E-commerce is a competitive battlefield, where sometimes it feels like the only way that you can get on top is to bring your prices down low. But, price wars are a dangerous game for any online seller, damaging long-term profits, reputation, and, ultimately, your success. They’re also unnecessary - consumers are willing to spend 17% more in return for good customer service.
Top customer service is a simple way to deliver outstanding value without affecting your profits, and we’re here to explain how.
- What is a price war?
- Price wars and loss of profit
- Customer service as the differentiator
- How to deliver top customer service
- Ease of contact
- Fast and free shipping
- eCommerce sellers winning price wars
What is a price war?
A price war occurs when two competitors battle it out for customers, sales and market share by undercutting each other’s prices. This can be done manually or automatically through the use of repricing software.
Price wars and loss of profit
Technology and eCommerce have created a world where low prices, fast shipping, and product variety not only matter, but they’re easy to find. Adopting an eCommerce pricing strategy that focuses on being the cheapest may seem like a quick way to win customers, but it’s also a quick way to lose profits. That’s because success in a price war requires:
There’s a reason that price wars are won by big brands. Making profit from low priced items requires a significant amount of customers, sales and products. Small to medium-sized eCommerce businesses will have a harder time absorbing losses while making a profit.
The less margin you’re making on your products, the less money you have available for other business fundamentals, such as marketing and customer service. This makes it harder to attract new customers, difficult to retain existing customers and impossible to create a reputable brand - limiting your profits.
Competitors will always be there undercutting your prices - Amazon alone changes its prices more than 2.5 million times per day. E-retailers looking to win a price war must keep a constant watch on the market and be ready to react with even lower prices, further impacting revenue.
Bargain hunters are loyal to the price only, and will leave your store if someone else is offering the same products cheaper. This means that a constant stream of new customers is required, which is difficult when you don’t have the funds to spend on marketing and advertising.
Put simply, price wars are a race to the bottom; they’re unsustainable and are damaging to your reputation, customer lifetime value and success.
Customer service as the differentiator
Price wars are proving so unsuccessful that even popular online marketplaces are shifting their focus. Amazon, Walmart, and eBay are all moving away from low prices and instead are promoting fast shipping programs, such as FBA, Walmart Free-2-Day Shipping, and eBay Guaranteed Delivery, that offer value in the form of fast nationwide delivery instead of low prices.
Customers receive outstanding service, product prices remain reasonable, and revenue figures don’t take a hit. It’s an attractive pricing strategy when you know how to do it.
How to deliver top customer service without killing your margins
The best thing about outstanding customer service is that e-retailers of any size can compete by following a few of these techniques: 1. Ease of contact Online shopping can be a lonely experience. No mirrors to see what items look like on, no friends to recommend matching shoes, and no sales assistant to tell you what other colors are also available. It’s no wonder that browse abandonment is at a 92% high. Providing customers with an easy and friendly way to communicate with you during their online shopping trip is a simple way to build a relationship that drives conversions without lowering your prices.
Live chat Provide customers with live chat that offers immediate support and a personalized shopping experience, making them less concerned with price and you more likely to retain customers. Solutions like JivoChat can help you turn browsers into buyers with a seamless contact experience. Shoppers have access to someone who can help right as they look around, and you can focus on providing all the answers they need instead of dropping your prices.
Instant callbacks Sometimes, it’s easier to pick up the phone, which is why you should provide customers with a fast callback option - giving them less time to visit a competitor, and you more time to sell.
Speedy emails For those online shoppers favoring traditional email, ensure that you provide a prompt response by integrating your support and live chat inboxes so that you respond to queries before your competitors can.
Fast and free shipping 66% of retail shoppers consider fast delivery to be the most influential factor when it comes to cart abandonment - not product price. The importance of fast and affordable shipping in attracting and retaining customers is on the rise, making your delivery standards vital to your online success.
Fast delivery Provide accurate delivery estimations on your website, and fulfill them by streamlining your delivery process, or using a fulfillment provider who has the knowledge, geographical locations and manpower to deliver your products quickly, without costing you extra.
Affordable delivery Offer customers different delivery speed and cost combinations to satisfy different needs. To accommodate this, reduce overall shipping costs by using plain packaging, opt for all-inclusive pricing, and use a fulfillment cost calculator to see if outsourcing fulfillment will work out cheaper.
Fast shipping programs Providing fast and affordable delivery options qualify you for fast shipping programs such as Walmart Free 2-Day Shipping. Appearing on these shipping programs…
Increases your search rankings
Makes you more likely to win the buy box
Filters out your competition
Provides your customers with a seal of approval that they can trust
All of these factors lead to more conversions.
E-Commerce sellers winning customers without lowering prices
The proof, they say, is in the pudding, which is why there are plenty of sellers shouting out about how they’ve won customers without reducing their prices.
Case study #1
A Walmart haircare seller boosted their listings above their competitors and won the buy box simply by getting on Walmart’s free-2-day shipping program. They achieved the number one search result spot (even without filtering on delivery), despite their prices being higher than their competitors’, simply by offering fast shipping.
Case study #2
DRIVE Auto Products was able to reach the top of Walmart search after activating 2-day shipping. They saw a sustained daily increase in page views and an increase in sales conversions. Product prices were maintained, revenue increased, and costs even decreased - allowing expansion into multiple online marketplaces.
And they’re not the only ones. Customer service through ease of communication and fast shipping is proving a popular way scale the eCommerce landscape, without entering into a pricing battle that no one ever really wins. Price wars - move over, customer service is king.
About the Author
This is a guest post from Michael Krakaris. Michael is one of Forbes’ 30 Under 30 and the co-founder of Deliverr. Deliverr provides fast and affordable fulfillment for your eBay, Walmart and Shopify stores, helping to boost sales through programs like Walmart Free 2-Day Shipping and eBay Guaranteed Delivery. Deliverr’s FBA-like multi-channel fulfillment comes with clear pricing, easy onboarding and a hassle-free experience so you can focus on growing your eCommerce business.