Why SMEs shouldn't compete on price online

By: Jake Anderson

Date: 9 April 2018

Why SMEs shouldn't compete on price onlineOne of the great appeals of ecommerce is that it often allows consumers to purchase goods at a lower price point. People can quickly and easily shop around for the least expensive offering. With one search, online buyers can see a list of goods that match their criteria and compare prices instantly.

There's just one problem with this system. The increased pressure to give shoppers the best price means lower margins for ecommerce store owners. Larger companies have an inherent advantage here, because they can leverage their resources to force out competition.

Here's why SMEs shouldn't compete on price when they sell online.

Quality demands a higher price tag

You've always been told to strive for quality over quantity. Yet, factory assembly methods have popularized cheaper, inferior goods. Larger companies prefer this set-up, since small and medium-sized businesses often can't keep up with mass production and many consumers will simply gravitate toward the least expensive products.

It makes no sense for SMEs to try going head-to-head with ecommerce giants on this front. Unless you're drop-shipping or only focusing on one or two offerings, you're no match for the vast resources of larger businesses.

Quality is, however, something SMEs can almost always do better. This doesn't necessarily need to mean hand-made or original goods - although these can be huge ecommerce hits if marketed the right way. Find a niche that hasn't been oversaturated, then offer high-quality products at a reasonable, but profitable, price point.

SMEs doing this will almost always be more successful than those trying to undercut the big players.

Build a stronger user experience

If you're running a small or medium-sized business looking to sell online, you need to be serious about user experience. People won't stick around for long if your online store is just an abbreviated version of Amazon.

Younger shoppers tend to value experiences as highly as the products themselves. Having a boring website that does nothing but list your inventory isn't going to cut it with the modern consumer.

Choosing the right ecommerce store is essential. Choose a provider that offers strong design options so you can infuse your site with personality.

Don't create enemies

It's a common assumption that the business world is a zero-sum game. This is amplified even more in the ecommerce world, as online stores tend to be isolated. To get to a shop in real life, you need to drive there, and will pass by many other retailers that may also catch your eye. Physical stores often cluster together and use cooperative selling effectively.

Ecommerce vendors can harness this idea in order to boost their sales. One way to do this is through marketing partnerships. SMEs can promote one another's goods, with the goal of all parties generating more sales.

While this won't work for direct competitors, brands that overlap can greatly benefit from this kind of collaboration.

Brand loyalty is everything

Why is Apple able to charge more than other companies for its devices? Apple is the king of brand loyalty. Once people are hooked on your brand, they're willing to pay more for your goods. Marketing is a huge component in generating this.

Social media is probably the best place to start for most SMEs. While Facebook is still important, Instagram is blossoming into a haven for brands as it shows potential customers highly attractive visual representations of your offerings, drawing them in. Images can be precisely curated to engage a specific audience.

Online influencers are another way SMEs can take advantage of social media. These are people who will promote a product in exchange for some form of compensation. Finding a social media influencer who perfectly aligns with your brand is a perfect way to get new customers and increase loyalty.

From a purely economic perspective, it might seem like engaging in a price war is the only way to distinguish your company online. However, this is absolutely not the correct approach for many SMEs.

Copyright © 2018 Jake Anderson, self-proclaimed gadget freak and tech writer