Choosing the Optimal Pricing Strategy for E-commerce

39.4 million French people buy on the Internet: that's 500,000 more buyers than last year, according to Fevad (2024). E-commerce is winning over more and more customers... And the number of online stores is growing too. France is even considered Europe's second-largest e-commerce market, just behind the UK.

So, for professionals, the competition is real. But how do you stand out from the crowd, make a profit and attract as many customers as possible, all at the same time? The answer can be summed up in 3 words: pricing strategy.

With a good pricing strategy, sellers are sure to sell more, and better. And this is true whether they offer their products via e-commerce or marketplace. So, what are the different pricing strategies? And how do you choose the right price for your products? Follow the guide!

The importance of pricing strategy in e-commerce

Pricing strategy is a crucial issue in e-commerce. In fact, it's one of the most important elements for consumers: while a fair price can be a motivating factor for purchase, a price deemed too high can drive buyers away to the competition.

For 2.0 sellers, product pricing is a strategic action to be taken as early as possible, right from the creation of the e-commerce site or before joining a marketplace such as Rakuten. It's part of the 4P strategy (Price, Product, Place, Promotion)... And the only one to be a profit structure, rather than a cost structure!

Beyond simply offering "the best price", this strategy must reflect the company's pricing identity. This pricing identity rests on 4 pillars (source: La stratégie Prix, Dunod):

1. Consistent price positioning: product prices must be consistent with each other and with the brand image. This pricing positioning must be clear to buyers (low-cost, high-end, mid-range, etc.).
2. Offer legibility: buyers must be able to find their way easily between the different products. Product price comparisons must not be complex or illogical.
3. Price promise : the prices offered must respect the promise made to the customer, with regard to the product or range of products.
4. Responding to needs: e-tailers must ensure that their prices respond to customers' needs, without restricting the shopping experience.

Once these fundamentals have been defined, an optimal pricing strategy offers sellers the following benefits:

• Improved competitiveness: pricing is a golden differentiation lever, enabling you to maintain your competitive edge in a booming e-commerce market.
• Increased profits and profitability : the right pricing increases margins, profits and growth.
• Customer loyalty: as long as price doesn't become an obstacle, customers remain loyal and committed. Ideal for long-term retention!
• Optimized inventory management: an effective pricing strategy allows you to optimize inventory management, in particular through prices that fluctuate according to the time of year, to sell off items that were previously unsold.
• Enhanced brand image : price is an essential component in the perception of a company. Perceived value varies according to the prices set for products.

However, to take advantage of all these benefits, you need to know which pricing strategy to choose, for your online store or marketplace presence... Let's discover the different possibilities.

6 e-commerce price strategies

Traditionally, product manufacturers share a recommended retail price (RRP). However, e-tailers are free to set their own prices, in particular to increase their margins. Different approaches are possible. Here are 6 of them:

1- Competition-based pricing

The prices charged by competitors are key indicators for setting your own prices. For example, if you offer your products on a marketplace like Rakuten, you can analyze the selling prices offered by other sellers before posting your own:

Based on competitors' prices, you can then opt to :

• A premium strategy: sell your products at a higher price than your competitors, because your perceived value is higher and more upscale.
• An alignment strategy: sell your products at the same market prices as your competitors, to avoid a price war.
• A low-cost strategy: sell your products at lower prices than your competitors, to attract more cost-conscious customers.

2- Cost-based pricing

To calculate the "right price", you can also take into account internal cost factors. What are your manufacturing and storage costs? Your delivery costs? Your target gross margin?

Depending on your answers to these questions, you'll be able to set pricing based primarily on costs. Your mission: to ensure a profit margin that enables you to achieve the best possible profitability.

This margin depends on the type of product you sell and your sector. It can vary from 7% to 50%. The higher the margin, the more profitable your online store.

Find out more about the KPIs you need to follow in e-commerce, to maximize your success.

3- Value-based pricing

This indicator is based on the value perceived by customers, to define selling prices. Do you know what your brand equity is? Are your products perceived as high-end, mid-range or low-end? How do consumers describe the quality of your products?

Based on the answers to these questions, you can determine value-based pricing. The more upscale and qualitative the brand is perceived to be, the higher the prices can be.

To take things a step further, you can also adjust your prices according to customer demand. This is known as Yield Management. This technique optimizes stock levels and profit margins, based on customer demand (which also depends on perceived value!).

