How we got €1M in sales revenue using 7 pricing strategies

Many online shops lose margin or sales without realising it, simply because nobody looks at their prices next to their competitors’. Seven simple rules close a good share of those gaps.

The seven pricing strategies in this article are: raising the price where you are well below the competitor, winning the lowest price when the gap is small, cutting products with negative margin, selling what nobody else offers, taking advantage of competitors’ stock-outs, working on the Amazon Buy Box and automating all of the above.

The title reflects the experience of our own online shop, run by the team that later created Boardfy. In mid-2015 we started tracking our competitors’ prices and moves by hand. With the first rules, applied manually, we raised margins, sold more and closed 2015 with €1.5 million in sales. Stock-out tracking and automation came later, with the in-house tool that eventually became Boardfy.

For the strategies where we have it, we describe what we did in our shop; where the case does not provide a figure, we fill the gap with an assumption or a hypothetical example, clearly labelled and with the calculations shown.

Key takeaways

• Monitoring competitor prices is as useful for raising prices as for cutting them: products where you are well below the next competitor are margin left on the table.
• Cutting a price only makes sense if there is still margin left after commissions, shipping and product cost; that is why every rule needs a minimum price.
• A product with negative margin loses money on every sale, even if turnover goes up.
• On Amazon, price alone is not enough to win the Buy Box (Featured Offer): delivery time, stock and seller performance also count.
• With thousands of products and several competitors, reviewing prices by hand is no longer feasible, and automated rules become the only way to apply these strategies every day.

These are the 7 strategies we used

Every strategy starts from the same data: the price of each of your products compared with that of the competitors selling exactly that product (same EAN or reference). If that matching fails, any pricing rule is applied to the wrong comparison. To build that foundation, competitor price monitoring is the first step.

1. Raise your margin where you are well below the competition

The first strategy is to find the products where your price is well below the nearest competitor and raise it while staying the cheapest. When we started monitoring, we found many products like that in our catalogue: we could have raised the price and didn’t know it.

A real case from our shop: we were selling a product at €320 and the nearest competitor was selling it at €370. We had up to €49.99 of extra margin per unit while remaining the cheapest. To see the effect, let’s assume a cost of €250 and amounts excluding VAT: raising the price still keeps us below the competitor, and every extra euro goes straight to margin.

Sitting one cent below the competitor maximises margin, but leaves your price exposed to any cut they make. A buffer of 1% to 3% of the competitor’s price (in this example, between €3.70 and €11.10) is usually more stable, and the rule should be reviewed every time the competitor’s price changes.

2. Win the lowest price when the gap is small

The second strategy is the reverse: find the products where you don’t have the lowest price but the gap to the cheapest seller is very small, and cut just enough. On comparison sites and marketplaces, being the cheapest by a few cents can change who gets the sale.

When we reviewed our shop’s catalogue, we found more than 650 products where we did not have the best price, but the gap to the cheapest was less than one euro. We cut the price on all those that still kept a healthy margin after the cut.

Hypothetical example (gross margin, excluding commissions and shipping, for simplicity): you sell a product at €45.90 that costs you €36, and the cheapest competitor is at €45.20. If you drop to €45.19, your margin goes from €9.90 to €9.19. With a minimum margin set at €8 (a minimum price of €44), the cut is acceptable; if the competitor dropped to €43.50, the rule should not follow.

The minimum price is what separates this strategy from a price war. How to set that floor product by product is explained in the guide on competitive pricing strategy in ecommerce.

3. Cut products with negative margin

Selling lots of units does not mean making money: if the price does not cover the product cost, the channel commission and shipping, every sale loses money. We learnt this from the price cuts in the previous strategy: a price war can end in negative margin. Later on, we automated the detection of those products so we could deactivate them temporarily or withdraw them until they were profitable again.

Hypothetical example on Amazon.es with a 15% commission and Spanish VAT (21%): you sell a product at €29.90 excluding VAT (€36.18 including VAT) that costs you €22, and you pay the €4.50 shipping yourself. According to the Amazon.es fees page, the referral fee is applied to the final price, VAT included.

The break-even price in this case is (22 + 4.50) / (1 − 0.15 × 1.21) = 26.50 / 0.8185 = €32.38 excluding VAT. Below that figure, the product loses money on every order, and the choice is to raise the price, negotiate the cost or stop selling it on that channel. The full calculation, with all the costs worth allocating, is in the article on profit margin calculation.

