Why You Should Avoid Underpricing Your Products When Dropshipping

If e-commerce is a game, it’s certainly one where players are often keen to bend the rules. On a conceptual level pricing is all about fairness. Take the product price, add your costs and potential risks, add a fair profit for you and your co-workers… And that’s it. But when it comes to pricing your products, just how high or low should you go?

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The reality is that price is the most important component for a customer. Countless studies on the subject all agree to vary degrees to this fact. However, that does not mean that “cheapness” is a guaranteed way to make a profit. Price is important as a factor of perception. It communicates information about a product’s value that can be considered adequate depending on a series of factors.

It would be easy to break the bank and sell at loss in exchange for traffic. If there’s a budget for marketing, burning away one of your products might as well be considered part of your hunt for visibility. This approach is quite common in marketplaces where merchants are pitted against each other in a narrow environment, whether through buy boxes or a very sales-centric search algorithm. Unfortunately, this strategy often only benefits the marketplace itself since the merchants themselves enter a downward spiral of pricing that destroys the real value perception of a product, making it almost impossible to get back to a profitable model. Clients bounce from one merchant to the next which destroys any potential benefit you could be having from this experiment. This reality scares many dropshippers away from those platforms and only the most experienced successfully manage to handle that pricing jungle.

Dropshipping is not about being the cheapest

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Do you know who sells cheaper than you? Your supplier. Dropshipping was built with the idea that less popular or more “exotic” platforms cannot reach customers with any other argument than being ridiculously cheap. That if a product is given the proper care and love, its value perception can reach a place that can accommodate one more actor in the price chain (you!). Going against this very principle is often a precipitated decision that stems from a lack of comprehension of the realities of the business. Don’t go headfirst revolutionizing Dropshipping if your approach doesn’t provide a clear idea of your profit model.

The many faces of a product

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One of the perks of social media is that it could find out the different exquisite faces. It used to be a trick only big corporations could afford, piece together the tastiest plastic burger for a mouthwatering treat that would only exist in a photo. Now photoshop and filters will take you just as far with minimum cost. A cheap photo display box and a modern smartphone can make any product look good.

Paraphrasing the man spider, with great power comes great responsibilities. It is not recommended to advise to set your clients up for disappointment. Securing a sale will never be a better option than securing a faithful client.

The issue, in this case, is not to make a bad product look good but to make a good product look bad. If your product has a high-value visual perception, selling it for cheap will make the customer assume that you’re lying. People have been tricked too many times with false advertisements and dishonest photos and this damage has created a generalized distrust towards online purchases.

You could make a good deal look like a bad one, and this is not the effect that you are after.

The many faces of a business

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It’s not only the products that are subject to the game of perceptions, business is too. The logic is fairly simple, only a big company can acquire supply in massive volumes. Big volumes mean cheaper prices. Therefore, only big retailers can sell for very cheap.

Big retail is for many people unescapable immorality, while virtue is owned by the small passionate shop owners. We’ll let you be the judge of this bias; all we can say for certain is that this perception won’t change by the end of this article.

Smaller retailers are expected to substitute volume and price with quality. If you’re small you can’t acquire or produce in mass, therefore you can’t sell for very cheap, therefore if you do… Something’s wrong here!

If you have a nice-looking Shopify store with a limited and carefully selected modest product listing, underpricing yourself is the safest way to break the spell and destroy your carefully crafted brand. We’re not telling you to crown yourself king of French high-fashion and charge ludicrous amounts of money. But ultimately you should strive to be true to yourself, sell what you value and value what you sell fairly.

The pricing pitfall

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First impressions matter. Imagine there’s a new shop in your street. You go there and you see that everything is nice and crazily cheap! You buy a few products and make sure to remember to come back. Two weeks later, the store hasn’t changed, the products are the same… But the price has tripled! How would that make you feel? This is the pricing trap we mentioned previously. Once a product has been priced to a certain level it is hard for it to regain value. In traditional retail, discounts usually mean getting rid of products that didn’t sell to make room for newer ones, and in essence, this means that It is the end of a cycle and not the beginning.

Launching a store and finding new clients is a plan that requires sustainability. Creating the excitement for a new store or to give livelihood to an old one can be done in many ways that don’t involve underpricing yourself. Bundles, special coupons, buy two get three, free shipping, etc.

Anything that can protect the pricing integrity of your product while creating the feeling of opportunity in your clients will always be a preferable option to keep you competitive in the long run.

Many ways to sell a product

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Often dropshippers will go via the underpricing route because of an underpricing competitor. If this store is selling the same product for less then there’s no other option than matching their price, right? Wrong! Just like you’ve taken the challenge of taking a foreign product and maximize its appeal, the same can be said to your dropshipping competitors.

Strike their perceived weaknesses and go the extra mile. Are you using the same photos? Can you find better photos of your products? Is there anything that doesn’t sound right about their product description? Is their store visually appealing? More often than not people fight with price when they’ve given up on fighting with other arguments. We’ve all seen reckless rookie stores with 2% margins and web designs from hell. They’re not doing your products any good but if you create enough separation the same product can feel like two completely different ones. Fighting your competition in ways that secure your profitability will always be worth the effort.

Summary

In conclusion, underpricing is often a simplistic solution to a complex problem. Not only do you risk not solving your problem at all, but you might also damage your store irreversibly. One of the elements that we’ve yet to mention is that the simplest way to get a better price is to acquire your supply for less. Finding products that will allow you to secure a healthy profit margin while corresponding to the expectations of your clients.

With millions of products, MyyShop is a brand-new supply solution for dropshippers that want wholesale prices but without the wholesale hassles. MyyShop guarantees quality products with professional customer care for a smooth dropshipping experience.

Find out how MyyShop can change the way you buy and sell online HERE

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