In Southeast Asia, eCommerce has opened up the regional marketplace to big and small players alike. It has opened up paths for solopreneurship, and given small businesses the chance to compete with large brands without spending on a brick-and-mortar shop in a prime location.
But eCommerce in South East Asia is becoming highly competitive and dense. For instance, Shopee, one of the top Southeast Asia eCommerce platforms, claims to have over 7 million active sellers. And the gross merchandise value (GMV) of eCommerce sales in six countries—Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—reached US$38 billion in 2019. That number is predicted to soar to US$153 billion by 2025.
So how can sellers and businesses compete in this massive marketplace? One way is through implementing pricing strategies suitable for an online audience. Here are seven pricing strategies that eCommerce Southeast Asia sellers can adopt.
Consider the ‘left-digit effect’
Most people in this region read from left to right. So, the lower the digits are on the left side, the more affordable the price appears to be. This perception is known as the ‘left-digit effect’.
For instance, a $199 price tag makes a product seem more affordable than $200, even though the difference is a mere dollar. By pricing the item at $199, you’re keeping it within the one-hundred-dollar range, not two hundred.
To maximise profits, sellers can balance out low-value left digits with high-value right digits. Instead of pricing a product at $120, you can tag it with $125 or $129.
Also note that consumers tend to associate prices ending in odd numbers—especially the number ‘9’—with discounts. That’s because the price appears cheaper relative to the next round number (i.e., $19.99 is cheaper than $20).
By creating the perception of a discount, you’re also minimising the sense of loss or pain that consumers feel when they spend money, thus helping them overcome their hesitation over buying the product.
Offer a bundle
One popular eCommerce pricing strategy is to sell a bundle of related items (e.g., mobile phone + phone case + wireless earphones; or facial cleanser + toner + moisturiser). This allows you to increase basket size and introduce new products or brands to the customer. It also helps you sell items that the customer might be unwilling to purchase individually due to the additional cost.
If you doubt this pricing strategy, think of the last time you wanted to buy only a burger at a fast-food restaurant, but ended up getting a meal complete with fries and drinks instead. Aside from the convenience of getting a set meal, it comes out cheaper than buying each item a la carte.
Or if you’ve purchased a Nintendo Switch, you’ll notice that sellers provide the option of getting the game console along with a case and a couple of games. In fact, when researchers from Carnegie Mellon University studied the sales of Nintendo's Game Boy Advance and Game Boy Advance SP consoles and games between 2001 and 2005, they found that the bundle option increased hardware sales by 100,000 units.
There’s a catch, though—bundling increased revenue when offered as an option, not as the customer’s only choice. In fact, a pure bundling strategy actually reduced revenue by 20%. So if you sell a bundle, you need to make each item in the bundle available as an individual purchase, too.
Implement dynamic pricing
Dynamic pricing allows you to adjust product prices according to real-time market demand, thus seizing the chance to maximise profits. It’s now possible to do this thanks to data analytics and automation. You don’t even have to develop your own program code for this; there are dynamic-pricing plugins that integrate into eCommerce websites.
A dynamic-pricing plugin will allow you to set rules, and will execute them on autopilot. Examples of dynamic-pricing rules include:
- “When X units of this product are sold, increase the price by $1”
- “When the basket value reaches $XXX, give the buyer a 5% discount”
- “When X units of [Product Name] are sold within 2 hours, raise the price by $3”
Target a niche to justify a premium price
Instead of aiming for a higher percentage of market share, you can target a narrower audience that’s willing to pay a premium for niche products.
You might think that Southeast Asian consumers would prioritise affordability all the time. It’s time to throw that stereotype out the window. Research by the Boston Consulting Group shows that the ‘mass affluent’ of Southeast Asia are willing to shell out more for products like niche cosmetics. This consumer class is expected to grow to 136 million people by 2030, up from 57 million today.
And according to an Australian government report, the region’s future ‘urbanites’ will be younger and have more discretionary spending power. This will be accompanied by a greater appetite for premium products.
Use a tiered pricing strategy
When people shop, whether online or in physical stores, they often compare product prices. This is why retailers practice price anchoring—setting a price point that buyers can refer to when considering a purchase.
This can be done by simply showing an item’s original price beside its discounted price. On the other hand, you can sell two or three versions of a product, such as basic and premium. This makes the consumer compare prices, and—depending on the difference in price, features, and functionality—view either the cheaper or more expensive product as a bargain purchase.
Benchmark against competitors
Competitor research is a basic approach to pricing strategy, and one that every business needs to conduct at the outset. You can price higher, especially if you claim to offer higher-quality products and better customer service than your competitors. On the other hand, you can aim for a lower price if you want to have a large volume of sales.
Whichever strategy you go with, remember to avoid pricing too high or too low compared to your competitors, especially if you’re selling the exact same product.
Use the manufacturer’s suggested retail price
Also called ‘suggested retail list price,’ the manufacturer’s suggested retail price (MSRP) is often applicable for standardised items with high demand, such as consumer electronics. They’re applied when the manufacturer aims to sell large volumes of a product, such as a mobile phone.
By suggesting a retail price, the manufacturer can keep the price attractive and prevent retailers from adding excessive markups.
That doesn’t mean you can’t differentiate yourself from competitors when you follow the MSRP. You can win consumers through other strategies, such as by optimising product listings, offering optional bundles, providing more flexible payment options, or responding to inquiries more quickly.
Keep your eyes on the customer
When determining an eCommerce Marketplace or Platform pricing strategy, keep in mind that it still boils down to knowing your market. A strategy may look good on paper, but backfire in real life.
For example, bundling might make your customers perceive items as more affordable, when what they really want is a premium product that fewer people can afford, thus setting them apart from—and above—the crowd.
So before adopting a certain pricing strategy, you need to understand the behaviour and motivations of your target market. What’s their spending power? Why do they buy these products? Are they loyal to certain brands? Do the sources of ingredients matter to them?
If you’re still in doubt, the good news is that eCommerce in South East Asia is maturing. That means there are integrated logistics businesses that can help you manage your eCommerce operations, from listing products and setting products down to order fulfillment and last-mile delivery.
At the end of the day, getting consumers to buy an item is only one part of the much bigger picture. As a seller, it’s on you to fulfil your promise to the customer by delivering a product that fits their expectations and by providing quality customer service.
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