Dropshipping: Pricing Strategy is Your Salvation

By Moira McCormick on January 23, 2020

Read on to find out more about dropshipping and the pricing strategy you can use. 


Dropshipping Pricing Strategy

Dropshipping is a retail fulfilment process. Dropshippers purchase the items they sell from third parties and have them shipped directly to the customer from those third parties. Richard Lazazzera, eCommerce Entrepreneur and former Shopify Growth Team Strategist describes dropshipping as “a type of business model which enables a company to operate without maintaining inventory, owning a warehouse to store their products, or even having to ship their products to their customers themselves.”

Dropshippers don’t have to spend time physically managing a large and often varied inventory. However, what is essential for them is having an effective pricing strategy for that large inventory, one that allows them to earn a profit on every single item they sell. This is where BlackCurve can help.

BlackCurve’s price optimisation software allows retailers to implement their pricing strategy over their entire inventory no matter how large. Our software blends the flexibility of a rules-based engine with the power of artificial intelligence. By making pricing decisions supported by Explainable Artificial Intelligence 24x7, retailers can move beyond simple competitor price tracking and obtain the real benefits of dynamic pricing.

 

Dropshipping Pricing: the basics

Bear in mind that there's not just one pricing strategy suitable for every type of dropshipping business: it really depends on what you are selling. 

However, there are a number of ways you can improve your pricing strategy to better fit the products you sell. For example, electronics and some clothing items may sell in higher volume, but with a lower profit margin; fragrances and home accessories may sell lower in volume but with a higher margin.

The Ultimate Guide To Retail Pricing - BlackCurve

Dr Rob Horton, Product Director at BlackCurve explains that with dropshippers “margins generally tend to be incredibly tight due to operating in very competitive marketplaces”.

A dropshipping pricing strategy shouldn't remain static. Try experimenting with different pricing options, exploring new product lines and scrutinising how different markets react to different pricing. Always keep a close eye on your competitors and regularly re-evaluate your prices in line with competitors.

If you are providing your customers with variety coupled with high-quality products, they often feel more disposed to pay a decent price for them. Varying the price a little will also reveal how many new customers you can attract with a lower price. As a result this gives you a better understanding of your market and your customers.

Offering special deals, coupons and discounts can be a positive business move but these should only be used when you feel comfortable with your products and their position in the market.

Offer freebies, buy one, get one free, discounts on further purchases, free shipping etc. Bundling and cross-selling are also useful options. However, don't neglect your reputation/image/brand; cheap isn’t always the answer as this can so easily discourage potential customers. 

Engaging in meaningful dialogue with your suppliers is also a very necessary part of the pricing process. Suppliers might have pricing recommendations for you, specific to the type of products that you are selling. Naturally, improving your relationship with suppliers is never a bad thing. 

If the products and goods you sell are either disposable and/or renewable it means there is a good chance your customers will place repeat orders. Many retailers set up subscription options for their customers which secures repeat purchases. It becomes even more tempting if you offer a discount for this service.

 

Dropshipping Case Study

BlackCurve is currently working with a Netherlands and China-based dropshipping company which operates through multiple channel brands. Hundreds of thousands of products are sold throughout their sites. Their products range from handbags and educational toys to wearable technology and gaming products.

This company found that with an inventory of 100,000+ products, it was impossible to manage prices effectively across even one of their channels. The company selected BlackCurve’s Price Optimisation Tool as a solution to this problem. A 3-month pilot was initiated across 6,500 products, and BlackCurve’s A.I. Engine was utilised for fully autonomous price optimisation across these products. BlackCurve’s API was used to connect with the dropshipping company’s back-end systems.

 

The results from choosing BlackCurve speak for themselves:

22,000 price changes were implemented over a 3-month period.

14% increase in monthly profit over the 3-month period, compared to the previous period.

11% increase in the number of unique products sold month-on-month (250 new products sold).

The A.I. Engine targeted low selling products, minimising risk, and maximising gains.

This company now plans to roll-out BlackCurve to their entire product inventory.

 

Why should your dropshipping company trust BlackCurve's Pricing Optimisation Platform?

  • Business Growth:  this is achieved by setting the optimum price for EVERY product in your inventory
  • Support from AI:  pricing decisions are supported by AI so you can identify smart pricing decisions 24x7.
  • Price Dynamically: change prices at any time to react to changes in your marketplace.
  • Better Competitive Benchmarking: know when to follow or when to ignore your competitors' pricing decisions.
  • Intelligent Use of Data: use sales history, website traffic, stock levels - and more - to deliver the smartest price
  • It's AI Without the Black Box: every system-suggested price change is transparent and easily explained
  • Will Save you Time and Resources: you will be able to concentrate on other areas of business growth
  • Leading eCommerce Platform Integrations:  this makes for seamless data transfers, a speedy set up and immediate ROI.

Why not see how BlackCurve can help your business grow by booking a chat with us today? At BlackCurve we can help price your products, competitor analysis and so much more!


Related articles:

6 eCommerce Pricing Experiments That You Can Run Today

Here Are Effective Revenue Management Strategies You Can Use Today

Stop Letting Your Competitors Race Ahead Of You - Here's How To Grow Your Profit Margins

 

References

https://www.abetterlemonadestand.com/what-is-drop-shipping/

https://www.shopify.com/guides/dropshipping/understanding-dropshipping

https://www.oberlo.co.uk/blog/pricing-strategy-for-ecommerce

https://www.bigcommerce.co.uk/blog/dropshipping/

https://www.veeqo.com/blog/psychological-pricing-strategy

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