4. Sell products nobody else offers on the channel

The fourth strategy is to look on Amazon and Google Shopping for products in your catalogue that no other seller offers on that channel. If you are the only one, you are not competing on price and can set it according to your target margin and demand. It was one of the strategies that worked best for our shop.

Hypothetical example in your own shop, with no marketplace commission or advertising spend, for simplicity: a product that costs you €40 and on which you want a 30% margin on the price excluding VAT sells at 40 ÷ (1 − 0.30) = €57.14 excluding VAT, or €69.14 including Spanish VAT (21%). If it sells well with no rivals, you can test a higher price and measure whether total profit rises.

Before listing a product on your own, check two things. First, that there is demand: if nobody sells it, it may be because nobody is searching for it. Second, that you meet the channel’s requirements; on Amazon, for example, the Amazon.es guide to getting started states that each listing needs a product identifier, such as a GTIN, EAN or UPC, or an exemption requested from Amazon.

5. Raise prices when competitors run out of stock

The fifth strategy takes advantage of competitors’ stock-outs: when the cheapest competitor runs out of stock, the reference price becomes that of the next one, and you can raise yours or reactivate a product you had paused. In our case, this rule came later, once we already had the in-house tool that eventually became Boardfy, and it brought in a fair amount of extra revenue.

Hypothetical example: you sell at €89 and competitor A, at €87, runs out of stock. The next available competitor is at €95. You can go up to €93.90 and still be the cheapest among those with stock; when A restocks, the rule takes your price back to its previous level.

On Amazon, the increase needs to be measured: Amazon’s seller guide to the Featured Offer (Amazon’s US site) lists a price that is too high among the reasons an offer may stop being eligible to be featured. A moderate, temporary increase that is reversed when the competitor restocks reduces that risk.

6. Win the Amazon Buy Box

Having the lowest price on Amazon does not guarantee sales, because a large share of purchases go through the Buy Box (Featured Offer) and Amazon does not award it on price alone. Delivery speed and cost, the product being in stock and the seller meeting Amazon’s performance requirements also count, as the Amazon.es advertising page points out.

In our shop we tracked the products where we did not have the Buy Box, kept adjusting the price and advertised them more to win sales and reviews. For any shop, the strategy is the same: test price adjustments within your minimum margin and, at the same time, improve delivery times, stock and reviews. Who holds the Buy Box is a volatile data point that can change at any moment, so it needs to be monitored regularly. The factors are covered in more detail in how the Amazon Buy Box works, and the rules side for that channel in the Amazon price optimiser.

7. Automate your pricing rules

The six previous strategies depend on reviewing prices frequently, and by hand that only works for small catalogues. Beyond a few hundred products, the time it takes to review them usually exceeds the time it takes the market to change.

Hypothetical example: a catalogue of 3,000 products with 5 competitors each means 15,000 prices. Checking them by hand at 10 seconds per price takes 150,000 seconds, about 41.7 hours, for a single pass. Reading them four times a day means 60,000 checks a day, which is only possible with a tool.

Automating does not mean letting the software decide: it means writing each strategy as a rule (raise up to €X below the next competitor, cut until you match without going below the minimum, deactivate if the margin is negative) and having it applied automatically. That is the principle behind repricing and dynamic pricing software.

Which pricing strategy should you start with?

The most profitable approach is usually to start with the strategies that cost no margin: raising prices where you are well below (1) and cutting negative margin (3). Next come the ones that win sales (2, 4, 5 and 6), and automation (7) turns all of them into a daily process.

How can you apply these pricing strategies without reviewing prices by hand?

To apply them, you need up-to-date competitor prices, your real margin per product and rules that run on their own. Boardfy is a SaaS platform for competitor price monitoring and dynamic pricing for e-commerce, with direct price updates on Amazon, eBay, Google Shopping and Mirakl marketplaces.

• Boardfy reads competitor prices every 6 hours, with or without shipping, and applies your rules every 30 minutes.
• Boardfy calculates your margin from the product cost, deducting the marketplace commission, card payment fees and other costs, and never goes below your minimum.
• Boardfy shows which competitor holds the Buy Box on Amazon, a volatile data point that can change at any moment.

Boardfy does not decide your strategy: it applies the rules you set. On channels without a direct connection, the new price is sent to your shop or your ERP. Try Boardfy free for 7 days, no card required.