How do demand and supply affect the price?
With a little exaggeration, we can say that e-commerce is so successful because, by default, everything is present at the same time. The customer is looking for a solution consciously for an issue, but this does not necessarily mean that we cannot guide them towards a new one - influencing demand with supply. What price should we ask for this? It depends.
1. Microeconomics basics translated to web
The market is where supply and demand meet, the customer is showing a certain interest in a product for a defined price. The online marketplace is an endless network, where the customer has access to a mass of goods through this channel. Nowadays, only the products are not sold that do not exist, the key is to sell a product that is desirable for the customer.
Do not forget that we are sharing the market with the competition, it is essential to be present on the platforms that they are too. A few good examples are Facebook and Google. You should create ads but let’s start at the beginning, tv ads must only come when we are standing on a sure basis.
To guide the visitors, first, a good supply is needed that is complemented with good prices. It is important to offer various versions, and to have prices on different scales: from low to medium to upper category to have the possibility of choosing.
2. What does affect the demand?
The fact the something is missing from the customer’s life is obvious. For example, the coronavirus, the release of the emergency situation, the next waves are all circumstances that are making necessary to buy certain products. It is essential to react to the necessities properly, meaning to show the products that are becoming popular - and preparing for the future necessities.
The data of marketplaces show that the demand for the tools that help to prevent getting the virus, for example, hand sanitizers was 110 times higher. It is certain that this demand will increase in autumn again when the viruses are coming back (not only corona but general flu).
What can you do if you are selling a completely different product range? You can find a way to the buyer anyways: either entice yourself with a price (one of the dedicated online clothing chains offered winter products at a 50% discount in June - they have profited this way too), or you invest time and content to encourage customers.
To explain this easily, you need to show why and for what do they need your products. For this, you need some creativity. During a curfew, customers cannot really use a new camera until they want a new hobby. These times are perfect to start a new hobby.
3. The relation between price and supply
It is often mentioned that the checkout only happens if the demand meets the customer’s requirements. Availability is a golden ticket that must not be forgotten, or else we will leave money on the table. Monitoring the stock is especially important when the supply is not certain - and yes we are talking about the pandemic situation again.
At the moment when we can see that we cannot reach something, unconsciously we will see that object as more valuable. This way we can catch the conscious customers who are only buying the necessities too if we have the products in stock. Without any big profits, with a little price raise, we can create a purchase that is advantageous for both parties. No one will argue the small price change.
Products that can be bought for a limited time only also become more desirable. It is useful to become partners with brands that are not continuous participants in the market. From these short time partnerships, we can learn a lot, based on the demand changes we can widen our product portfolio.
It is for sure that in these uncertain times it is very difficult to plan ahead, also it is exactly what is needed. A plan that can handle the customer number decrease (that is inevitable because of the coming economic crisis) and can keep our business in the online environment. Pay attention to stockings, offer a quality service, and have a conscious price strategy behind all of this!
