How to define your pricing strategy
Pricing across multiple markets
Expanding into new markets—whether geographical regions or new sales channels—is a common strategic move for online retailers. When done properly, market entry is preceded by a detailed analysis, including market size, legal regulations, consumer behavior, logistics and shipping options, marketing costs, competitor strength, and market saturation. However, despite thorough planning, pricing is often an afterthought. Many businesses simply take their domestic price, convert it using the exchange rate, and apply it to the new market. So, how can this be done better?
If there is one area where pricing is critical, it’s during market expansion. Your pricing strategy defines your market positioning, and setting the right prices, along with marketing efforts, will help attract your first customers. More than ever, you need to understand competitor pricing and adjust accordingly based on your chosen expansion strategy.
If you have strong financial backing and can afford to invest heavily, you can follow the strategy of TEMU, Shein, or local players like Alza in Hungary. This means setting your prices lower than competitors and investing in market share and customer acquisition.
If, like most online stores, you cannot afford to burn multiple years’ worth of revenue on expansion, you can use simple rules such as light price competition to establish an initial market presence. Then, evaluate which product groups perform well and which do not, and adjust your tactics accordingly. You can rely on your initial analysis to identify opportunities more quickly. You should also assess how different product groups contribute to achieving your strategic goals, supporting those that perform well while limiting or discontinuing those that do not.
And what if you have not conducted a market analysis before entering a new market? In that case, you will need to create a pricing strategy for foreign markets on your own. As always, start with your overall business strategy—this will help you determine your margin limits. Calculate or estimate the impact of additional costs in the supply chain, such as warehousing, shipping, and returns, on your minimum margin. If possible, obtain competitor price monitoring to gain a clear understanding of the market. Then, apply pricing tactics and rules as you would in your home market. For example, you can use light price competition to ensure you do not sell at a loss while remaining as competitive as possible.
How many markets are you currently operating in, and what are your expansion plans for the next 12 months?
What is your current strategy for entering a new market?
What are the costs of fulfillment and promotion for a single product in each market where you operate?
