The risk of overbidding in eCommerce

It is clear to all of us that one of the main purchase drivers in eCommerce is price. By definition, we all want to buy cheaper, and this was once one of the differential values of the Internet (at least in the early days of eCommerce).

Add to this the fact that users are highly motivated by the prospect of finding an opportunity that others have missed. That feeling of anticipating everyone else.

Therefore, for an offer or promotion to be considered as such, it is essential that two aspects are present: that the price is lower than the usual marketing price and that it is limited to a specific period of time or a limited number of units.

Before the great development of online commerce, in a world where practically everything was retailers, the market moved in a very different way.

Generally speaking, seasonality was very marked and collections were associated with it. The same was true for sales, since there were two main periods: summer and winter sales. Outside of these, you could find occasional offers or outlet stores selling products from other seasons, but everything was very well established beforehand.

Strategically, we believe that selling a range of products at a reduced price will pay off as turnover increases overall.

But there is also no doubt that this increase in sales is based on the worsening of our commercial margins. When we check our logistics costs, human resources, media, recruitment, etc., and we allocate them to each sale, we may even discover that the net margin is negative.

Sometimes the mistake is made when underestimating the buyer's ability. As online marketing strategies have evolved, shoppers have also become more sophisticated and understand better how Internet offers work. 

They have learned to use them to their advantage and it is not uncommon, for example, for them to stop the buying process and look for discount coupons for stores that usually have them (or simply incorporate a field to enter them at checkout).

On many occasions, they even know how to play with remarketing, waiting for a better offer or a recovery discount for an abandoned cart.

All these are delays and problems to conversion that not only affect the margin, but can also mean that we lose the customer along the way and end up with the competition.

In this case we are not talking about SEO positioning, but about something that is much more linked to the overall brand strategy.

We are talking about how our target audience perceives us. If our goal is to be the cheapest brand in the market and always have offers, it would make sense, but we must be clear that our eCommerce will be seen as a flea market or a sale section.

Anything that focuses on getting a more premium positioning is incompatible with being in perpetual promotion. The user ends up doubting even the legitimacy or quality of the products.

To sum up: if you make too many offers in your eCommerce, they end up being less effective, the user gets used to them and stops seeing them as an added value. They do not even stimulate urgency, because they know that there will soon be a new one.

On the other hand, if offers are made at specific times, they are more attractive. This is, taken to the extreme, the philosophy behind Amazon Prime Days, AliExpress' Singles Day or even Black Friday: concentration of offers on specific, recurring dates.