Dropshipping Pricing Strategy and Formula – A Quick Note

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Is there any particular reason as for why most of us are into drop shipping business? 

Without thinking much, the answer is to earn a robust income for sure with the help if e-commerce business. 

On the drop shipping business, the formula for calculating profit is not the same. Actually, it is the difference between two prices, one is what you are showing in the store, and the other is what you are getting from the seller

Very simple, the more the price, the merrier will be the profit, right?

Well, it is not likely the same.

To work and deliver a high ranging drop shipping strategy, you must know some of the potential tips, and we are here to help you to gain an immense amount of profit

Start working on the costing feature 

It is something everyone knows about.

It doesn’t make sense to keep your expenses higher and going down with your profits. Therefore, take a look at the expenses that need your conscious. 

  • The product price that you are paying to the seller – the mandatory element 
  • The cost of shipping – begin with selecting the shipping modes in which both you and your customers are suitable. Here we are trying to say, look for the alternatives. You can decide on free shipping as well as ePacket delivery. Generally, every seller will ask you for shipping price, so don’t forget to add it to the price of shipping
  • Don’t ignore branding costs – with this, we would like to connote you with promotions. If you read the Amazon seller guidance structure, they say, pack the product with branding. It is very simple; you just have to pay a meagre amount to the seller to work on branding. You can include promotional leaflets, branded sticker, envelope, discount coupon, and so on. It is being done for establishing the reputation and image. On the whole, you must think about the costing here very wisely. 

Spend the time of research 

Sit down and take a look at what your competitors are doing; this is the coolest way, through which you can finalise the pricing. 

  • Search for the competitors who are working in the similar niche. Suppose your target area is narrow and the audience is limited, then the pricing and strategy of your fellow competitors will be a support. On the contrary, if you are looking for a comprehensive market, then this strategy will not be fruitful. It will give you a simple idea of what is going on in the market.
  • Which market section is ready to offer you with excellent potential? Unable to understand the point? For example, you are dealing with a phone case which is costing 10$ in the USA, but in Canada, its pricing is 35$. Here your focal point should be on the areas where the prices can be increased

Keep on increasing the drop shipping prices

Making an increase in the drop shipping products is healthy, and here it is why you should do it.

  • People out in the market to whom you are going to target will be price-conscious. Therefore, if your intention is to keep the pricing low, then it won’t rally round. Customers have a tendency to look for CHEAP PRODUCTS, but there will be no profit, and even the pricing will be unsuitable. It might result in impulse purchase, but targeting the customers might not work. 
  • If you are keeping the pricing low, then there is less chance to get the trust in the offers. The products with lower rates are mostly considered suspicious in terms of quality, and you might not be able to build a reputation from the same. 
  • If you are dealing with the price that is high in quality, then there is no need to lessen its rates.  Offer it with the price that it really deserves.Sometimes a small group that easy to manage and control will offer you with a good range of profit. This group is made up together with top-selling products. It is you who has to notice the price that is offering you with high demand and slowly the price can be duly optimised. 
  • All the drop shippers who are experienced in this section are able to play with the price increase from time to time. In one the cases, it was observed with the rise in the price of the cases; the demand also took a sweep high. It would be great trying this strategy; it might work for you as well. 

Don’t ignore your customers. 

While you are raising the bar of the products on your drop shipping store, you must think about the expectations of the customers too

By the time, you understand, what your customer are willing to purchase, then it would be easy to plan the pricing. 

It is the customers who value the offers that you start; but why?

Because you are giving them accessibility and availability

The exclusiveness and rareness of the products

By the time, you will make your start appealing for the target audience; you can work on modifying the pricing in order to build more sales. 

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Create exciting offers. 

There is no magic at all- people can be lured through offers and deals. Increase the number of offers and customers will reach you very soon. 

It is the first step behind making a high-end pricing strategy for your drop shipping store. In the meanwhile, you can introduce a sale, and plan a discount for many numbers of products. On the other side, you can work along like Kingpin known to provide tonnes of large scale product coupons

Try Alidropship mark-up formula. 

Imagine you are having around 20 products on your drop shipping store, then it won’t take long in changing the prices manually.

It might ask you to spend time on it, but with delivering some patience, the reverts will be meaningful.

With 20 products, you will feel like it as an easy task, but with 100 or more, things can become complicated.

Let your customer act immediately 

The offer is going to end now

It is the end of super sale

The only product in the stock

The sale is only for 3 hours

You definitely saw this for the first time, right?

Trying these ideas will generate instant fancy purchases, and many drop shippers are gaining from it too. Customers will not waste time on thinking when they come to know that the offer is going to rush. It will lead to adding a product on the cart and then paying right at the moment. 

Here is a spoiler –The customers are likely to act likewise.

Think of involving psychological pricing tricks.

Many analyst and researchers have given their perception of this through many papers. 

The two renowned concepts 

  • It is only about the psychology that people look for the pricing that ends with an odd number like 7 or 7. Here they are not at all concerned about any precise part suppose 2.99$ instead of 2.00$. 
  • While picking expensive products, customers look for round numbers. So, if you are dealing with the products that are of high range, then set pricing like 25.00$ and not 25.99$. 

It won’t be wrong in trying these methods, as one might work of you other for someone else. While it is known to be working until now!

Do experiments 

Have you ever turned the pages of books on drop shipping, one similar thing that will pass by is taking the initial steps. 

