Why Competing On Prices Is Bad For Your e-Commerce Site


Did you ever made a price comparison list when you were shopping online on e-Commerce websites? You would shop at that e-Commerce website, because it has lower prices compared to its competitors? Have you ever felt worried that you can’t make profit, because your item is selling for the same or lower price on e-Commerce website?

Now, forget all of those worries. In this blog entry, we will let you know why you shouldn’t compete in price wars. Competition nowadays is tough and stiff and it seems like the only way to get ahead is to compare with your competitors’ and subsequently by cutting your price down. DON’T DO IT!!

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Did you know that lowering your price and beating the others simply won’t work and that it is bad for your business? Now, I know lowering prices might attract more customers and bring more profits, but have you thought of whether it will benefit your business rather than hurt it? You need to do your homework well and list the pros & cons to determine it by yourself. Below are the list of reasons why competing on price is bad for your e-Commerce sites.

1. Customers only loyal to price

When your customers bought products from your e-Commerce sites due to low price, they are likely to buy from someone else when they find an alternative and cheaper site. Customer won’t stay loyal with you. As soon as your competitor lowers down the price, you will lose that customer.

Only start price war if you have a huge budget or you don’t mind to break-even on your profit.

2. Low pricing is a never ending race

As soon as you cut prices compared to your competitors, they will counterattack and cut theirs as well. Then you will cut them again, and they cut them again. It is like a never ending vicious circle, however, at some stage it may lead to a more painful aftermath – loss in profits and possibly capital.

Always remember when you cut down the price, have you thought of the price you will have to actually pay? All of the operations in your company will be affected. You won’t be able to sustain your position in the market longer enough and you won’t have enough money for marketing activities, hiring your staff etc.

3. Lower cost per unit

When you lower your item price, it means that you earn a significantly lower amount of profit. It means that you need to sell more items to earn back the same amount of profit you did before you lowered the price of your item. However, there are two schools of thought and this rule may not apply to different products you are selling. In some instances, lowering product price can actually benefit your business. For example, if you sell value-adding items, or something that’s very trendy and in high demand.

4. Phycology plays an important role

“You always get what you pay for”. This is a popular message you often hear. It is something that has been planted into people’s mind. When people see a higher cost of an item, they will automatically assume that it is a high quality product. The same goes to the opposite way around when people see a low-cost item, they will also assume that it’s a low quality product.

It’s hard to please everyone nowadays. When you increase your price, people complain, when you lower down your price, people will assume either your product has problems or is of low quality.

So, with that in mind, these are a few points that you could take away with if you are planning to lower down your product price to compete with your competitor. In long term, competing on prices is not going to benefit your e-Commerce site. Instead, competing on value that showcase another side of your business. If you already have a plan in your mind that you want to start an e-Commerce website, come talk and grow your business with iPay88. We will assist you to build your first e-Commerce sites or brush up your existing one!