Competitive Pricing for Your Shopify Store: Is it the Best Strategy?
Explore the pros and cons of competitive pricing for your Shopify store. Learn how to use it effectively, while considering other pricing strategies to maximize profitability.
Updated January 21, 2025.
Competitive pricing can be a powerful strategy for Shopify store owners, helping to attract customers and boost sales. By adjusting your prices to match or beat your competitors, you can position your products as the best deals in the market. However, while it offers immediate advantages, competitive pricing also has its drawbacks.
In this blog, we'll explore when this strategy works, its benefits, limitations, and how to balance it with other pricing tactics to maximize profitability.
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Meet the Expert
Courtney Sharp is a marketing and e-commerce expert. Her marketing agency, Sharp Media Agency, specializes in digital marketing, branding, ads, and social media, with a strong focus on fashion, retail, and beauty commerce.
What is Competitive Pricing?
Competitive pricing means setting prices based on competitors, whether by matching, undercutting, or charging more for unique features or quality.
» Aside from competitive pricing. Here are more ways to make your Shopify store a better one
4 Key Considerations for Competitive Pricing in Your Shopify Store
- Profit margins: Competitive pricing often means lowering your prices to keep up with others, but that can eat into your profits. It’s important to figure out if your business can handle slimmer margins without cutting corners on quality or hurting your bottom line.
- Product differentiation: If your products stand out - maybe they’re better quality, handmade, or tied to a strong brand story - competitive pricing might not be the best move. You don’t want to undervalue what makes your products special.
- Target audience: Think about who you’re selling to. If your customers care most about getting a good deal, competitive pricing works. But if they’re drawn to your brand for its premium quality or ethical values, pricing too low could send the wrong message.
- Competitor landscape: Check out your competition. If the market is crowded with stores undercutting each other, trying to match their prices might not work long-term. Instead, look for ways to stand out, like unique features or better customer service.
» Learn how to increase online sales in your Shopify store
Automate Your Store With EGNITION Tools
Use Egnition’s tools to streamline discount processes, ensuring accuracy and a better customer experience.
1. In a Crowded Market
If you're in a highly competitive industry, such as beauty or fashion, pricing can help you stand out. When customers are comparing various options, aligning your prices with competitors can attract their attention and increase conversions.
2. When Your Customers are Budget-Conscious
If your target audience is focused on getting the best deal, like parents purchasing baby essentials, competitive pricing is crucial. It’s an effective way to attract price-sensitive shoppers and ensure your store remains appealing to those who prioritize value. This also boosts repeat business—offering great value encourages customers to return, especially when paired with strong customer service.
3. When Selling Similar Products Without USPs
In cases where your products are quite similar to competitors’ offerings, like basic storage solutions or kitchen utensils, pricing competitively is a must. Customers can easily find similar products elsewhere, so keeping your prices in line with competitors gives you a better chance to win their business.
» Read more: What are the easiest types of products to manage on Shopify?
4. During Promotional Periods
Events like Black Friday or other seasonal sales offer a unique opportunity for competitive pricing. During these times, customers expect discounts, and matching or beating competitor prices ensures you stay competitive. This tactic helps you attract price-conscious shoppers and remain visible among numerous discounted offerings.
» Discover how to create a percentage discount in Shopify
3 Scenarios Where Competitive Pricing Can Be Detrimental
1. Undervaluing Premium Products
For stores offering high-quality or unique products, pricing them too low to match mass-produced alternatives can harm your brand.
Example: If you sell premium handmade jewelry but price it the same as mass-produced items, customers may question its authenticity or craftsmanship.
2. Compromising Brand Identity
If your store has a strong mission or story, like eco-friendly or ethically sourced products, focusing too much on competitive pricing can undermine these values. Customers who are drawn to your brand for its ethical principles might view aggressive discounting as a sign that you’re cutting corners, which could damage your reputation and customer trust.
» Can you combine discounts? Here's how
3. Losing Customer Trust
Frequently changing your prices to remain competitive can lead to frustration among loyal customers, especially if they feel they overpaid compared to new customers. This can damage your relationship with your customer base and lead to a loss of trust, ultimately making it harder to build long-term loyalty.
» Check out these successful marketing incentives to retain e-commerce customers
4 Complementary and Alternative Pricing Strategies
1. Psychological Pricing
Psychological pricing involves setting prices to influence customer perception, like $9.99 instead of $10. It makes items feel more affordable.
Example: Pricing a product at $14.95 instead of $15 will help increase your conversion rates.
Pros
- Increases perceived value without significant price drops.
- Encourages impulse buys by making prices feel lower.
Cons
- May seem gimmicky for premium or luxury products.
- Not a strong enough pricing strategy to stand on its own.
2. Dynamic Pricing
Dynamic pricing adjusts prices in real time based on demand, competition, or other market factors. Shopify apps like Prisync can automate this.
Example: During a sale, prices for best sellers can dynamically match competitors, ensuring you stay competitive without constant manual updates.
Pros
- Maximizes profitability during high demand periods.
- Keeps you competitive without manual monitoring.
- Adapts quickly to market changes.
Cons
- Can confuse or frustrate customers if prices change too frequently.
- Requires robust software tools and clear communication.
3. Value Based Pricing
Value-based pricing sets prices based on perceived customer value rather than costs. Shopify stores can use this instead of competitive pricing by highlighting premium and/or unique features.
Pros
- Strengthens brand identity and perceived quality.
- Allows for higher margins.
Cons
- Requires strong branding and messaging to justify higher prices.
- May not work in highly price sensitive markets.
4. Tiered Pricing / Bundles
Tiered pricing and or bundles offer discounts based on purchase volume.
Example: Buy 1 pair of baby booties for $20, or 3 pairs for $50.
Pros
- Increases average order value.
- Encourages bulk purchases without lowering individual product prices.
- Can help move slow moving inventory.
Cons
- Requires proper inventory management to avoid stockouts.
- Discounts can cut into margins if not calculated carefully.
» Enhance customer loyalty with personalized, automated discounts
Experimenting with Pricing Strategies: Practical Tips for Shopify Store Owners
- Monitor and adapt: Keep an eye on key metrics like conversion rates, average order value, and profit margins as you test pricing strategies. Use Shopify’s analytics or cohort analysis to track how pricing changes impact customer behavior over time and adjust accordingly.
- Segment by audience: Experiment with pricing strategies for different customer groups. This allows you to tailor pricing to each segment’s preferences and maximize profitability. You can also offer loyalty program members exclusive discounts.
» Learn more about this handy app in the following Order to Discount review
Key Takeaways on Competitive Pricing
Competitive pricing can be a valuable tool in your Shopify store’s pricing strategy, especially in crowded markets or during high-demand periods. However, store owners should be cautious about eroding profit margins and diminishing their brand's perceived value.
By pairing competitive pricing with complementary strategies and continually adapting based on market conditions, you can harness its benefits while mitigating potential downsides.
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