Modify the sale offers

Validate the pricing on the whole

Opt for a discount for a new range of products

Keep a look at the stats of your drop shipping store and see what changes you can make. 

These were the simplest 9 strategies that can lend you with outstanding profits. Thus, don’t look back and start trying them all. 

“What price should I set my items at on my ecommerce website?” is a question that drop ship resellers often ask. There are several different dropship pricing methods to choose from, and the strategy can vary depending on your goods, supplier(s), and business model. Some claim that the only “right” approach is to continually adjust the pricing while testing what works and what doesn’t. If you believe that or not, deciding on a drop-ship pricing strategy is one of the first steps in starting a dropship ecommerce company and has a huge effect on how consumers view your brand. Most resellers will benefit from taking the time to consider various pricing strategies and how they impact their profit margin and their customers’ perceptions of their market.

The first thing you can worry about is the goods you’ll be marketing. Not all products can be priced the same way. Electronics, for example, have a higher volume but a lower margin, whereas fragrances and home decor have a lower book but a higher margin. After you’ve chosen your product niche, look for product categories you can market and think about your pricing strategy.

When you’re ready to get started, speak to your supplier about your pricing ideas. It’s worth sending a quick email to your sales agent or help desk to see if they have any pricing recommendations for their product categories. Some suppliers may not provide anything in the way of retail pricing advice. Still, a good relationship with your sales representative will lead to some useful guidance before you get started.

There are several pricing methods, each of which is dependent on a unique set of circumstances.

Here are a few common pricing techniques to think about:

Fixed Markup on Cost

This can be measured by applying a pre-determined profit margin to the item’s cost. A fixed dollar markup or a fixed percentage markup may be used. The first thing to consider when determining whether to use a percentage or a limited dollar markup is your items’ overall cost. A percentage markup might not be the best option if most of your items are low-cost mobile phone accessories or a dollar store supplier. If any of your items are about $10, for example, a 15% markup will only add $1.50 to each one. If you want a fixed dollar markup of $3 or $5, however, the profit margin per item would be far higher.

Tiered Markup on Cost

When your supplier has a wide range of goods to sell, including many items with low and high dollar prices, this is a good price-setting strategy. If you’re concerned about overpricing your high-ticket products while underpricing your low-ticket items, a tiered structure could be your best bet. You may set tiers or levels for your products such that items under $10 get a higher markup, such as 50%, whereas things between $200 and $500 get a lower markup, such as 15%. You are free to create as many levels as you want. Some users choose to use 10 or 20 different price levels in their settings. The general intention is to use a higher markup on lower dollar items while lowering the markup on higher dollar items.

Since many retailers use a basic or single markup, this can be a good tactic. If they are selling goods on their own, it can be difficult for them to create a tiered system. This means that if you have a 30% markup on something and another store has a 25% markup; you will find it difficult to compete. If they’re looking for a laptop and some accessories, even if your markup on a power adapter or wireless mouse is marginally higher, the computer on your platform would be less costly, and that might help you win the entire shopping cart deal. Again, the choice you choose will be decided by your budget. If you sell general goods from a retailer with a vast product list, the price ranges of your items would be very diverse. However, if your supplier offers a more niche product like silk flowers, your goods’ content can be reduced, allowing you to set a more exact price.

Mark-Down from MSRP

A common strategy is to set your price as a markdown or “discount” from the Manufacturer’s Suggested Retail Price (MSRP). Many store owners consider a discount to be the most compelling reason for anyone to shop on their ecommerce platform. If the MSRP is $100 and your store offers a 20% discount, your store is saving you money. Before deciding on a deal, assess the product categories and competition, just as you would when deciding on a markup. Are the majority of the goods low-cost or high-cost? Is there a range of MSRP levels for your interests from your supplier? Also, does the MSRP for your products appear to be in line with consumer expectations?

If a supplier claims an item’s MSRP is $77, but many retailers tend to sell it for $50, an MSRP-based pricing policy cannot make sense. Electronics, on the whole, have well-defined MSRP levels. People have an idea of what a flat-screen TV, MP3 player, or laptop would sell for online, so the MSRP for these products might be similar to what the market uses for promotions. A smaller or niche supplier, on the other hand, could not have a large MSRP number. For example, most consumers do not know what the manufacturer suggests for the statue or remote control accessory if they are using an action figure or RC hobby, so it is more popular for these products to have a more independent’s suggested price.

Manufacturer Suggested Retail Price (MSRP)

Setting the price exactly at the MSRP is another common tactic used by smaller retailers to prevent price wars while still making a profit. The retailer is excluded from the decision-making process by pricing goods using the vendor’s suggested retail rates. Even if a supplier provides excellent MSRP levels for their items, you will find it difficult to gain an advantage over the competition if you do not want a discount below MSRP.

Psychological Pricing

When prices are set at a certain amount, the customer perceives the price to be lower based on the price shown. The most popular form is “odd-pricing,” which uses cents ending in 5, 7, or 9 as the final value. Consumers are believed to round down a price of $9.95 to $9 rather than $10. With the very common sense ending value solution of ending in 99 or 95 cents, some users try to price below the competition by using the cents ending value. As more people mention 95 cents as their final price, you can lower yours to 85, 45, or even 9 cents for all items to always try to get the best deal. While psychological pricing and the cents ending value are very popular on ecommerce websites, when listing on a marketplace with several sellers like Amazon, eBay, Walmart, and others using a much lower cents ending value may be a better approach.

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