How does an e-commerce company decide on the best discount of a product?

Pricing depends on many factors,

You can start out with a pricing that seems reasonable to you and then play with the price until you find the most efficient price spot which maximizes your profit.

You have to take into account that you are not alone in the market, you have competitors, and what your competitors do directly affects you.

Competitors are only one parameter out of several which you have to take into account when pricing your products. There’s seasonality affect and holidays effect (if your product tends to sell extremely well just before the holidays, you can increase prices and still enjoy a good demand) among others.

With commodities, it’s usually the case of decreasing prices over time as models tend to get out of date while newer models replace them, the iPhone 6, for example, is much more expensive than the iPhone 2…it’s true that it does much more, but that’s not the reason for the price difference, the reason is demand vs. supply.

There are many re-pricing softwares in the market, the ones I’m familiar with are pretty basic in the sense that they keep your prices lower than your competitors. This is a very bad business approach in my opinion as it only leads to price wars, lowering your prices until your margin shrinks to a point where you can no longer compete instead of competing over your value added proposition vs the competitors’.

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