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Online Store Merchandising: Selecting and Pricing Products

The product selection and pricing levels are key elements to your online store's success. Some products sell better online than others, just as different products sell in different locations of the country. At the same time, price competition online is intense.

You need to make astute business decisions about what you sell and at what price. Don’t be afraid to run financial projections or to ask your accountant for help.

First, decide what you’ll sell, whether it's a subset of your inventory or all of it. If you’re just starting a business, check out the criteria for choosing products suitable for online sales. Items that sell well on the Internet change over time, as shown in the following illustration, which lists sales for selected categories in 2007 and 2012. Travel and home sales aren't included in this list.

[Credit: Source: eMarketer (www.emarketer.com)]
Credit: Source: eMarketer (www.emarketer.com)

Your second decision is how many items will be in your catalog to start with and how many items your catalog must eventually accommodate. Catalog size is a primary factor to consider when selecting a storefront solution.

Some catalogs are intended for fewer than 100 items; a different solution is needed for 100,000 products. Given intense competition online and shoppers’ desires for good selections, you need a critical mass of products and choices — unless you have a narrow niche with high demand.

If you have only one or two products to sell, review your business plan to determine whether an online store will be profitable. Also, consider whether you might do better selling “one-offs” through another outlet, such as

  • eBay or another auction site

  • Amazon Marketplace

  • A distributor at another online store

  • A classified ad on a site such as Craigslist.org

Finally, decide on pricing. Check competitors’ prices on one of the many comparison sites, such as PriceGrabber, Shopzilla, MySimon, or BizRate.

If your prices will be substantially higher than those of your competitors, be sure to state your value proposition clearly so that shoppers perceive a benefit for paying more. Do you offer better support, a warranty, onsite service, a money-back guarantee, free shipping, a discount on the next purchase, free add-ons, or gift-wrapping?

Your online prices can differ from your bricks-and-mortar prices unless your site drives customers to your real-world store to make purchases or pick up orders. In those cases, your prices should match. This is particularly important when local shoppers compare prices on a smartphone before they come into your store. Also consider your shipping and handling costs before finalizing prices.

In most cases, think about setting a minimum online order of $10 if you intend to make money. (Music and similar downloads at $1 or $2 apiece are exceptions.) The costs of handling, customer acquisition, and marketing can eat up your profits. Let visitors know your minimum order immediately. Alternatively, package low-priced items together, such as three pairs of socks for $9.99.

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