Pricing: A Beginner’s Guide

As you decide what products to sell on your e-commerce store, you might wonder if you are pricing your products correctly. Are you charging too little for your products, or charging too much? It can be difficult to know what your products are really worth, especially if you’re a new seller.

We’ve worked with many e-commerce merchants, and in doing so, have gathered some tips on correctly pricing your products. Below are our tips for setting initial pricing and optimizing your pricing.

How to Set Initial Pricing

When it comes to setting initial prices for your store’s products, there are a number of factors to consider in order to create an accurate price:

Market Research

Market research is a crucial step in determining the pricing of your products. Look at your target market and customers, and try to understand who they are and what they’re looking for. This will give you an idea of your customers’ wants, needs, and beliefs. Are your customers interested in luxury products, or are they looking for a bargain? Identify how the products you’re selling fit into your customers’ lifestyles.

Check Competition Pricing

One of the most accurate ways to determine product pricing is by looking at how competitors price their products. Then, once you’ve identified the average competitor’s price, it’s time to determine how your pricing will compare. Do you want to price your products similarly to competitors? Are you looking to stand out by having a lower or higher price?

Factor in Total Costs

The price of your product must also reflect the costs that go into making and shipping out that product. Determine how much you spend on average when it comes to creating, packaging, and shipping a product. Assume that, for every product sold, you might have to pay the highest cost for shipping. Once you determine how much you’re spending on each product you sell, factor this into the price of your products. And, if you end up not spending as much as you thought you would on the cost of goods, you’ll end up making a larger profit.

Accept Realistic Pricing

Finally, it’s important to accept a fair price for your product, even if the price seems unfair to you. Just because you love your product doesn’t mean that you can charge anything. Keep this in mind as you calculate the correct price for your product, and accept that the number could be different than you originally planned.

Optimizing Pricing

Now that you’ve determined the initial prices for your products, it’s time to discuss altering the prices of your products—why should you change the prices of your products, and what is the best way to do it? Here are some key points to keep in mind:

Sales Shouldn’t Last Forever

It doesn't make sense to always have the same products on sale. After all, there’s no demand if customers know that the “sale” price is really a product’s regular price. Promotions are a powerful tool, and because of this, they should be used sparingly to gain attention and draw customers into your store.

As Your Costs Change, So Should Your Pricing

While it’s important to factor in things like the cost of goods, shipping, and shipping packaging into your initial pricing, it is also important to adjust the price of your products as those costs change. Your costs may shift for different reasons, but as your business scales, costs will lower overall. If your costs increase, don’t be afraid to increase your prices. Even if your products are more expensive, loyal customers will continue to shop with you.

Pricing is Fluid

Overall, it’s important to remember that your product pricing is fluid, and therefore, can be changed at any time. Even if you’ve maintained the same prices for years, don’t be afraid to change your pricing if it will benefit you. Pricing should be a guideline, it should not be something that’s rigid. Be open to shifting as things in the e-commerce space shift.

Are You Making a Profit?

Finally, it’s important that you are making enough money off of your products to keep your store open and to pay for living expenses. After all, this business is your job, and you’re supposed to make some money off of it. If you are not making enough profit off of your sales, consider where you can cut costs in creating and shipping your products, or consider shifting the pricing of your products.

Product pricing is something that is constantly changing and is different for every seller. By staying up-to-date on e-commerce trends and keeping an eye on things shifting within your own business, you should have a good idea of when to update your pricing and when to leave things alone. It’s important to never get too comfortable in your pricing, and if you see a sale opportunity or a chance to update your pricing, don’t be afraid to take it.

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