The biggest e-retailers changed prices nearly 30 times more often than smaller rivals.
When it comes to the sophistication of a retailer’s pricing strategy, size matters.
The 20 most-trafficked retail web sites changed their prices nearly 30 times more often than their less-trafficked peers, according to an analysis by BlackLocus, which sells comparative-pricing services to online retailers.
“The top retailers are being very strategic in how they approach pricing,” says Rodrigo Carvahlo, the CEO and founder of BlackLocus. “They’re using loss leaders to draw in customers, while increasing prices on other products to ensure that their margins are there.”
Meanwhile, retailers that attract fewer visitors are often playing a game of catch-up that is a reaction to larger retailers’ price changes, he says. That’s evident as price drops represented roughly half of the more heavily trafficked sites’ changes, compared to about 67% of the tweaks made by smaller retailers.
Finding ways to successfully make small price increases can have a big impact on a retailer’s profits, says Carvahlo, whose technology tracks prices of products sold by clients’ competitors so that merchants can adjust prices accordingly. For instance, a retailer can use BlackLocus’s technology to undercut the lowest-priced retailer on a particular product. Or a merchant could use it to raise prices if, for example, Amazon.com Inc.was offering the lowest price on an item but had sold out of it. In that scenario another retailer that had lowered its price to be competitive with Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, could increase the item’s price to ensure a larger margin.
Pricing is increasingly important as consumers become more sophisticated about using the web to compare prices. A recent survey found that 38% of smartphone owners said that they used their smartphone to find the lowest price on an item during the holidays.
BlackLocus’s analysis was based on data gathered from Nov. 15 to Dec. 15 via its own price-tracking software, along with web traffic figures of the 5,000 most-trafficked retail sites from Alexa Internet Inc., a unit of Amazon.com that provides web site traffic and other Internet data.
BlackLocus, which launched in January 2011, announced last July that it had raised $2.5 million in the company’s first funding round.