Pricing trends in the electronics & household appliances e-commerce market: Interview with Jakub Kot, CEO at Dealavo
- 01 October 2021
This interview is part of the report “Trends in the electronics and household appliances e-commerce market“.
Over the last few years, you had a chance to discuss the pricing topics with representatives of several industries. Have you noticed anything particular about the companies offering electronics or household appliances? Are their pricing needs somehow different?
Jakub Kot, Dealavo: I would say that what characterizes companies from this industry is the high awareness of price importance. As Dealavo, we offer our services to 2 main types of clients: online stores and brands. I can see that for both of them prices are particularly important in comparison to many other industries.
First of all, prices are often a decisive factor for online shoppers. In the case of electronics and household appliances, making comparisons between retailers is fairly easy – you need to know the product name and model and then you obtain a list of different shops’ offers. Which one customer chooses – usually depends on the price, especially if he checks the price comparison websites. That’s why it is the industry in which webshops tend to closely monitor their competitors’ prices to make sure their offer is attractive to customers.
From the manufacturer’s perspective on the other hand, prices are a relevant factor influencing the brand image. That’s why they keep an eye on their product prices and their positioning against competitors. In the case of electronics and a big part of household appliances, customers can use many specifications to compare products – RAM, display, battery capacity,… Still, to understand the product quality, they often look at the price and compare it with other products. That’s why many pricing strategies include, next to the information about the value to the customer, information about price positioning against competitors. And that’s what can be then monitored with the Dealavo reports – the implementation of the pricing strategy.
You mentioned that online stores from the industry often compete with prices. Is it, however, the main way to attract customers?
J.K.: There are certainly other factors that a store should work on – first of all, it should have a reliable image. Electronics and household appliances are not products that one buys every day. A customer wants to be sure that he would get the product, the guarantee etc. That’s why a webshop should make sure that it has positive reviews, and that his website looks legitimate. Marketplaces help with that as well, by showing other customers’ opinions and the seller’s score. Almost no one would buy a product from the cheapest seller with poor opinions – such a combination always looks suspicious.
The other relevant factors are, among others, the delivery terms, customer service and website design. I think that the latter plays a smaller role now, though.
Why is that?
J.K.: Because more and more often the first contact happens not on the shop’s website but on a marketplace or a price comparison website. That’s where a customer sees the offer, the price, and the shop’s reviews. And very often he doesn’t even visit the shop but buys directly on the marketplace. That’s why there are many customers that are frequent shop’s clients without ever visiting the store’s website.
It seems that marketplaces are useful for customers. What, however, is the seller’s attitude towards them?
J.K.: It’s a tough question to answer because it really depends on the store – its standing point, popularity, but also – how well they worked on their multichannel sales strategy.
For the smaller players, selling on marketplaces is a relevant way of promoting their brand and generating the traffic on their not yet popular website. Many customers get to know the shop by seeing an attractive offer on a price comparison website, such as Idealo. If the whole shopping experience works smoothly, they are likely to remember the brand and repeat the purchase in the future. With no marketplaces or price comparison websites, it would be more difficult for them to encourage the people to visit the website instead of any bigger and well-known market player.
Selling on marketplaces has some limitations, though. I mean especially those related to designing the customer journey. Sellers need to follow the rules related to presenting the products and can’t use some of the marketing automation tricks, such as smart product suggestions.
There is one more aspect that directly influences the margin: the fees. On most of the price comparison websites, the margins are affected by the CPC system which charges them if a customer visits their website after clicking the link on a price comparison website. There are many ways to optimize it, though.
J.K.: Sure. I would say that there are two main ones: the first one is including only the traffic generators on the price comparison websites. The second one is having a “monopoly” on a specific marketplace after identifying the products that are not yet listed.
Traffic generators are the most popular products in the shop’s assortment, the best sellers. Shops often accept lower margins on such products. This way, their offer is listed higher on a marketplace or price comparison website. Thanks to competitive prices, a shop often can attract many customers to their website or account. And that’s when the cross-selling, including the “standard” products, with higher margins, happens.
Identifying the products not yet offered by competitors is also important. Many of our customers do it in the Dealavo app by filtering out the products with no offers in a specific sales channel. Then, their offer is the only one a customer browsing e.g. Amazon finds.
Are there any other “tricks” or strategies that are particularly popular among electronics and household appliances companies?
J.K.: I would say that they quite often use some elements of the psychological pricing to increase the profits. We all know have seen many examples of the product lining (e.g. several models of Apple’s smartphones), anchor pricing (especially during Black Friday or Cyber Monday) or product bundles. Many companies from the industry have mastered that.
Do you have any final tips for companies from this industry?
J.K.: The most important one would be: remember to monitor the changes in the market to be able to answer the current customer needs and not to lag behind the competition. The market is more dynamic than ever so analyzing the proper and up-to-date data is the key to success.