Price management during a crisis.
How will COVID-19 affect e-commerce?

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The coronavirus pandemic has affected many sectors of the industry, transforming some of them for good. Depending on the industry, the crisis caused by the epidemic has presented both threats and opportunities. What will the e-commerce market look like after the pandemic and how should you manage your online prices in these new conditions?

Sectors in recession – who will survive?

Although there are many industries that have been damaged by the epidemic, some businesses are now truly booming. Those worst affected include the tourist industry, logistics, catering and the hotel business. Luxury products and any products that are not urgently needed also do not sell as well. However, the crisis has certainly contributed to the performance of the online entertainment business as well as companies offering essential products, such as food, OTC drugs or pet products.

Those most successful in the new reality are the pure players, who have used e-commerce for a long time and who are prepared for online sales. Many stores that have been available online only to a limited extent have chosen to use the national quarantine as a reason to further develop this channel. This refers to, for instance Carrefour, which started offering home delivery in cooperation with the Glovo application. The worst off, however, are the players who have so far sold their products exclusively offline – they will find it hardest to adapt to the new reality.

How to manage prices during a recession?

Companies that are currently struggling to cope with the reduced demand for their products and services are implementing various strategies for surviving on the market. One of them is to reduce prices and cut costs by reducing employment or acquiring cheaper materials. Unfortunately, such measures may lead to price wars, margin erosion, loss of reputation and downtime of suppliers.

A better method of avoiding price erosion is to use 2+1 special offers, i.e. offering extra products and services at the same price. This way, it is possible to keep the existing margin and cover fixed costs and, consequently, avoid discontinuity in the operation of manufacturing plants. Another useful method is to adapt the offering to the current demand of the customer, e.g. focusing on sales of the cheapest and most basic versions of the product, without any extra options.

How to use price monitoring?

The crisis has caused the customers to be more sensitive to the changing prices, which are now changing very dynamically (for an example of price analysis, look here). t the same time, the rapid growth of the e-commerce market makes manual monitoring of online stores impossible. That is why it is critical to use automatic price monitoring tools to get a good perspective of the situation. Price information has become particularly important – it will enable store owners to quickly regain their footing on the new market, check if their prices are competitive and make the right decisions on how to grow their business. Manufacturers, in turn, can make sure that the sellers are not excessively reducing the prices of their products due to price pressure and if the reputation of the brand is not at risk.

If you would like to know more about product pricing using price monitoring, read our article: Using price monitoring to value new products.

During times of cost reduction, excessive monitoring may be undesirable. If your budget is small, you should focus on the monitoring of marketplaces, e.g. Google Shopping, which aggregate offers from different platforms, instead of tracking the entire market down to its smallest players. This is the fastest and least expensive way to gain valuable price information.

Contact us if you are in need of guidance on how to effectively manage prices during a crisis. At Dealavo, we have helped manufacturers and online stores for years to monitor the market using an advanced, comprehensive platform. We can advise you on how to manage the prices in your industry in order to mitigate the effects of the crisis or maximise your profit.

 

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