As retail migrated to cyberspace, many online merchants starting out knew little about how to effectively leverage price in a profitable manner. Other firms believe they can price items effectively by playing off of what the competition does. This simply lures them into duplicating other companies' mistakes. Online retailers must ensure that every product carried is optimally priced to truly meet their online profitability potential. In light of the Internet, electronic retailers needn't rely on the archaic data mining approach.
Live testing allows online retailers to get a holistic sense of what is driving the market.
Everything from customer demand to competitor influence is available immediately. A brand's perceived market value can be captured instantly and capitalized upon. Prices can be raised temporarily if there's a brief order lead time and a dip in inventory, which can be lowered when demand is weak. In this manner, excesses and shortages can be effectively curbed and managed. To survive, online businesses need to concentrate heavily on core tactics that directly affect gross margins.