4- Dynamic pricing

This strategy involves adjusting prices in real time, using predictive algorithms. They take into account numerous factors, such as customer demand, inventory, sales seasonality, promotions, economic trends, etc

To implement dynamic pricing, complex software is required. Prices then become flexible and evolve in line with the market. This strategy is ideal for maximizing profits, but if you're just starting out in e-commerce... Beware of costly solutions!

5- Penetration pricing

This method is often used by new e-tailers. It involves offering a low price to attract customers and "penetrate" an existing market. The seller then gradually increases the price over time.

Over time, market share is built up and products become better positioned. However, this practice is not immediate: it requires a great deal of patience!

6- Skimming pricing

This strategy is the opposite of the previous one. Whereas penetration pricing consists in gradually increasing the price of products, skimming allows you to lower prices over time. The aim of skimming is to set a high initial price, in order to attract customers known as "early adopters".

This type of customer is ready to pay a high price to benefit from a product quickly. Then, over time, products lose their value: it becomes necessary to adjust their prices downwards, to continue generating sales and profit.

How to choose the right pricing strategy?

Are you hesitating between different pricing methods? Don't panic! Here are our key tips for successfully carrying out your e-commerce project. They'll help you make the right choice, then adjust your strategy over time... to generate maximum success!

Know your market and your customers

A "good" strategy is always based on "good" data. And that data comes first and foremost from your customers' behavior: what are their preferences? Their demographic characteristics? Their buying behavior? Price sensitivity?

All these elements will help you to better understand how your customers perceive the value of your products. You'll then be able to propose pricing that's advantageous for your customers, and relevant to the rest of the market, to set you apart from the competition.

Evaluate costs and margins

Beyond customer and market analysis, the second factor to consider is your costs and margins. List your various production, transport, storage and customer delivery costs... as well asthe commissions charged by marketplaces, if you choose to sell on a platform like Rakuten.

For example, at Rakuten, our rates are adapted to your needs and the value of the item sold. Ideal for greater profitability!

Click here to discover our rates.

Experiment, test, iterate!

There's no such thing as a perfect pricing strategy. To find the method that best suits your products, your market and your customers, we advise you to experiment with different approaches. Dynamic pricing, pricing based on competition or added value, penetration strategy..

Remember to analyze the data from each strategy tested in real time, to adapt according to the results obtained. This experimentation phase can take several months, and that's perfectly normal. Take the time to test, measure and iterate.

Test approaches such as dynamic pricing, competition-based pricing or value-based pricing to assess their effectiveness. Analyze the data in real time and adapt your strategy according to the results.

To adjust your strategy effectively, you'll need to measure the right performance indicators. These include conversion rate, profit margin, sales over a given period... Compare all the KPIs obtained, if you are testing different pricing methods.

Implement promotions and discounts

Promotions, sales, discounts... Reducing the sale price during a given period is effective not only for increasing sales in the short term, but also for attracting new customers. It also helps you sell off excess stock. An ideal operation to stimulate growth!

Promotions can take many forms:

• Sales: these discount periods generally cover a wide range of products on a fixed date.
• Launch offers : these special promotions are organized to coincide with the launch of new products.
• Group purchases: these discounts encourage the purchase of several items together, to take advantage of a discount.
• Flash sales: these major discounts on certain products over a short period of time are particularly effective in e-commerce. Flash sales are even considered a growth lever!

Whatever the nature of the promotion, be sure to round down low prices to the nearest decimal place, or to round up high prices to the nearest round. For example, a promotional item will sell better if it costs €20 or €9.99, rather than €21 or €9.35.

A final tip: for easy promotions and extra discounts... Use Rakuten Coupons and Rakuten Points, if you sell your products on our marketplace!

Rakuten Coupons are discount coupons valid only on your products.

They enable you to gain instant visibility on our platform: your ads that benefit from Rakuten Coupons are automatically placed in strategic Rakuten locations, such as the Rakuten Deals page.

Rakuten Points are additional discounts you can offer your customers, without affecting the face price of your products. Rakuten Points are available to Club R members, who can receive up to 20% extra discount on your products. Ads benefiting from additional Rakuten Points discounts are also featured on the most attractive positions on our platform.

In short, our marketplace is home to over 12,000 professional sellers, free to set their own prices and offer their customers exclusive promotions on their Rakuten e-shop. 13 million loyal, regular buyers are just a click away. Perfect for making your first sales quickly... and growing your online store, directly from our marketplace.

So, are you ready to embark on your e-commerce adventure?