We are at the cusp of the new year 2023, and consumer electronics retailers are scrambling to formulate the perfect pricing strategies for their brands. But designing growth and profit-centric strategies requires you to do a deep data study of customer behavior and market dynamics. And this is not always possible for retail brands that need to focus on delivering superior customer experience and may not have the bandwidth to dip their toes in big data analysis.
So we took the liberty to do it for you!
Crafting pricing strategies based on simplistic assumptions and one-size-fits-all approaches end up leaving money on the table and missed growth opportunities. In order to set the right prices, business leaders need to recognize their competitive strengths and vulnerabilities and determine the value their products deliver to customers. And the best way to extract these particulars is by (a) having the most accurate and timely information on competition data and (b) putting your analytical hats on and diving deep into the world of predictive modelling and artificial intelligence.
Our data engineers began noticing a certain trend in the electronics retail industry and decided to answer three questions that will assist retailers in formulating perfect pricing strategies for 2023 –
- Has the focus on price competitiveness increased in Electronics Retail Industry?
- Which Product Categories and Brands are experiencing the highest levels of Price Competitiveness?
- What is the common factor between the fastest-growing brands?
To answer these questions, we conducted a statistical analysis in the following manner –
First, we used Price Spread as a proxy for increased price competitiveness.
So, what is a Price Spread?
A Price Spread is the range of price differences between the EXACT same product across categories and brands. It is calculated by dividing the difference between the highest and lowest prices by the average price. (Highest Price – Lowest Price/ Average Prices)
A high Price Spread means that the prices across various marketplaces and sales touchpoints are far away from each other.
A low Price Spread indicates that prices across different platforms are very close to each other.
Importance of a Price Spread
Price spread helps retailers prioritize their competitive pricing efforts. Through the study of prevailing price spread, electronics retailers can comprehend and identify Categories or Brands where the overall market is getting more competitive. With this insight, they can devote more efforts and resources in competition price tracking and optimization in more competitive segments, and vice-versa.
Over the past 5 years, we have developed deep expertise in electronics pricing trends and strategies, covering more than 200 categories and their corresponding top-performing brands and after studying the Overall Market Competitiveness, we saw –
- While Diwali 2022 season was a record-breaking season for online sales in electronics categories, there is a considerable increase in price competitiveness and instances where platforms matched the lowest prices offered in the market.
- A 13% reduction in the price spread in all the electronic retail categories indicates that more and more retailers are keeping prices close to each other.
- Price competitiveness index across the market improved by 33%.
Next, we wanted to analyze whether Anchor Pricing is at play…
So we examined price competition in Smartphones Vs. Accessories and Laptops Vs. Accessories
And found that the price spread in mobile accessories was 24% while that in smartphones was 6.1%. Similarly, we found that Laptops had a 6.2% price spread and Accessories had a 17.2% price spread. The lower price spreads in Laptops and Smartphones show that retailers are more concerned about price competitiveness in high-value products than low-value ancillary products. This is possibly borne out of the behavior demonstrated by their customers, where they might have shown higher competitive sensitivity on high-value products and vice versa.
The high price products are playing the role of anchor products in shaping up the competitive price perceptions of the customers.
After seeing a higher price competitiveness in high-value products, we dug deeper into it.
We compared High-Value Products and derived that the price competitiveness amongst products in the following categories Smart Phones, TV LCDs, Laptops, Air Conditioners, and Washing Machines, had seen a considerable increase in 2022, in comparison to 2021.
While the price competitiveness, i.e., the price spread in low-value products like Health and Personal Care, Connected Homes and Housewares, Kitchen Appliances, Home Appliances, Cooling & Heating Appliances Fans, was much lower.
In the overall electronics retail analysis, we derived that AC Brands, Refrigerator Brands, Smartphone Brands and TV Brands saw a decrease in the price spread, i.e., an increase in the overall price competitiveness from 2021 to 2022.
Finally, we derived that…
The last quarter of the year 2022 saw record-breaking sales performance in the nationwide electronics retail industry. It also witnessed a significant increase in price competition, which will be much higher in 2023. Going forward, retailers and brands will need to adopt a targeted and focused approach to effectively prioritize their competitive pricing efforts to maximize their ROIs.
In order to price right, retailers will need SPEED, SCALABILITY, SCIENTIFIC RIGOR and SIMPLICITY IN EXECUTION.
To get more information on Electronics Ecommerce Pricing Trends download the complete report here.