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Anonymous
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You have several options depending on your e-commerce site capabilities and how much administration you want to do. When dealing with a mix of small and high volume customers you are best to look at things like volume/value discounting, customer category pricing, delivery charges, returns policy, rewards system, etc.

If you do deal with a lot of business customers then creating a B2B portal for them and giving options like saved order lists, quick entry ordering, online inventory control can help differentiate your business from the others.

You shouldn’t set your prices too meet the lowest competitor, if you start at the bottom you leave no where to go with things like discounting. There are times you simply can’t compete on price with other businesses, especially if just starting out, as they can have huge supply chain advantages such as lower transport costs, volume discounts, group buying power and better credit terms.

Work out who your customers would go to for any comparison pricing, like Officeworks. I know from research they are definitely not the cheapest price for stationery on a lot of products and see if you can match their prices and still maintain a sustainable margin. If you try to compete with some others there is no way a new business could compete against some of those prices, as I’ve seen some at around 10% margin on what I could buy that product for.

I can’t remember where I read it but a customers perception on price and savings differs a lot depending on the amount. The higher the price the more they tend to shop around, your example of the $40 vs $42 (5%) price may stand out to a customer but a $4.29 vs $4.79 (11%) is likely to not even register and a retail customer is much less likely to spend time comparing prices to save 50c.

If you add on say a small volume discount of just 5%, convert the % to a dollar value before checkout by updating the shopping basket, customers relate better to dollar values, or free shipping. You are more likely for a customer to ignore higher prices.

Your main concern at the moment is actually getting potential customers to your business than losing sleep on pricing. Start with RRP or 50% margin and look at addons to promote and work out a pricing/discount structure for larger customers.