysis page.
How to start tracking product prices in e-commerce? The best idea is to talk to an expert, who will guide you through all the steps and advise you on which solution to pick depending on your business.