How Amazon Sellers Should Think About Online Versus In-Store Pricing
Online retailing has exploded in recent years, bringing with it many opportunities for retailers. High margins from online sales allow even small retailers to reap enormous profits. Yet many small businesses have failed because they did not take the time to understand the economics of online selling before jumping into the retail industry. For this reason, Amazon's recent acquisition of a video game business proves that consumers do indeed have alternatives when it comes to buying physical products like video games. Amazon seller training course teaches those entrepreneurs what to look for in online retailing.
Online retailing is nothing new. In fact, many of the earliest Internet retailers started online as they tried to find a way to compete with brick and mortar stores. Yet the online retailing landscape is significantly different than it was just a few short years ago. Today's online retailers must consider not only how their products will sell on traditional store shelves, but also on virtual storefronts that offer additional benefits such as customer reviews and interactive shopping.
The key question then becomes how retailers should think about online versus in-store pricing. The answer depends upon the type of product being sold. Amazon's decision to let its video game business become an independent company illustrates how these retailers can do the same without having to rely on expensive leases and expensive storefronts. Amazon's decision to run its business autonomously provided an excellent opportunity for independent retailers to capitalize on the e-commerce revolution.
Many retailers who chose to remain within the traditional brick and mortar business chose to price their products much higher than they would have if they had chosen to sell on Amazon. Amazon's online price strategy generated enormous excitement because consumers were looking for an alternative to traditional high cost stores such as Wal-Mart and Target. This created extra room for online price competition. A savvy retailer could take advantage of this by increasing the price of products just enough to generate sales while maintaining substantial profit margins.
How retailers should think about online versus in-store pricing depends upon whether the retailer plans to build a physical store or to sell through an online website. Each method has its advantages and disadvantages. An online store can be much easier to manage and much cheaper than a traditional store. On the other hand, an in-store transaction requires the customer to leave with products. Online purchases are typically more convenient because shoppers can enter the product identification number of items they wish to buy and pay using a credit card.
The most obvious benefit of an online store is that customers can browse items without having to drive to the store. They can stay on a computer or laptop for hours without leaving their home. If a customer buys something online and likes what they see without searching the store, then they will be more likely to make a purchase there. The increased convenience of online purchases also reduces traffic in the store.
In addition to the convenience of shopping online, many people enjoy the experience of browsing through a physical store. Studies show that traditional retailing generate more impulse buys and more impulse purchase behavior. People who shop in stores often spend more time shopping than those who do not. In addition, shoppers spend a longer amount of time per visit to the in-store clerks. All of these factors add up to an advantage for online retailing.
How retailers should think about online versus in-store pricing hinges on whether customers have the time to travel to the in-store. Most people would rather shop online rather than drive to the store. Also, most people like to be able to smell the merchandise before they buy it. On the other hand, most consumers would rather purchase something in the traditional brick and mortar store and smell it than drive for half an hour. Online shopping is advantageous for retailers because it allows them to reduce their store inventory costs. They can also take advantage of drop-shipping services that send products directly to the customers, cutting out the shipping costs.