Pricing is critical, too low, and one would not make enough, too high and obviously people wont buy.
The real issue is, How much to charge, and many blogshops go out of business because they charge too low.
Here are some reasons why you need a buffer on your price:
- Everyone wants a discount – As shop owners you know that everyone who meets you or contacts you will ask for a discount. You need to factor that into your pricing.
- Friends and Family Kawan price. When you run a shop, you do need a tier of pricing for friends and family, its expected.
- You do not factor in the cost of your time. – What is it worth to you to clean and wrap the item, take a train and meet at an MRT station or queue up at a postal counter just to send the item and to repeat the process every day. The $1.50 transport charge starts looking rather low when you factor that every day and realise that you make $6 time cost for the last 3 hours you spent.
- Bulk orders – When you sell items where customers can purchase in bulk, you have to have a structure where you can give a discount to the customer.
- Ability to run promotions – Pricing needs to factor in the ability to run a promotion without losing money.
I used to run an online shop that was doing very well. It was for an item that just became popular and I was getting 3-5 orders a day.I had priced it to be competitive but I didn’t realize most of the points I mentioned above.
I was ecstatic for awhile but eventually I realised that it was not sustainable. Even though I was getting all those orders, I realized that all I was doing was travelling around making deliveries. I hadn’t factored my time cost into it. I got 11 orders on my highest day and on my site I had committed to fulfilling every order within a certain time frame. I didnt feel I was making enough or the time it was taking.
Also, I realized that at the price point, I had no wriggle room and when a customer ordered 20 pcs, I couldn’t give him a discount. I made the sale eventually but I wasnt able to make the customer happy.
Of course some will come and say : “But if I sell any higher, no one will buy.. ” To which I will say that if a low price is the ONLY reason someone is buying from you you need to rethink your business model. Like I once heard someone say, “You cant Out Walmart Walmart. ”